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
Cheque
Amoun
No.
t
2009
$
Sept 28
1120
8 800
Dec 7
1180
4 000
2010
Jun 12
1210
1 000
Dec 30
1600
7 000
(iii) The receipt side of the cash book had been overcast by $100;
(iv) A sum of $9000 was deposited to the bank on 30 December 2009 but had not been
credited by the bank.
(v) A cheque of $500 received from a customer was mistakenly credited by the bank as
$5000.
(vi) No entries have been made regarding an autopay item of $1500 for an electricity bill.
(vii) A credit transfer of $1900 from Nicole had not been recorded.
(viii) The bank had wrongly charged overdraft interest of $900.
(ix) 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

1,000 Peter dishonored cheque (i)

1,440

Accounts payable stale cheque 13,800 Suspense (iii)

(ii)
Nicole credit transfer

1,900 Electricity autopay (vi)

Suspense (ix) (1500 + 5100)

6,600 Balance c/f

100
1,500
20,260

23,300

23,300

(b)
Winter Company
Bank reconciliation statement as at 31 December 2010

Balance as per adjusted cash book

$
20,26
0

Add: Unpresented cheques No. 1600 (ii)

Bank error (v)

7,000
4,500

Less: Uncredited cheque (iv)

Bank error (viii)

9,000
900

11,500
31,760
9,900

Balance as per bank statement

(c)

21,860

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
Pre-Mock Exam 2012-2013
(Bank Rec)
1. The cash book of Capital Company showed a debit balance of $5,360 on the bank account,
on 30 April 2011 while the bank statement showed a credit balance different from the
companys record. The following information has been obtained:
(i)
On 30 April 2011, the following cheques remained unpresented:
Cheque
Date of
Amount
No.
cheque
($)
1313
18 October
300
2010
1314
15 January
520
2011
1320
7 February
2,013
2011
(ii) 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.
(iii) The bank debited the companys account in error for $870.
(iv) 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.
(v) 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)
Cash Book (bank column only)
$
Balance b/d

5,360 Accounts receivable post-dated

cheque (ii)

Accounts payable stale cheque (i)

Rental income Direct deposit (v)

300 Salaries Autopay (iv)

370
3,400

6,800 Balance c/d

8,690

12,460

12,460

(b)
Bank reconciliation statement as at 30 April 2011
$

Balance as per adjusted cash book

8,690

Add: Unpresented cheques (i)

No. 1314
No. 1320
Autopay of salaries delayed

520
2,013
3,400

Less: Uncredited cheque (ii)

Bank error
Balance as per bank statement

5,200
870

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:
201
1
De
4 Cindy Ltd
c

5 Connie Fashion Co

20 Chloe Ltd
28 Carmen Co
31 Cherry Ltd

31 Balance c/d

Cash at bank
$ 201
1
125 Dec 1
000
25 300
12
72 530
13
7 235
22
8 005
22
9 530
247
600

Cheque
No.
Balance
b/d
Electricity
Yuki Co
Zoey & Co
Salaries

31 Clara Co

10 500
532018
532019
532020
532021
532022

Doris Ltd received the following bank statement for the month of December 2011:
Dat
e
201
1
Dec

Bank Statement as at 31 December 2011

Description
Withdraw
Deposi
al
t
$
$
1

Balance b/d

Cheque deposit

Cheque deposit

Cheque 532010

300

12

Cheque 532018

2 820

13

Cheque 532019

24 500

20

Cheque deposit

22

Cheque 532021

125
000
23 500

72 530
109 420

Balanc
e
$
(10
000)
115
000
138
500
138
200
135
380
110
880
183
410
73 990

2 820
24 500
31 600
109
420
68 760
247
600

23
30
31
31
31

Refer to drawer
Credit transfer
Direct debit management fees
Bank charges
Cheque 982277

72 530

1
47
42
42

460
710
685
660
(63
000)

46 250
5 025
25
105 660

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)

Cash Book
2011
Dec

$ 201
1
31 Debtors credit transfer 46 250 Dec
(ii)
31 Balance c/d

49 895

96,145

$
31 Balance b/d

9 530

31 Connie Fashion Co (i)

1 800

31 Carmen Co
cheque (i)

31 Chloe
Ltd
cheque

31 Management fees

31 Bank charges

Post-dated 7 235
Returned

72
530
5 025
25
96,14

5
(b)

Bank Reconciliation Statement as at 31 December 2011

$
Balance as per adjusted cash book
Add Unpresented cheques
532020
31 600
532022
68 760
532009 ($10 500 $10 000 $300) (iv)
200
Less Uncredited deposit Cherry Ltd
Bank error incorrect debit (iii)
Balances as per bank statement

8 005
105
660

$
(49 895)

100 560
50 665
113 665
(63,000)

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 drawers account
)
post-dated cheque
wrong drawees name/drawers signature

