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Chapter 15
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Which of these items will require an entry in the cash book?
A
3, 4 and 6
B
1, 3 and 5
C
1, 2 and 4
D
2, 5 and 6
Test your understanding 3
The following information has been extracted from the records of N
Patel:
Bank
account
$
Chq
no
$
1 Dec
Balance b/f 16,491 1 Dec
Alexander 782
857
2 Dec
Able
962 6 Dec
Burgess
783
221
Baker 1,103
14
Dec
Barry
784
511
10 Dec Charlie
2,312 17 Dec Cook
785
97
14 Dec Delta
419 24 Dec Hay
786
343
21 Dec Echo
327 29 Dec Rent
787
260
23 Dec Cash sales
529
30 Dec Fred
119 31 Dec Balance c/f
19,973
–––––
–––––
22,262
22,262
–––––
–––––
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High Street Bank
Bank Statement – N. Patel
Date Details Withdrawals
Deposits
Balance
$
$
$
1 December
Balance b/f
17,478
2 December
780
426
2 December
781
737
16,315
2 December
Deposit
176
16,491
5 December
782
857
5 December
Bank charges
47
15,587
6 December
Deposit
2,065
17,652
10 December Standing order
(rates)
137
17,515
11 December 783
212
17,303
13 December Deposit
2,312
19,615
17 December 784
511
19,104
17 December Deposit
419
19,523
23 December Deposit
327
19,850
24 December Deposit
528
20,378
28 December 786
343
20,035
30 December 310923
297
19,738
31 December Balance c/f
19,738
(a)
Prepare a bank reconciliation statement at 1 December.
(b)
Update the cash book for December.
(c)
Prepare a bank reconciliation statement at 31 December.
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Test your understanding 4
The following is a summary of Ami’s cash book as presented to you for
the month of December 20X6:
Bank account
$
$
Receipts 1,469
Balance
b/f
761
Balance c/f
554 Payments
1,262
–––––
–––––
2,023
2,023
–––––
–––––
All receipts are banked and payments made by cheque.
Upon investigation you discover:
1
Bank charges of $136 entered on the bank statement had not been
entered in the cash book.
2
Cheques drawn amounting to $267 had not been presented to the
bank for payment.
3
A cheque for $22 had been entered as a receipt in the cash book
instead of as a payment;
4
A cheque drawn for $6 had been incorrectly entered in the cash
book as $66.
What balance is shown on the bank statement at 31 December
20X6?
A $913
B $941
overdraft
C $941
D $407
overdraft
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Chapter summary
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Test your understanding answers
Test your understanding 1
Cash book
$
$
Bank interest
X
Bank charges
X
Direct credits
X
Direct debits/standing
orders
X
Dishonoured
cheques
X
Test your understanding 2
The correct answer is B
Test your understanding 3
Bank reconciliation statement as at 1 December
$
Balance per bank statement
17,478
Less: Outstanding cheques ($426 + $737)
(1,163)
Add: Outstanding lodgements
176
––––––
Balance per cash book
16,491
Bank account
$
$
Balance b/f
19,973 Deposit difference
($529
–
528)
1
Error – cheque 783
Bank charges
47
($221–212) 9
Rates – s/order
137
Revised balance c/f
19,797
–––––
–––––
19,982
19,982
–––––
–––––
Revised balance b/f
19,797
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Bank reconciliation statement as at 31 December
$
Balance per bank statement
19,738
Less: Outstanding cheques ($97 + 260)
(357)
Add: Outstanding lodgements (Fred)
119
Bank error (Cheque 310923)
297
––––––
Balance per cash book
19,797
––––––
Test your understanding 4
The correct answer is D
Bank account
$
$
Adjustment re cheque (4)
60 Balance b/f
554
Balance c/f
674 Bank charges (1)
136
Adjustment re paid
cheque entered as receipt
(3)
44
––––
––––
734
734
––––
––––
Balance
b/f
674
Bank reconciliation statement as at 31 December 20X6
$
Balance per bank statement at 31 December 20X6 (derived)
(407)
Less: Cheques issued but not yet presented (2)
(267)
Balance per cash book at 31 Dec 20X6
–––––
(674)
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The trial balance, errors
and suspense accounts
Chapter learning objectives
Upon completion of this chapter you will be able to:
•
identify the purpose of and prepare a trial balance
•
identify the types of error which may occur in bookkeeping
systems
•
identify the types of error which would and would not be
highlighted by a trial balance
•
understand the purpose of a suspense account
•
prepare journal entries to correct errors and clear out a
suspense account
•
understand and calculate the impact of errors on the financial
statements.
PER
One of the PER performance objectives (PO6) is
to record and process transactions and events.
Working through this chapter should help you
understand how to demonstrate that objective.
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16
The trial balance, errors and suspense accounts
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1 Overview
Introduction
This chapter deals with collation of ledger account balances into a trial
balance, along with consideration of how errors in accounting records
may arise and how they are corrected.
Much of the content of this chapter is new. Correction of errors and
accounting adjustments are an important topic in your future ACCA
studies, in particular for Financial Reporting and Strategic Business
Reporting.
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2
The trial balance
At the end of the year, once all ledger accounts have been balanced off, the
closing balances are summarised on a long list of balances. This is referred to
as a trial balance.
All the closing debit balances are summarised in one column and the closing
credit balances in another. Given the nature of the double entry system
described in this text the totals of both columns should agree. If not the
discrepancy must be investigated and corrected.
This is another control in the accounting system to ensure that the balances
reported in the financial statements are accurate. The layout of a trial balance is
illustrated below:
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