1ST Mock Exam 2012-2013
(Bank Rec)
1. On 31 December 2010, the bank statement of Winter Company did not agree with the cash book balance of
$1000 (Dr). On checking the cash book with the bank statement, he discovered the following:
(i)
Some cheques of $1440 issued by Peter were returned by the bank and marked as “wrong signature-refer to
drawer”. No entries have been made.
(ii)
The following cheques were found to be unpresented on 31 December 2010.
Date
2009
Sept 28
Dec 7
2010
Jun 12
Dec 30
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Cheque No.
1120
1180
Amount
$
8 800
4 000
1210
1600
1 000
7 000
The receipt side of the cash book had been overcast by $100;
A sum of $9000 was deposited to the bank on 30 December 2009 but had not been credited by the bank.
A cheque of $500 received from a customer was mistakenly credited by the bank as $5000.
No entries have been made regarding an autopay item of $1500 for an electricity bill.
A credit transfer of $1900 from Nicole had not been recorded.
The bank had wrongly charged overdraft interest of $900.
The bank balance as at 30 November of $1500 (Dr) in the cash book was wrongly brought down as $5100
(Cr).
REQUIRED:
(a) Prepare an updated cash book showing the corrected balance at 31 December 2010.
(b) Prepare a bank reconciliation statement as at 31 December 2010, staring with the adjusted cash book
balance.
(b) Apart from a wrong signature, under what conditions would the bank return a cheque?
(a)
Cash Book (bank column only)
Balance b/f
Accounts payable – stale cheque (ii)
Nicole – credit transfer
Suspense (ix) (1500 + 5100)
(b)
$
1,000
13,800
1,900
6,600
23,300
$
1,440
100
1,500
20,260
23,300
Peter – dishonored cheque (i)
Suspense (iii)
Electricity – autopay (vi)
Balance c/f
Winter Company
Bank reconciliation statement as at 31 December 2010
$
Balance as per adjusted cash book
Add: Unpresented cheques – No. 1600 (ii)
Bank error (v)
Less: Uncredited cheque (iv)
Bank error (viii)
Balance as per bank statement
(c)
—
—
—
—
—
Insufficient money to make the payment
Post-dated cheque
Stale cheque
The cheque is not dated
The amount in numbers does not match that in words
$
20,260
7,000
4,500
9,000
900
11,500
31,760
9,900
21,860
Pre-Mock Exam 2012-2013
(Bank Rec)
1. The cash book of Capital Company showed a debit balance of $5,360 on the bank account, on 30 April 2011 while
the bank statement showed a credit balance different from the company’s record. The following information has
been obtained:
(i)
On 30 April 2011, the following cheques remained unpresented:
(ii)
(iii)
(iv)
(v)
Cheque No.
Date of cheque
Amount ($)
1313
18 October 2010
300
1314
15 January 2011
520
1320
7 February 2011
2,013
Cheques totaling $5,200 were banked on 28 April 2011 but only credited by bank on 2 May 2011, except for
one cheque amounted to $950 was dishonoured. A cheque of $370 dated 15 May 2011 received from a
customer was recorded but was still in the hand of the cashier.
The bank debited the company’s account in error for $870.
Salaries to staff are paid by autopay at the end of each month. However, the autopay for April 2011 salaries
amounted to $3,400 was not executed until 3 May 2011. The amount had not been accounted for and
recorded in the books of the company.
Tenants deposited rent of $6,800 directly into the bank account of the company but no entries have been
made regarding this.
REQUIRED:
(a) Update the cash book of Capital Company.
(2.5 marks)
(b) Prepare a bank reconciliation statement as at 30 April 2011, commencing with updated cash book balance.
