Cat Ltd. received the bank statement from CC Bank showing a balance of $27,000 a

ID: 2567836 • Letter: C

Question

Cat Ltd. received the bank statement from CC Bank showing a balance of $27,000 at 30th June 2017. The book of Cat Ltd. showed a cash balance $28,000 as at 30th June 2017. No outstanding checks were carried over from last month and no deposits in transits were noted at the end of last month. You are the accountant and need to prepare the bank reconciliation at 30h June, using the following information: 1. Cat Ltd. had deposited total checks of $23,400 as at 30h June, but the bank showed deposit of $10,000 in the bank statement. 2. A check $500 issued by Shy Ltd. in favour of Cat Ltd. was returned by the bank because of insufficient fund. 3. Cat Ltd. issued a check of $3,600 for payment of equipment, but the company's assistant accountant erroneously recorded in accounting records as $4,600. 4. Service charged by bank, $400. 5. Total checks written by Cat Ltd. was $29,000 for paying the company's expenses but the checks cleared by the bank was $22,000. 6. A note receivable of $5,300 was credited directly to Cat Ltd.'s bank account. ah Ssrwitecoargea byronksio .rded n Required: (a) Prepare a bank reconciliation statement as at 30h June 2017. Show your (14 marks) (b) Prepare the journal entries that should be made in the accounting records of Cat (6 marks) workings. Ltd. as a result of the above bank reconciliation.

Explanation / Answer

Bank Reconciliation Statement.

S.NO.

Particulars

Total Amount (In $)

Balance as per Cat Ltd. Books

28,000

Deposit of checks but not cleared by Bank

(13,400)

Check dishonored but not recorded in books of Cat Ltd.

(500)

Wrong amount of equipment purchase entered in books

1,000

Service charges by bank not recorded in books of Cat Ltd.

(400)

Checks written by Cat Ltd. For expenses but not cleared till date

7,000

Note receivable directly credited in Bank and not recorded in Books

5,300

Balance as per CC Bank Statement

27,000

Note 1: Cat Ltd. Deposited checks of $23,400 and the same was recorded in the books as debit to Bank account but checks of only $10,000 is credited by Bank. Therefore, there is excess recording of cash receipts amounting to $13,400 in the books and the same is reversed.

Note 2: Check of $500 received from Shy Ltd. Is dishonored but the same is not credited in the books, therefore we have subtracted the same to credit in Bank account in the books.

Note 3: Company purchased equipment and erroneously recorded an excess debit to Bank account in the books amounting to $1,000. This means bank is decreased by $1,000 in the books. The same is now added back.

Note 4: Service charged by bank not recorded in books, now credited.

Note 5: Company issued checks of $29,000 to bank for payment but bank cleared only $22,000. Differential $7,000 were excessed recorded as debit company in books. Therefore, the same is added in books now to reconcile the bank statement.

Note 6: Bank credited the note receivable directly and the same is not recorded by company in its books of account. The same is now added in books.