NABTEB Accounting 2022 Theory — Question 5

Model answer

Dupe Enterprises Adjusted Cash Book (balancing figure approach): Dr side: Dividend 315,000; Payment overcast (correction, added back) 256,813; Credit transfer 1,050,000; Receipt undercast 256,813 -- Total Dr = 1,878,626 Cr side: Payment understated (correction) 332,500; Balance b/f (original overdraft) 216,126; Standing order 420,000; Bank charges 8,750; Dishonoured cheque 700,000; Balance c/d (adjusted, overdrawn) 201,250 -- Total Cr = 1,878,626 Adjusted cash book balance = #201,250 overdrawn (Dr side balance c/d 201,250, i.e. an overdraft). Bank Reconciliation Statement as at 31 December 2016: Balance as per adjusted cash book (overdrawn): 201,250 Add: Unpresented cheque: 1,165,500 = 1,366,750 Less: Uncredited cheque: (1,922,375) = (555,625) Less: Bank error: (150,000)... [Working: cheque drawn 697,550 less amount recorded in cash book (payment undercast) 365,050 = 332,500 correction] Balance as per bank statement (overdraft) = #905,625 Note: the balance is shown as an overdraft (negative) because a bank overdraft occurs when withdrawals exceed the amount held in the account - it is a short-term loan from the bank.