(3.5 marks)
(Total: 7 marks)
(a)
Balance b/d
Accounts payable – stale cheque (i)
Rental income – Direct deposit (v)
Cash Book (bank column only)
$
5,360 Accounts receivable – post-dated cheque (ii)
300 Salaries – Autopay (iv)
6,800 Balance c/d
12,460
$
370
3,400
8,690
12,460
(b)
Bank reconciliation statement as at 30 April 2011
$
Balance as per adjusted cash book
Add: Unpresented cheques (i)
No. 1314
No. 1320
Autopay of salaries delayed
Less:
Uncredited cheque (ii)
Bank error
Balance as per bank statement
520
2,013
3,400
5,200
870
$
8,690
5,933
14,623
6,070
8,553
HKDSE
(2012, 5)
(Bank Rec)
The following information was extracted from the cash book of Doris Ltd for the month ended 31 December 2011:
2011
Dec 4
“
5
“
20
28
31
“
31
Cindy Ltd
Connie Fashion Co
Chloe Ltd
Carmen Co
Cherry Ltd
Balance c/d
Cash at bank
$ 2011
125 000 Dec
25 300 “
72 530 “
7 235
8 005
9 530 “
247 600
Cheque No.
1
12
13
22
22
31
Balance b/d
Electricity
Yuki Co
Zoey & Co
Salaries
Clara Co
532018
532019
532020
532021
532022
$
10 500
2 820
24 500
31 600
109 420
68 760
247 600
Doris Ltd received the following bank statement for the month of December 2011:
Date
2011
Dec
Description
1
4
5
8
12
13
20
22
23
30
31
31
31
Bank Statement as at 31 December 2011
Withdrawal
$
Balance b/d
Cheque deposit
Cheque deposit
Cheque 532010
Cheque 532018
Cheque 532019
Cheque deposit
Cheque 532021
Refer to drawer
Credit transfer
Direct debit – management fees
Bank charges
Cheque 982277
Deposit
$
125 000
23 500
300
2 820
24 500
72 530
109 420
72 530
46 250
5 025
25
105 660
Balance
$
(10 000)
115 000
138 500
138 200
135 380
110 880
183 410
73 990
1 460
47 710
42 685
42 660
(63 000)
Additional information:
(i) A cheque for $23 500 received from Connie Fashion Co was wrongly recorded in the cash book as $25 300. Also, it
was discovered that the cheque received from Carmen Co on 28 December 2011 was dated 2 January 2012.
(ii) The credit transfer on 30 December 2011 shown on the bank statement was made by a customer of Doris Ltd.
(iii) Doris Ltd had been informed by its bank that Cheque 982277 was an incorrect debit entry and the correction
would be made by the bank on 5 January 2012.
(iv) The reason for the difference in the opening balances of the cash at bank account and the bank statement was
due to two cheques, 532009 and 532010, issued in November 2011 remained unpresented on 30 November 2011.
REQUIRED:
(a) Update the cash at bank account of Doris Ltd.
(b) Prepare a bank reconciliation statement as at 31 December 2011, commencing with the updated cash at bank
balance.
(c) List two possible reasons why the cheque deposit made on 20 December 2011 was returned by the bank on 23
December 2011.
(a)
2011
Dec
“
31 Debtors – credit transfer (ii)
31 Balance c/d
Cash Book
$ 2011
46 250 Dec
“
49 895
“
“
“
“
96,145
31
31
31
31
31
31
$
9
530
Balance b/d
1 800
Connie Fashion Co (i)
Carmen Co – Post-dated cheque (i) 7 235
72 530
Chloe Ltd – Returned cheque
Management fees
5 025
Bank charges
25
96,145
(b)
Bank Reconciliation Statement as at 31 December 2011
$
Balance as per adjusted cash book
Add Unpresented cheques
— 532020
— 532022
— 532009 ($10 500 – $10 000 – $300) (iv)
Less Uncredited deposit – Cherry Ltd
Bank error – incorrect debit (iii)
Balances as per bank statement
31 600
68 760
200
8 005
105 660
Unpresented cheque 532009 + Unpresented cheque 532010 = $10 500 – $10 000 = $500
Unpresented cheque 532009 + $300 = $500
Unpresented cheque 532009 = $500 – $300 = $200
(c) — insufficient cash in drawer’s account
— post-dated cheque
— wrong drawee’s name/drawers signature
$
(49 895)
100 560
50 665
113 665
(63,000)
HKET Mock (1, 2011)
(Bank Rec)
The accountant of A Ltd has resigned suddenly in October. The newly employed accountant found that the records on
the bank statement for October differed from the records in the cash book. On 31 October 2011, the bank balance in
cash book was $629,000. Here are some findings after investigation:
(i) A cheque dated on August with value $100,000 from customer Mr. Chan was found inside the drawer, but has
already recorded in the cash book.
