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The cash book shows a bank balance 5675$ overdrawn at 31 August 20X5. It is subsequently discovered that a standing order for $125 has been entered twice, and that a dishonoured cheque for $450 has been debited in the cash book instead of credited.
what is the correct bank balance
sirSir ,here,standing order means payment from us??
and in that case,5675$-125$=the first bank balance will be 5550$and my question
why 450$ is added 2 times to 5550???
please explain thoroughlyA standing order is a payment from us.
Since the 125 has been entered twice, one of the payments needs removing and the overdraft should only be 5675 – 125 = 5550.The dishonoured cheque is a payment we had initially received and entered. When we found it had been dishonours, then we should have removed it by crediting cash.
In error, they have debited cash. So we need to credit one time to cancel the wrong debit. Then we need to credit a second time because that is what the entry should have been. That means the overdraft is increased by 450 twice.This is all explained thoroughly in my free lectures on bank reconciliations, and you cannot expect me to type out my lectures here 🙂
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