8.0 Learning Objectives………………………………………………………………..
8.1 Introduction……………………………………………………………………….
8.2 Current Account………………………………………………………………….
8.2.1 Opening a Bank Current Account…………………………………………
8.2.2 Cheques……………………………………………………………………………
8.2.3 Pay-in-Slip…………………………………………………………………………
8.2.4 Dishonoured Cheques……………………………………………………………..
8.2.5 Stop Payment Order……………………………………………………………….
8.3 Interest Bearing Accounts…………………………………………………………
8.3.1 Savings Accounts………………………………………………………………….
8.3.2 Fixed Deposit Account…………………………………………………………….
8.4 Inter-Bank Transfers……………………………………………………………….
8.4.1 Mode of Operation of Electronic Banking Products………………………………
8.5 Credit Cards……………………………………………………………………….
8.6 Bank Statement…………………………………………………………………….
8.6.1 Example of a Bank Statement……………………………………………………
8.7 Bank Reconciliation Statement……………………………………………………
8.7.1 Steps Involved in the Recognition of Discrepancies……………………………
8.7.2 Preparation of the Bank Reconciliation Statement………………………………
CHAPTER EIGHT
BANKING SYSTEMS AND
SERVICES
8.0 Learning objectives
At the end of this chapter candidates should be able to
Know the types of accounts a business can open with the bank
Understand interbank transfers
Understand the role and operations of the electronic fund transfer (EFT).
Recognize the causes of discrepancy between bank statement and cash book balances.
Determine the cash available to a business for inclusion in the end of period statement of financial position.
Prepare a bank reconciliation statement.
8.1 Introduction
In the last chapter we said that one of the ways to guide against loss of cash through theft and fraud is to open and maintain a bank account. Apart from guiding against theft a business entity or customer can also enjoy some credit facilities and professional advice from its/his bank. There are two main types of account a customer may keep with the bank. These are current accounts and savings accounts.
8.2 Current Account
A current account is operated by the use of cheques. Money can be withdrawn from the account anytime without giving prior notice to the banker. For this reason it is called “Demand Deposit.” The customer usually does not enjoy any interest on current account balances. In a few cases, little interest may be given by the bank. A current account customer may be granted an overdraft.
A Cheque book is issued to the account holder when a current account is opened. Each cheque is assigned with identification number that is serially numbered. The holder of the account can issue cheques for payment to any person he has done business with. However, the cheques must be duly signed by the drawer and the signature, which must be regular or identical to the signature on the mandate card.
Money is deposited into the bank account through pay-in-slip. The number assigned to the cheques and pay-in-slip is printed in magnetic ink to make processing of transactions possible by the computer.
At intervals, usually every month, the banker will send bank statement to its customers, detailing all cash lodgement, payment cheques, dishonoured cheques, bank charges, direct payments, dividend warrants received on behalf of the customer etc.
8.2.1 Opening a Bank Current Account
Every business entity is required to open a current account to transact its business. The bank requires the customer to provide the following items /information for opening a current account.
(a) A written application to open an account, stating the type and purpose of the account.
(b) Two or more reference letters from people who maintain current accounts with any branch of the bank or other banks.
(c) Completed mandate cards.
(d) Two or more passport photographs.
(e) Copy of the Article and Memorandum of Association if it is a corporate organization or deed of partnership for partnership firms and constitution in respect of un-incorporated body.
(f) An extract of the minutes of the meeting in which the decision to open the account was taken.
(g) An initial deposit as may be stipulated by the bank from time to time.
(h) In some countries evidence of payment of tax by the sole trader, partner or the limited liability company.
(i) The specimen signature by the authorized person must be signed on the mandate card. The signature on cheques is compared with the specimen signature each time the customer wants to make withdrawal.
8.2.2 Cheques
A cheque is a written order upon a particular banker to pay a certain sum of money to a specified person or organization. There are three parties to a cheque namely
i. The drawer- issues the cheque
ii. The drawee- The bank on which the cheque is written and
iii. The payee- the person to whom the cheque is payable.
One of the means by which a bank customer can know the balance in his/her account is to record on the cheques‟ counterfoils the amount of money drawn and the amount of money deposited. Another means of knowing the balance is through the amount recorded in the bank columns of the cash book.
8.2.3 Pay-In-Slip
A bank customer fills out pay-in-slip for each deposit usually in duplicate or triplicate.
Some pay-in-slips are carbonized.