(ii) On the bank statement of October, there was a record of cash withdrawal for $10,000, but on the cash book, the
amount is recorded as $1,000 and the actual cash balance is also $1,000. After the confirmation from the bank,
the accountant has indeed withdrawn $10,000 that day.
(iii) A cheque $50,000 given to supplier Mr. Lee has been rejected, the reason was incorrect payee name.
(iv) A cheque $30,000 given to supplier Mr. Ho has not yet been presented.
REQUIRED:
(a) Adjust the cash book of A Ltd (only show bank column).
(b) Prepare the bank reconciliation statement for 31 October 2011, starting from the adjusted cash book balance.
(c) If the resigned accountant in A Ltd is a professional accountant, based on the above four findings, this accountant
may violate which principles under the Code of Ethics for Professional Accountants? State two principles that he
may violate and explain.
(a)
Cash Book
2011
Oct
Oct
31 Balance b/d
31 Mr. Lee – Returned cheque (iii)
$ 2011
629,000 Oct
50,000 Oct
679,000
31 Cash withdrawal (ii)
31 Balance c/d
$
9,000
670,000
679,000
(b)
A Ltd
Bank Reconciliation Statement as at 31 October 2011
Adjusted balance as per cash book
Add Unpresented cheque – Mr. Ho (iv)
Less Uncredited cheque – Mr. Chan (i)
Balance as per bank statement
(c)
(i) The accountant resigned in October, but it is found to have a cheque received earlier which has not yet
credited to the bank account. This shows the accountant did not give his due care to finish the work on
time. He did not utilise his professional competence and due care to protect the benefit of his employer.
He may violate the principle "Professional Competence and Due Care" under the Code of Ethics.
(ii) The actual cash withdrawal is $10,000, but the record on cash book is only $1,000 and the actual cash
balance is also $1,000. That means there is $9,000 being taken without any record. The accountant may
not necessary be the one who took the money $9,000, but he may dishonestly record the amount in
cash book, or purposely hide the record or miss out the record. He may violate the principle "Integrity"
under the Code of Ethics.
(iii) The cheque was rejected because of the incorrect payee name, this may be because the accountant did
not write it and check it carefully and caused Mr. Lee cannot honour the cheque. This may adversely
affect the goodwill of A Ltd. He did not utilise his professional competence and due care to protect the
benefit of his employer. He may violate the principle "Professional Competence and Due Care" under
the Code of Ethics.
$
670,000
30,000
700,000
(100,000)
60,000
Longman Mock (2, 2011)
(Bank Rec)
The bank statement of Karen & Co for March 2012 is as follows:
Bank Statement
Date
2012
Mar
"
"
"
"
"
"
"
Details
1
3
9
11
21
25
27
31
Dr
$
Balance b/d
Deposit
Cheque
Direct debit — Management fees
Deposit
Direct credit — Dividends
Cheque
Overdraft interest
Cr
$
498,753
135,950
7,195
77,987
2,750
3,860
18,756
Balance
$
375,984
122,769
13,181
20,376
57,611
60,361
56,501
37,745
Dr
Cr
Dr
Dr
Cr
Cr
Cr
Cr
The cash book (bank columns) for March 2012 is as follows:
2012
Mar
4 Easy Co
"
20 Fulton Ltd
"
30 Paul Chan
"
31 Balance c/d
Cash Book
$
2012
498,753
Mar
1 Balance b/d
77,987
"
7 Citizen Ltd
7,590
"
22 Henry Lau
58,339
"
28 Salem Ltd
642,669
$
375,984
135,950
3,860
126,875
642,669
You are required to:
(a) Update the cash book.
(4 marks)
(b) Prepare a bank reconciliation statement as at 31 March 2012.