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

$ 201
1

Oct

31 Balance b/d

Oct

31 Mr.
Lee

cheque (iii)

629,00 Oct
0
Returned 50,000 Oct

$
31 Cash withdrawal (ii)
31 Balance c/d

679,00
0

9,000
670,00
0
679,00
0

(b)
A Ltd
Bank Reconciliation Statement as at 31 October 2011

$
Adjusted balance as per cash book
Add Unpresented cheque Mr. Ho (iv)

670,000
30,000
700,000

Less Uncredited cheque Mr. Chan (i)

Balance as per bank statement

(100,000
)
60,000

(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.
Longman Mock (2, 2011)
(Bank Rec)
The bank statement of Karen & Co for March 2012 is as follows:
Bank Statement
Date

Details

Dr

Cr

2012
Mar

Balance b/d

"

Deposit

"

Cheque

"

11

Direct debit Management fees

"

21

Deposit

"

25

Direct credit Dividends

"

27

Cheque

"

31

Overdraft interest

Balance
$
375,984 Dr

498,753

122,769 Cr

135,950

13,181 Dr

7,195

20,376 Dr
77,987

57,611 Cr

2,750

60,361 Cr

3,860

56,501 Cr

18,756

37,745 Cr

The cash book (bank columns) for March 2012 is as follows:

Cash Book
2012

Mar

4 Easy Co

498,753

"

20 Fulton Ltd

77,987

"

30 Paul Chan

"

31 Balance c/d

2012
Mar

$
1 Balance b/d

375,984

"

7 Citizen Ltd

135,950

7,590

"

22 Henry Lau

3,860

58,339

"

28 Salem Ltd

126,875

642,669

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)

Cash Book

201
2

$ 201
2

Mar 31 Dividends Direct

credit
"

31 Balance c/d

2,750 Mar 31 Balance b/d

81,540 "

58,339

31 Management fees Direct

7,195

debit

"

31 Overdraft interest

84,290

18,756
84,290

(b)

Karen & Co
Bank Reconciliation Statement as at 31 March 2012
$
Corrected overdraft balance as per cash book

(81,540)

Add Unpresented cheque (Salem Ltd)

126,875
44,335

Les Uncredited cheque (Paul Chan)

s

(7,590)

Overdraft balance as per bank statement

(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:
Cash Book (Bank Column Only)
201
$ 201
$
0
0
Aug 1 Balance b/d
2,42 Aug 2 General expenses (211012)
67
0
Aug 4 Sales
835 Aug 9 Wages (211013)
330
Aug 23 Sales
716 Aug 11 Drawings (211014)
410
Aug 31 Company A
185 Aug 12 Purchases (211015)
406
Sales
640 Aug 24 Rent (211016)
290
2,44 Aug 25 Wages (211017)
345
6
Aug 27 C Limited (211018)
502
4,79
2,350
6
Bank Statement
Dat
Details
e
200
9

Dr

Cr

Balance

Aug
Aug
Aug
Aug
Aug
Aug
Aug
Aug

1
3
4
7
11
16
20
23

Aug 27
Aug 30

Balance b/d
CQ211012
Credit
Standing order (rates)
CQ211013
CQ211014
CQ211015
Direct debt (insurance)
Credit
CQ211017
Credit transfer B Limited
Bank interest

67
835
136
330
140
406
153
716
345
268
8

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 companys 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 31 Balance
$2,350)

b/d

Tai Sang Company

Cash Book (Bank Column Only)
$ 201
0
($4,796 2,446 Aug 31 Standing order (rates)

"

31 Drawing
($410$140)

overstated

"

31 Credit transfer B Limited

"

31 Bank interest

270

"

31 Direct debt (insurance)

268

"

31 Balance c/d

1 Balance b/d

136
153
2,703

8
2,992

Sep

2,992

2,703

(b)
Tai Sang Company
Bank reconciliation statement as at 31 August 2010
Balance as per bank statement
Add Uncredited itemsCompany A
Uncredited itemsSales

$
185
640

$
2,670
825
3,495

Less Unpresented cheques (211016)

Unpresented cheques (211016)
Balances as per updated cash book

290
502

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
Companys 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 companys 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 companys
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 companys 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
Date of issue
Amount
Number
30801
17 December
$2453
2011
30834
30 December
$3758
2011
(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

$ 201
1

31 Balance b/d

4000 Dec

31 Bank charges (i)

31 Trade receivables (ii)

7933

31 Balance b/d

469
11437

11933

(b)

11933

VM Ltd
Bank reconciliation Statement as at 31 December 2011
$

Balance as per adjusted bank account

$
11437

Add: Unpresented cheques (iii)

30801

2453

30834

3758

6211
17648

Less: Uncredited deposit (iv)

Balance as per bank statement

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
firms 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 companys 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:
Marc
h

