CIMA BA3 · Chapter 6 · Question 6 of 10
A business's cash book shows an overdraft of $2,150. Comparison with the bank statement at the same date shows: (1) A customer's cheque for $480 has been dishonoured; this appears on the bank statement but has not been recorded in the cash book. (2) Bank interest of $65 appears on the bank statement but has not been recorded in the cash book. (3) Cheques of $1,930 recorded in the cash book have not yet been presented to the bank. (4) A lodgement of $3,100 recorded in the cash book has not yet been credited by the bank. (5) The bank has made an error: it debited the business's account with a $250 cheque drawn by another customer of the bank. The bank has not yet corrected this error, so it is included in the bank statement balance. What balance is shown on the bank statement?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $4,115 overdrawn
Explanation
First correct the cash book for items (1) and (2): -$2,150 - $480 - $65 = -$2,695 (overdrawn $2,695). Then reconcile to the bank statement: add back unpresented cheques $1,930 (not yet deducted by the bank), deduct the uncredited lodgement $3,100 (not yet added by the bank) and deduct the uncorrected bank error $250 (wrongly deducted by the bank): -$2,695 + $1,930 - $3,100 - $250 = -$4,115. The bank statement shows an overdraft of $4,115. Ignoring the bank error gives $3,865 overdrawn, which is not an option.
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