(3 marks)
(Total: 7 marks)
(a)
2012
Mar
"
31 Dividends —Direct credit
31 Balance c/d
Cash Book
$ 2012
2,750 Mar
81,540 "
"
31 Balance b/d
31 Management fees —Direct debit
31 Overdraft interest
84,290
$
58,339
7,195
18,756
84,290
(b)
Karen & Co
Bank Reconciliation Statement as at 31 March 2012
Corrected overdraft balance as per cash book
Add Unpresented cheque (Salem Ltd)
Less Uncredited cheque (Paul Chan)
Overdraft balance as per bank statement
$
(81,540)
126,875
44,335
(7,590)
(37,745)
AAT 2011 (Pilot Paper 2, 6)
(Bank Rec)
6. The following information relates to the banking transactions of Tai Sang Company for the month of August 2010:
2010
Aug
Aug
Aug
Aug
1
4
23
31
Balance b/d
Sales
Sales
Company A
Sales
Cash Book (Bank Column Only)
$ 2010
2,420 Aug
2 General expenses (211012)
835 Aug
9 Wages (211013)
716 Aug 11 Drawings (211014)
185 Aug 12 Purchases (211015)
640 Aug 24 Rent (211016)
2,446 Aug 25 Wages (211017)
Aug 27 C Limited (211018)
4,796
Bank Statement
Date
Details
2009
Aug
1
Balance b/d
Aug
3
CQ211012
Aug
4
Credit
Aug
7
Standing order (rates)
Aug 11
CQ211013
Aug 16
CQ211014
Aug 20
CQ211015
Aug 23
Direct debt (insurance)
Credit
Aug 27
CQ211017
Aug 30
Credit transfer – B Limited
Bank interest
Dr
$
Cr
$
67
835
136
330
140
406
153
716
345
268
8
$
67
330
410
406
290
345
502
2,350
Balance
$
2,420
2,353
3,188
3,052
2,722
2,582
2,176
2,023
2,739
2,394
2,662
2,670
Cr
Cr
Cr
Cr
Cr
Cr
Cr
Cr
Cr
Cr
Cr
Cr
REQUIRED:
(a) Update the cash book starting with the closing balance as at 31 August 2010.
(b) Prepare the bank reconciliation statement as at 31 August 2010, starting with the bank statement balance.
(c) Explain why the entry of Company A in the bank column of the company’s cash book on 31 August 2010 was
not credited by the bank even it has already been deposited into the bank on that date.
(d) Explain with TWO reasons why business needs to use a bank reconciliation statement for cash control purpose.
6 (a)
2010
Aug
"
"
"
Sep
31
31
31
31
1
Tai Sang Company
Cash Book (Bank Column Only)
$ 2010
2,446 Aug
31 Standing order (rates)
Balance b/d ($4,796  $2,350)
270
"
31 Direct debt (insurance)
Drawing overstated ($410$140)
Credit transfer – B Limited
268
"
31 Balance c/d
Bank interest
8
2,992
Balance b/d
2,703
$
136
153
2,703
2,992
(b)
Tai Sang Company
Bank reconciliation statement as at 31 August 2010
$
Balance as per bank statement
Add Uncredited itemsCompany A
Uncredited itemsSales
Less
Unpresented cheques (211016)
Unpresented cheques (211016)
Balances as per updated cash book
185
640
290
502
$
2,670
825
3,495
792
2,703
(c) One possible reason is when a cheque is deposited into the bank by Tai Sang Company, it takes at least
One full working day for the bank to clear the cheque. As the company deposited the cheque on 31
August according to its record in bank column of the cash book, it would only be credited to Tai Sang
Company’s account on 1 September by the bank. Hence, this cheque was not shown in the bank
statement as at 31 August.
(d) Reasons for using bank reconciliation statements are as follows:
 A bank reconciliation statement provides verification of a company’s records with items not yet
processed by the bank such as unpresented cheques and uncredited items.
 Also, a bank reconciliation statement provides an update of the company’s records with items made
by the bank but not yet accounted for by the company such as interest received, credit transfers,
standing orders and bank charges.
 Accounting staff can locate the errors in either the company’s cash book or the bank statement by
preparing the bank reconciliation statement.
 Bank reconciliation statement provides a check on the timing difference between the date recording
the receipts (or payment) and the date of banking in these receipts (or withdrawing these payments
from bank).
HKDSE Sample 2 (2A, 1)
(Bank Rec)
The bank account of VM Ltd as at 31 December 2011 has a debit balance of $4000, which was different from the
ending balance shown on the bank statement for the month of December 2011. Subsequent comparison of the cash
book with the bank statement revealed the following:
(i)
Bank charges of $469 shown on the bank statement had not been recorded in the cash book.