Items to be found on a pay –in-slip or cash lodgements teller are:-
i. Date
ii. Bank and branch
iii. Account number
iv. Account name
v. Note and coin denomination
vi. Amount in words
vii. Amount in figures
viii. Total amount
ix. Payer’s name and signature
x. Payer’s telephone number
xi. Mothers‟ maiden name
Details of cheques are analyzed on the reverse side of the pay-in-slip, if the latter is not the carbonized type.
The bank teller will sign the duplicate copy of the pay-in-slip. This will serve as documentary evidence of the amount deposited. The pay-in-slip can be compared with the amount debited in the cash book.
8.2.4 Dishonoured Cheques
A business may deposit a cheque received from a customer into its bank account but the bank may refuse to honour the cheque for various reasons. A cheque that is so treated is referred to as a dishonoured cheque.
A cheque may be dishonoured for any of the following reasons:-
i. The cheque is not dated
ii. The amount in words does not correspond to the figure written on the cheque
iii. The balance in the drawer’s account is not sufficient to accommodate the amount to be drawn with the cheque.
iv. The cheque has been mutilated
v. The cheque has become stale
vi. Signature on the cheque is irregular
vii. The cheque is post-dated viii. The cheque is not signed.
ix. Suspicion that the cheque has been stolen from the drawer and there is a need to seek further confirmation from the drawer.
8.2.5 Stop Payment Order
When a cheque is lost or stolen, the owner of the cheque should issue a stop payment order on the bank. He should identify the missing cheque by its serial number and amount if the cheque had been issued and signed. The stop order is issued to prevent payment to a wrong person.
8.3 Interest Bearing Accounts
Some business organisations transact a large volume of business through their current accounts every month, and they may not be able to earn any interest on their current account balances. Therefore some businesses usually open some other accounts on which they can earn interests; these could be referred to as interest-bearing accounts. These consist of savings account and fixed deposit account. They will transfer surplus cash from the current account to these accounts to earn interests
8.3.1 Savings Account
This type of account is meant for the small savers to keep their surplus funds. This account is usually opened by individuals such as clubs, associations, salary earners, petty traders etc. A prospective customer who is a salary earner should bring a letter of introduction from his/her employer, upon which he/she will be given the bank’s application forms to complete and supply the following information:
(i) His full names and address (Not P. O. Box)
(ii) Business or Occupation
(iii) Specimen signature or thumb print
(iv) Three (3) recent passport photographs, and
(v) Customer’s identity card or international passport or driver’s license.
(vi) The initial deposit. This varies from bank to bank. The bank then issues the paying-in-booklet to the customer to enter the initial deposit and every subsequent deposit.
Some other distinguishing features of savings account are:
(i) No cheques are required for withdrawal
(ii) Customers may not be granted overdraft facilities on this type of account
(iii) Interest is payable on the sum standing to the customer’s credit
(iv) The balance standing to a customer’s credit on savings account is repayable on demand. Although, there is a dormant rule, which requires at least 7 days notice before withdrawal is made.
(v) Customer must be present physically when withdrawal is made.
(vi) In some years back, passbooks were issued to the customer to show both the credit and debit entries of the account. But nowadays, paying-in-slips and withdrawal booklets are issued to customers to make payments to and withdrawals from their accounts.
(vii) No reference is required for this type of account except where cheques will be paid into the account in the future, but a letter of introduction is required where the account will be used to receive the customer’s salary.
8.3.2 Fixed Deposit Account
In this situation, an account is kept with the bank in form of investment for a specific period of time usually 30 days, 60 days, 90 days or 180 days. A fixed rate of interest is paid by the bank on such bank deposits. The banker needs to be adequately informed before cash can be withdrawn from this account.
The features of this type of account are as follows:
(i) The balance standing to a customer’s credit on deposit account is repayable or rolled-over upon a written application after a stated or agreed period.
(ii) The customer is not issued with cheque book but with a receipt or certificate indicating the terms and conditions of the deposit e.g. amount fixed, interest rate, date of maturity etc.
(iii) Both the bank and the customer agree on the terms and conditions of the relationship, such as interest rate, amount and duration of the account.
(iv) No bank statement is issued to the customer.
(v) No reference is taken since the account requires cash transaction. But where lodgement of cheque is anticipated in the future, bank must ensure that references are taken and all the necessary account opening procedures are followed.
(vi) No commission is charged by the bank.
8.4 Inter-Bank Transfers
Through the use of computer and the internet, a lot of electronic equipment is now available which enables banks to transfer funds from the account of one customer to another without the need for exchange of paper document. This electronic equipment is turning the monetary system to a cashless society.
