Question

7. This is the bank account of a firm as shown in its Cash Book for the

Month of January.
Dr
2002
Jan 1
Balance b/d
6
Sales
7 Rent received
18 M.Yoa
29 Sales
30 Other
Feb1 Balance b/d
2002
2
Jan 1 Balance b/f
Deposit
Cheque No.2999
Cheque No. 3000
910
505
(40)
80
407
110
2052
1405
Cash Book
$
2002
12 Cheque No. 3001
15 Cheque No. 3003
20 Deposit M.Yoa
31 Service charge
Jan 3 Wages
7
4
9 Deposit
Deposit
10 Credit transfer: L Jake
Purchases
10 Fisher
15 S.Sung
30 Rates
31 Balance c/d
Bank Statement
Dr
100
60
312
(14
30
Chq No.
3000
3001
3002
3003
3004
Cr
$
265
505
40
200
80
Cr
$
60
312-
141
114
20
(1405
2052
Balance
S
745
1010
910
(c) Draw up a statement to reconcile the difference between the
amended balance in the Cash Book and the balance as shown
by the Bank Statement as at 31 Jan 2002.
850
1355
1395
1595
1283
1169
1249
1219
Required:
(a) Compare the opening balance (1 Jan 2002) in the Cash Book to
the opening balance in the Bank Statement. Assuming that there
are no errors in the two sets of records, explain why they differ.
(b) Bring the Cash Book up to date.

Answer 1

(a) **Comparing Opening Balances (1 Jan 2002):**

The opening balance in the Cash Book on Jan 1, 2002, is $6, whereas the opening balance in the Bank Statement is $60. The difference arises due to an unrecorded deposit in the Cash Book. The deposit made on Jan 2, as per the Bank Statement, is $54 (\$60 - \$6), and this amount needs to be added to the opening balance in the Cash Book to reconcile the difference.

(b) **Bringing the Cash Book up to Date:**

1. **Deposits:**
- Jan 2: Record the deposit of $54 (Cheque No. 3002) in the Cash Book.
- Jan 9: Record the deposit of $505 (Cheque No. 3001) in the Cash Book.

2. **Cheques:**
- Jan 12: Record the cheque payment of $60 (Cheque No. 3000) in the Cash Book.
- Jan 15: Record the cheque payment of $312 (Cheque No. 3001) in the Cash Book.

3. **Credit Transfers:**
- Jan 10: Record the credit transfer to L. Jake Fisher of $407 in the Cash Book.

4. **Other Transactions:**
- Jan 30: Record the service charge of $20 in the Cash Book.

After making these adjustments, the Cash Book should be up to date, and the closing balance on Jan 31, 2002, should match the closing balance on the Bank Statement.