(ii) Cash of $7933 deposited by a customer on 20 December 2011 had been credited by the bank but no record had
been made in the cash book.
(iii) The following cheques issued to suppliers were not shown on the bank statement:
Cheque Number
30801
30834
Date of issue
17 December 2011
30 December 2011
Amount
$2453
$3758
(iv) A cheque with an amount of $5100 deposited into the bank on 31 December 2011 was shown on the bank
statement for the month of January 2012.
REQUIRED:
(a) Update the bank account in the books of VM Ltd.
(b) Prepare for VM Ltd a bank reconciliation statement as at 31 December 2011, commencing with the updated bank
account balance in (a).
(c) List two uses of bank reconciliation statement for a company.
(a)
Cash Book
2011
Dec
“
31 Balance b/d
31 Trade receivables (ii)
$ 2011
4000 Dec
7933
“
11933
$
469
11437
11933
31 Bank charges (i)
31 Balance b/d
(b)
VM Ltd
Bank reconciliation Statement as at 31 December 2011
$
Balance as per adjusted bank account
Add: Unpresented cheques (iii)
30801
30834
Less: Uncredited deposit (iv)
Balance as per bank statement
2453
3758
$
11437
6211
17648
5100
12548
(c) Uses:
— locating accounting errors either made by the bank or by the firm
— explaining differences at a given date between the balance of the bank account as shown in the
firm’s cash book and the balance of bank statement as prepared by the bank
— preventing fraud by employees
HKDSE Sample 1 (2B, 8)
(Bank Rec)
Good Prospect Limited commences its business on 1 January 20X6 and has made a net profit of $3,000,000 for the year
ended 31 December 20X6. However, the company experienced problems in getting $1,800,000 to finance the
acquisition of a plant in Tai Po for expansion. Lee, the managing director, could not understand why the amounts in
each of the following pairs of items were not equal:
(i) net profit for the year and net increase in cash and bank balances for the year
(ii) bank balance in the cash book and the bank statement balance as at 31 December 20X6
REQUIRED:
(a)
Explain to the managing director why the amounts in each of the above of items would differ.
(a) (i) Net profit for the year vs net increase in cash and bank balances for the year:
— Net profit for the year is arrived at matching all expenses and revenues of a particular trading
period with adjustments of accruals and prepayments.
— Cash and bank balances represents the amount of cash in hand and on demand (net of cash
inflows and outflows).
— The business makes profit by converting cash into assets like accounts receivables, inventories,
investment, etc. and then converting such assets back into cash.
— A business wants to get hold of cash in the shortest possible time put to keep the least amount of
cash in hand so as to increase the number of trading cycles and hence the trading profits.
(ii) Bank balance in the cash book vs the bank statement balance as at 31 December 20X6:
— The cash book makes records from the company’s point of view. It debits all cash and cheques
deposited into the bank account, and credit bank charges and cheques drawn on payees.
— The transactions recorded in the bank statement are shown from the point of view of the bank, in
that payment are debited and receipts are credited.
— The balance in the bank statement rarely agree with the cash book balance of the same date:
The discrepancy may arise from:

Items arising from time differences e.g. cheques issued to suppliers not yet presented to the
bank for payment, deposits made by the company not yet credited by the bank

errors made by the bank or errors present in the cash book
HKCEE (2010, 3)
(Bank Rec)
Jane Ho is a sole proprietor who keeps records of her cash and bank transactions in a three-column cash book. The balances in the
cash book at 1 March 2010 were: cash $38,900 and bank overdraft $6,240. Jane made the following transactions during the month
of March 2010:
March
2
Sales with a list price of $8,000 were made to a customer at a discount of 10% on 25 February 2010. The
customer settled his account balance by cheque after deducting a 3% cash discount.
5
From the proceeds of cash sales, paid $1,000 for cash purchases of trading goods and banked the remaining
$4,600.
11
16
22
29
30
31
Settled a supplier’s outstanding account of $3,000 by cheque after deducting a 5% cash discount.
A customer paid cash $19,600 to settle her debt. A 2% cash discount was allowed for early settlement.
Paid suppliers in cash $16,500.
Banked cheques of $27,800 from customers through an Automatic Teller Machine (ATM).
