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Hello, Dear Sir, hope you will be fine,
A company’s bank statement shows $715 direct debits and $353 investment income not recorded in the cash book. The bank statement does not show a customer’s cheque for $875 entered in the cash book on the last day of the accounting period. If the cash book shows a credit balance of $610 what balance appears on the bank statement?
solution,
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Balance per cash book———————-(610)
Items on statement, not in cash book
Direct debits————————(715)
Investment income—————-353—————————————————–(362)
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Corrected balance per cash book———(972)Item in cash book not on statement:
Customer’s cheque—————————(875)
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Balance per bank statement————–(1,847)My question is that why should I deduct the customer cheque(the customer will pay to me which is not cleared yet) which should be added.
The receipt from the customer has not yet appeared in the bank statement and therefore the bank statement will be showing a bigger overdraft (because when it does appear in the bank statement the overdraft will fall and then be the same as the corrected balance in the cash account).
Do watch my lectures on bank reconciliations – the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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