At present in Nigeria, some of the available Electronic banking products are AutoTeller Machine (ATM), Electronic Fund Transfer (EFT) and Electronic devices such as the Magnetic Ink Character Recognition (MICR).
Apart from the foregoing, there are some other forms of electronic banking which are yet to be available in Nigeria. These include: Electronic Fund Transfer At Point of Sales (EFTPOS), Debit Cards and Smart Cards.
We shall now discuss the mode of operation of some of these products.
8.4.1 Mode of Operation of Electronic Banking Products
i) Auto-Teller Machines (ATM)
ATM is a cash dispenser which is designed to enable customers enjoy banking services without coming in contact with the Bank Teller (Cashier). The machine, therefore, performs the function traditionally reserved for cashiers. It is electronically operated and as such response to request by customers is done instantly.
(a) ATM is user-friendly and it guides users through the instructions that have been pre-programmed into it for easy operation.
(b) Access to the ATM is through the use of Personal Identification Number (PIN) and a plastic card that contains magnetic strips with which the customer is identified. Banks usually handover the PIN personally to the customer who is usually instructed not to disclose the number to a third party.
(c) It is essential for users to ensure the safety of the ATM card as well as to ensure that its surface is not mutilated. Otherwise, the machine may reject it, even where the PIN has been correctly entered.
(d) The first step to take while using the ATM is to insert the Card and thereafter the PIN. Then the customer can select the service required e.g. withdrawal, in which case the „Withdrawal‟ Key is depressed, and then presses the number keys for the amount of money required as well as the denominations wanted. It is not enough to punch the amount required, it is also necessary to press “ENTER” for the ATM to work.
Other functions that the machine is capable of performing are:
Printing of statements
Provision of account balances
Transfer of funds
Payment of bills
Cash Advances and
Display of Promotional messages
The objective of introducing the ATM in Nigeria is to decongest the counter; hence these ATM can only perform withdrawal functions.
ii) Electronic Fund Transfer (EFT)
EFT system allows customers account to be credited electronically instantly anywhere in the country especially in banks where there is on-line service. It provides a more suitable and cost-effective way of transferring funds when compared with the traditional modes such as Mail/Telegraphic transfers. It is more secure and time saving when money is transferred through EFT. Such money is transferred electronically by the bank through their branches or accredited agents.
iii) Electronic Fund Transfer At Point of Sale (EFTPOS)
This is a system which enables a customer’s account to be debited instantly with the cost of purchase in an outlet. The system requires the customer to be an ATM Card holder.
iv) Electronic Card Products (DEBIT CARD)
At present, most banks in Nigeria issue electronic debit cards. Debit Cards are like the EFTPOS that are supposed to be passed to a customer’s account immediately.
There are two popular debit cards; the Pass Card and the Smart Card.
(a) Pass Card
This product is processed in an IBM machine by debiting a customer’s bank account.
(b) Smart Card
This is a debit card whose micro-chips contain additional information on bio-data and financial position of the holder.
8.5 Credit Cards
A credit card is a convenient method of payment which embodies two essential aspects of basic banking functions; the transmission of payment and the granting of credits.
A credit card is similar to a cheque which is drawn upon the funds of the credit card company rather than upon the personal account of the customer. The credit card company would pay cash promptly to the creditor to redeem the credit card.
At the end of the month, the credit card company bills the credit card holder for all the drafts it has redeemed during the month. Making sales through credit cards, suppliers receive cash more quickly from credit sales and avoid problems of bad debts.
There are bank credit cards and non-bank credit cards.
(a) Bank Credit Cards: - Some widely used credit card is the master card. A business may deposit bank credit card draft directly in its bank account together with cash and cheques received from a customer. The bank accepts the credit cards for immediate deposit. Therefore sales to bank customers using credit cards are treated immediately as cash sales. The banker deducts some service charges from the customer‟s balances for handling the credit cards.
(b) Non bank credit cards: - Non bank credit cards drafts are not deposited directly into the bank. Therefore non bank credit cards drafts received from customers are not treated as cash sales but amount receivable from them.
The credit cards are sent to the credit cards company at periodic intervals. The credit cards company will now send cheques to the holder of the credit card draft. The amount received by this holder would not be the face value of the sales made or services rendered. The credit card company would have discounted the amount say by 5% to pay him for handling the credit cards.