Paid salaries in cash $14,000.
Banked a cheque of $3,007 from a customer in full settlement of his account of $3,100.
Jane Ho received a bank statement which showed a credit balance of $27,194 as at 31 March 2010. An examination of the bank
column in the cash book and the bank statement disclosed the following discrepancies:
(i)
(ii)
Bank lodgement on 31 March 2010 had not yet been recorded by the bank.
A bank service charge of $300 had been debited by the bank on 26 March 2010. However, an amount of $100 had been
overcharged and was refunded by the bank on 31 March 2010.
(iii) Cheques drawn totaling $19,200 had not been presented to the bank.
(iv) An autopay payment of $18,000 was made by the bank for rent.
(v) A post-dated cheque of $4,100 received from a customer was banked on 29 March 2010, but it was returned by the bank.
REQUIRED:
(a) Prepare a three-column cash book for the month of March 2010, incorporating the necessary updates to be made on 31
March 2010.
(b) Prepare a bank reconciliation statement as at 31 March 2010 commencing with the bank statement balance and ending with
the updated cash book balance in (a) above.
(a)
2010
Mar
1
2
5
5
16
29
31
31
Details
Balance b/d
Debtors
Sales
Cash
Debtors
Debtors
Debtors
Balance c/d
Discount
$
Cash
$
38,900
216
5,600
400
19,600
93
709
64,100
Cash Book
Bank
2010
Details
Discount
$
Mar
$
1
Balance b/d
6,984
Purchases
5
Bank
5
4,600
Creditors
150
11
Creditors
22
27,800
Salaries
30
3,007
Bank service charge (ii)
31
Rent (iv)
31
Debtors (v)
31
Balance c/d
31
42,391
150
Cash
$
Bank
$
6,240
1,000
4,600
2,850
16,500
14,000
28,000
64,100
200
18,000
4,100
11,001
42,391
(b)
Bank reconciliation statement as at 31 March 2010
Balance as per bank statement
Add Lodgement not yet recorded by bank (i)
Less Unpresented cheques (iii)
Balances as per updated cash book
$
27,194
3,007
30,201
19,200
11,001
HKCEE (2007, 4)
(Bank Rec)
Rex Lai is a sole proprietor who keeps records of his cash and bank transactions in a two-column cash book. The balances in the
cash book at 1 March 2007 were: cash $16,400 and bank overdraft $4,590. In addition, a petty cash imprest amount of $5,000 was
also kept on that date. Rex made the following transactions in the month of March 2007:
March
3
Cheques for $100,480 were received from customers in full settlement of debts totaling $102,000.
4
Settled a supplier’s outstanding balance of $2,000 by cheque. A discount of 2% was received for payment
made within the discount period.
8
10
16
21
26
A cheque of $3,000 issued to a supplier in September 2006 was written back as a stale cheque.
Cash sales amounted to $15,600.
Banked the remaining amount from cash sales on 10 March after deducting $9,600 for Rex’s private use.
Paid rent by cheque $23,000.
Purchased furniture at a cost of $5,000. A deposit of 20% was paid by cheque. The remaining balance is to be
paid on delivery of the furniture in April 2007.
Banked a cheque of $1,650 from a debtor.
The petty cash had a balance of $1,100. Cash was drawn to restore the petty cash imprest amount.
30
31
You are required to:
(a) Prepare the two-column cash book for the month of March 2007.
Rex received a bank statement which showed a credit balance of $86,920 at 31 March 2007. An examination of the bank column in
the cash book and the bank statement disclosed the following:
(i)
(ii)
(iii)
(iv)
(v)
The cheque written back on 8 March 2007 was honoured by the bank on 9 March 2007.
The lodgement on 30 March 2007 had not yet been recorded by the bank.
Cheques drawn totaling $9,050 had not yet been presented to the bank.
An autopay was made by the bank for rates of $860.
A direct deposit of $2,800 had been lodged by a customer in respect of a debt which had been written off in 2006.
You are required to:
(b) Prepare a bank reconciliation statement as at 31 March 2007 commencing with the balance as per cash book in (a) above and
ending with the balance as per bank statement.