2
5
1
1
1
6
2
2
2
9
3
0
3
1

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.
From the proceeds of cash sales, paid $1,000 for cash purchases of trading goods and
banked the remaining $4,600.
Settled a suppliers 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) Bank lodgement on 31 March 2010 had not yet been recorded by the bank.
(ii) 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

Details

Mar
1
Balance
b/d
2
Debtors
5
Sales
5
Cash
16 Debtors
29 Debtors
31 Debtors
31

Discoun Cash
t
$
$
38,900
216

Cash Book
Bank
2010
$

6,984
5,600
4,600

400

19,600
27,800
3,007

93

Balance
c/d

709

64,100

Mar
1
5
5
11
22
30
31

Details

Discou
nt
$

Cash

Bank

$
6,240

Balance b/d

31

Purchases
Bank
Creditors
Creditors
Salaries
Bank service
charge (ii)
Rent (iv)

31
31

Debtors (v)
Balance c/d

42,391

1,000
4,600
150

2,850
16,500
14,000
200
18,000

4,100
28,000 11,001
150 64,100 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

$
27,19
4
3,007
30,20
1
19,20
0
11,00
1

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:
Marc
h

3
4
8
1
0
1
6
2
1
2
6
3
0
3
1

Cheques for $100,480 were received from customers in full settlement of debts totaling
$102,000.
Settled a suppliers outstanding balance of $2,000 by cheque. A discount of 2% was
received for payment made within the discount period.
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
Rexs 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.

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 Book
Cash Bank
2007
Details
$
$
Mar
16,400
1
Balance b/d

4
Creditors ($2,000 x 98%)
100,480
3,000 16 Drawings

15,600
16 Bank ($15,600 $9,600)
6,000
21 Rent

1,650

26
31
31

32,000 111,130

Cash Bank
$
$
4,590

1,960
9,600

6,000

23,000

Furniture deposit ($5,000 x

1,000
20%)
Petty cash ($5,000 $1,100) 3,900

Balance c/d
12,500 80,580
32,000 111,13
0

(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)

9,050
2,800

Less: Cheque honoured by bank (i)

Lodgement not yet recorded by bank (ii)
Autopay for rates (iv)
Balance as per bank statement

3,000
1,650
860

HKCEE (2006, 5)

80,58
0
11,85
0
92,43
0

5,510
86,92
0

(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 months 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 + 315,000
300,700)
Bank deposit interest
Kettler Limited

$
34,200
650

$
80

Bank charges
Star Ray Limited dishonoured cheque

2,400 Balance c/d

37,250

10,25
0
26,92
0
37,25
0

(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

$
26,92
0
16,50
0
43,42
0
6,630
36,79
0

Sample 1
(Bank Rec)
The bank account for Flora Lees 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)
Cash Book
Bank
2011
Sept

Bank

$ 2011
30 Capital

Credit transfer (iii)

11,20 Sept

$
30 Balance b/d

33,22

0
"

30 Accounts receivable

0
"

30 Rent

Standing Order (ii)

13,30
0

Credit transfer (iv)

340

"

30 Albert

Au

Incorrect

amount
"

30 Cheque

receipt

wrongly

entered

recorded

($3,880

700

$3,180) (vi)

on credit side with a wrong

"

30 Debit side

total

of cash

book
amount
$7,211)
"

30 Balance c/d

(vii)

($7,122

+ 14,33

overstated (viii)

800

3
22,14
7
48,02

48,02

(b)
Flora Lee
Bank Reconciliation Statement as at 30 September 2011

$
Adjusted balance as per cash book

(22,147
)

Add Unpresented cheques ($350 + $600 + $2,100) (i)

3,050
(19,097
)

Less Uncredited item (v)

(900)

Overdraft balance as per bank statement

(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:
Cash Book (Bank Column)
2012
Jan

$
1

Balance b/d

2,355

2012
Jan

$
Payments

42,30
0

"

Receipts

32,66
0

"

Balance c/d

7,285

1
42,30

42,30

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 payers 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 Date credited by the bankAmount
Jan 29
Feb 1
$1,200
" 30
Jan 31
$2,400
" 31
Feb 2
$2,350
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
Pangs business as at 31 January 2012.

Answer:
(a)
Cash Book (Bank Column)
201

$ 201

Jan

Bank interest revenue (iv)

378 Jan

1
"

"
"
"

7,285

1
Mr Wong Direct credit (v)

1,900

"

1
"

3 Balance b/d
3 casting errors of cash book (i)

3,800

Dividend income wrongly

credited

as bank charges (vi) (3456 x

2)

Rental income Credit transfer

(viii)

Balance c/d

"

3 Debtor Dishonoured
1

6,912

"

3,353

cheque (iii)

3 Bank loan interest (vii)

2,000

1
800

"

3 Rent Standing order (vii)

2,210

1
8,658

1
18,64
8

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).