Question 29.19

The correct cash book balance is calculated by making a bank reconciliation. When we know what the correct cash book balance is, then we can work backwards to calculate what the balance must have been before correcting the mistakes in the cash book.

Hi John Could you please explain the answer for this question. They have done a bank reconciliation with the adjustments so i am a bit confused. I hope you can help

sir, if we have to work backwards, why so the logements we have added, we only add to the bank statement balance when we have to arrive at cash book revised balance. this doesn't make any sense

Did you both prepare a bank statement and do what I said? The bank reconciliation after adjusting for the lodgements not yet credited and the unpresented cheques gives a correct cash book balance of $51,700 overdrawn. If you then work backwards to find out what the cash book balance was before correcting the two mistakes in the cash book, then you get a balance of 51,700 - 200 - (2 x 4,200) = $43,100 overdrawn.

Thanks John. I will have a look tonight and come back to you.

You are welcome :-)

I got it John. Is it right to say you have to work out the correct cash balance first by doing the bank reconciliation first and then work out the cash book balance next.

Yes - that is what I wrote. (Although as always, how you do your workings is irrelevant)

thankyou very much

You are welcome :-)