(a)
2007
Mar
1
3
8
10
16
30
Details
Balance b/d
Debtors
Creditors
Sales
Cash ($15,600  $9,600)
Debtors
Cash
$
16,400


15,600


32,000
Cash Book
Bank
2007
Details
$
Mar
1
Balance b/d

100,480
Creditors ($2,000 x 98%)
4
3,000
16 Drawings
16 Bank ($15,600  $9,600)

6,000
21 Rent
1,650
26 Furniture – deposit ($5,000 x 20%)
31 Petty cash ($5,000  $1,100)
31 Balance c/d
111,130
Cash
$


9,600
6,000


3,900
12,500
32,000
Bank
$
4,590
1,960


23,000
1,000

80,580
111,130
(b)
Bank reconciliation statement as at 31 December 2008
$
Balance as per cash book in (a)
Add: Unpresented cheques (iii)
Direct deposit by customer (v)
Less:
Cheque honoured by bank (i)
Lodgement not yet recorded by bank (ii)
Autopay for rates (iv)
Balance as per bank statement
$
80,580
9,050
2,800
3,000
1,650
860
11,850
92,430
5,510
86,920
HKCEE (2006, 5)
(Bank Rec)
The trial balance of Ho Limited as at 31 March 2006 failed to agree and the difference was entered in a suspense account. The draft
net profit for the year amounted to $80,260.
Additional information:
(i)
The last month’s bank statement balance at 28 February 2006 showed a credit balance of $19,900, which was the same as
that in the cash book on that date. The balance had been wrongly included as the bank balance in the trial balance as at 31
March 2006.
Deposits and cheque payments, totaling $315,000 and $300,700 respectively, had been recorded in the cash book during
March 2006.
(ii)
The following items were shown on the March bank statement but not in the cash book:
1
Bank charges of $80;
2
Bank deposit interest of $650;
3
A dishonoured cheque of $10,250 from Star Ray Limited; and
4
A direct deposit of $2,400 logged by Kettler Limited.
(iii) Cheques, issued in March, amounting to $16,500 had not been presented to the bank for payment.
(iv) Lodgements, totaling $6,630 for March, were not recorded by the bank until 2 April 2006.
You are required to:
(a)
Show the necessary adjustments to be made in the cash book on 31 March 2006.
(b)
Prepare a bank reconciliation statement as at 31 March 2006, commencing with the adjusted cash book balance in (a) above.
(a)
Cash Book (bank column only)
Balance b/d (19,900 +
Bank deposit interest
Kettler Limited
)
$
34,200 Bank charges
650
2,400 Balance c/d
37,250
$
80
10,250
26,920
37,250
(b)
Bank Reconciliation Statement as at March 2006
Adjusted balances as per cash book
Add Uncredited cheque
Less Lodgements not yet recorded by bank
Adjusted balances as per bank statement
$
26,920
16,500
43,420
6,630
36,790
Sample 1
(Bank Rec)
The bank account for Flora Lee’s business showed a credit balance of $33,220 as at 30 September 2011, which did not
agree with the debit balance of $19,997 shown on the bank statement as at the same date. The following discrepancies
were found upon investigation:
(i)
Cheques for $350, $600 and $2,100 were issued by the business during the month but had not been presented
for payment.
(ii) On 30 September 2011, the bank paid the business office rent of $13,300 under a standing order. This item had
not been recorded in the cash book.
(iii) On 29 September 2011, the owner transferred $11,200 from her personal bank account to the business bank
account. This item had not been recorded in the cash book.
(iv) A trade debtor paid $340 directly into the business bank account. This item was shown on the bank statement
but had not been recorded in the cash book.
(v) An amount of $900 was paid into the bank account on 30 September 2011 but had not yet been credited by the
bank.
(vi) A cheque issued to Albert Au for $3,880 was correctly recorded in the bank statement but had been recorded in
the cash book as $3,180.
(vii) A cheque receipt of $7,122 was wrongly recorded on the credit side of the cash book as $7,211.
(viii) Due to a casting error, the total of the debit side of the cash book was overstated by $800.
Required:
(a) Update the cash book.
(b) Draw up a statement, under the correct heading, to account for the difference between the updated cash book
and the balance shown on the bank statement.
