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problem 1) Accountant of ABC Ltd Co is involved in reconciliation of the balance in the cash book with that of the bank statement. Cash book balance at 31 March 2006 was Rs 1,544 (Debit), as the bank statement showed an overdrawn balance of Rs 8,542. Upon investigation, the treasurer found following discrepancies:

(a) A cheque paid for purchase of stationery for Rs 750 had been entered in the cash book as Rs 705.

(b) A receipt of Rs 176 shown in the bank statement had not been entered in the cash book.

(c) Cheques for the amount of Rs 19,552 had not been paid into the bank.

(d) The credit side of the cash book for the month of March 2006 had been overstated by Rs 1,000.

(e) Bank commissions and charges of Rs 700 do not appear in the cash book.

(f) Receipts of Rs 5,350 paid into the bank on 31st March 2006 don’t appear in the bank statement.

(g) A direct debit payment of Rs 2,391 for telephone charges hadn’t been entered in the cash book.

(h) A credit transfer of Rs 1,552 hasn’t yet been entered in the cash book.

(i) Cheques amounting to Rs 15,224 have not yet been presented for payment.

Required:

(a) Create the amended cash book for the month of March 2006.

(b) Create a statement to reconcile the bank statement balance with the amended cash book balance.

(c) Mention the amount of bank balance to be included in the Balance Sheet as at 31 March 2006.

(d) What are the major reasons accounting for the difference between balance in the cash book and the bank reconciliation?

(e) Distinguish between a standing order and a direct debit.

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  • Category:- Accounting Basics
  • Reference No.:- M96423

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