Answer:
(a)
2011
Sept
"
"
"
30 Capital  Credit transfer (iii)
30 Accounts receivable 
Credit transfer (iv)
30 Cheque receipt wrongly recorded
on credit side with a wrong
amount (vii) ($7,122 + $7,211)
30 Balance c/d
Cash Book
Bank
$ 2011
11,200 Sept
"
340
"
"
14,333
22,147
48,020
30 Balance b/d
30 Rent  Standing Order (ii)
30 Albert Au  Incorrect amount
entered ($3,880  $3,180) (vi)
30 Debit side total of cash book
overstated (viii)
Bank
$
33,220
13,300
700
800
48,020
(b)
Flora Lee
Bank Reconciliation Statement as at 30 September 2011
Adjusted balance as per cash book
Add Unpresented cheques ($350 + $600 + $2,100) (i)
Less Uncredited item (v)
Overdraft balance as per bank statement
$
(22,147)
3,050
(19,097)
(900)
(19,997)
Sample 2
(Bank Rec)
The following cash book summary was extracted from the books of Peter Pang for the month of January 2012:
2012
Jan
1
"
" 31
Cash Book (Bank Column)
$ 2012
2,355
Jan
Payments
32,660
7,285
42,300
Balance b/d
Receipts
Balance c/d
$
42,300
42,300
The following information was found after investigation:
(i)
The receipt side of the above cash book was overstated by $3,800 due to casting errors.
(ii)
Three cheques drawn by the business in January 2012 were not yet presented for payment. The relevant
amounts were: $2,320, $960 and $670.
(iii)
On 10 January 2012, Peter deposited into the business bank account a cheque for $3,353 received from a trade
debtor. Appropriate entries had been made in both the cash book and the bank statement. On 13 January 2012,
however, the cheque was returned unpaid by the payer’s bank. The entry in respect of the returned cheque was
shown on the bank statement, but an entry was not yet made in the cash book.
(iv)
During the month, bank interest revenue of $378 was not recorded in the cash book.
(v)
At the end of the month, a trade debtor, Mr Wong, paid $1,900 directly into the business bank account but this
amount did not appear in the cash book.
(vi)
Dividend income of $3,456 was credited directly into the bank account but the amount has been wrongly
credited in the cash book as bank charges.
(vii) The following items were shown in the bank statement, but had not yet been entered in the cash book:
(a) Bank loan interest of $2,000 charged by the bank
(b) An autopay of $2,210 for rent in January 2010
(viii) Rental income amounting to $800 was deposited directly into the bank but was not yet been entered in the cash
book.
(ix)
The following cheque receipts were recorded in the cash book for the month of January 2012:
Date deposited
Jan 29
Date credited by the bank
Feb
Amount
1
$1,200
"
30
Jan 31
$2,400
"
31
Feb
$2,350
2
Required:
(a) Update the cash book for Peter Pang and show the adjusted bank balance as at 31 January 2012.
(b)
Prepare a bank reconciliation statement as at 31 January 2012, starting with the bank statement balance.
(c)
State the amount of the bank balance that should be shown in the balance sheet of Peter Pang’s business as at
31 January 2012.
Answer:
(a)
2012
Jan
"
"
"
"
"
31
31
31
31
31
31
Cash Book (Bank Column)
$ 2012
Bank interest revenue (iv)
378 Jan 31 Balance b/d
Mr Wong — Direct credit (v)
1,900
" 31 casting errors of cash book (i)
Dividend income wrongly credited
" 31 Debtor —Dishonoured cheque (iii)
as bank charges (vi) (3456 x 2)
6,912
" 31 Bank loan interest (vii)
Rental income — Credit transfer (viii)
800
" 31 Rent — Standing order (vii)
Balance c/d
8,658
18,648
$
7,285
3,800
3,353
2,000
2,210
18,648
(b)
Peter Pang
Bank Reconciliation Statement as at 31 January 2012
$
Overdraft balance as per bank statement (balancing figure)
Add Uncredited cheques ($1,200 + $2,350) (ix)
(8,258)
3,550
(4,708)
Less Unpresented cheques ($2,320 + $960 + $670) (ii)
(3,950)
Adjusted overdraft balance as per cash book
(8,658)
(c)
The bank balance shown in the balance sheet as at 31 January 2012 should be $8,658 (overdraft).