Illustration 8.1
Ossei Ltd. based in Ghana, sold some goods for N65,400 to a customer who uses Bafo Ltd.. Credit card. After seven days Ossei Ltd. sent the credit card drafts to Bafo Ltd.
which redeems the draft after deducting 7.5% discount.
Show the entries in the book of Ossei Ltd.
Solution to Illustration 8.1
(1) When the sales is made DR CR
N N
Receivables 65,400
Sales 65,400
To record sales to a customer using Bafo Ltd.. credit cards
(2) When Bafo Ltd. redeems the draft
DR CR
N N
Cash 60,495
Discount expenses on credit cards 4,905
Receivables Account 65,400
To record the collection of Amount due from Bafo Ltd. less 7½% discount.
Note: The credit card expenses will be treated as part of the operating expenses in the income statement.
8.6 Bank Statement
The bank usually sends a bank statement to its customer at the end of every month. The statement contains details of the receipts and payments by and on behalf of the customer for that period. Receipts will include cash paid into the customer‟s account and those paid by third parties direct into the bank. Until the customer receives the bank statement or a credit advice transaction alert in respect of the direct credit to his bank account, the business may not be aware of it or the amount involved.
Payment or withdrawal will also include details of cheques issued by the customer, bank charges and payments made on behalf of the customer to third parties by the bank ( if the customer so directs the bank, this is called a standing order).
The balance at the end of the period represents the balance as per bank statement. This balance can be a credit balance (favourable) or a debit balance (overdraft). Remember though that in the cash book of the customer, a favourable balance is a debit balance and a credit balance is an overdraft.
8.6.1 Example of a Bank Statement
Illustration 8.2 below is used as an example of a bank statement.
Illustration 8.2
Mr. K. A. Afolabi maintains a current account No. 000023456 with XYZ Bank Ltd..
The balance on the account as at 31/12/2001 was N15,500 credit.
Mr. Afolabi‟s transaction with the bank in the month of January 2002 were as follows
(i) N10,000 cash deposited on 2/1/2002.
(ii) A cheque of N2,500 issued to Mr. Afolabi by one of his receivables was lodged into his bank account on 6/1/2002.
(iii) He drew a „cash‟ cheque number 000062 for N4,000 on 7/1/2002. The cheque was presented to the bank and payment received on that date.
(iv) He issued a cheque No.000063 for N5,000 to one of his creditors, Mr. S. O. Babalola on 10/1/2002. Mr. Babalola presented the cheque to XYZ Bank Ltd. on 13/1/2002 and received payment.
(v) Received cheques totalling N22,000 from various customers and lodged them into the account on 14/1/2002. All cheques matured for credit to the account on 19/1/2002.
(vi) There was a standing agreement between the bank and Mr. Afolabi that his monthly life assurance premium of N2,150 should be paid direct to the insurance company by the bank. The bank remitted this on 25/1/2002
(vii) A customer living upcountry deposited a cash sum of N9,500 into Mr.
Afolabi‟s account No 000023456 with the local branch of XYZ Bank Ltd.. on 27/1/2002. The bank credited Mr. Afolabi‟s Account the same day.
(viii) On 31/1/2002 XYZ Bank Ltd. debited Mr. Afolabi‟s account with a service charge of N420.50.
You are required to prepare a statement as it would have been prepared by XYZ Bank Ltd reflecting the above transactions
Solution to Illustration 8.2
XYZ Bank Limited
202 Marina, Lagos Statement In respect of:
Account No: 000023456
Customer: Mr. K. A. Afolabi
Period covered: 01/01/2002 – 31/01/2002
Date issued: 05/02/2002
Date Transaction Debit N Credit N Balance N
01/01/2002 Balance b/f 15,500
02/01/2002 Cash deposit 10,000 25,500
06/01/2002 Cheque deposit 2,500 28,000
07/01/2002 Cheque No 000062 –cash 4,000 24,000
13/01/2002 Cheques No 000063- 5,000 19,000
19/01/2002 Cheque deposit 22,000 41,000
25/01/2002 Standing Order 2,150 38,850
27/01/2002 Cash deposit 9,500 48,350
31/01/2002
service charge 420.50 47,929.50
Opening Balance 15,500.00
Total Debit 11,570.50
Total credits 44,000.00
Closing balance 47,929.50
8.7 Bank Reconciliation Statement
The bank and its customer (e.g. a business entity) maintain independent records in respect of the transactions taking place between them. Therefore it is necessary to reconcile the bank statement balance with the bank balance in the cash book to be assured that the two are in agreement on the amount of money deposited and cheques drawn.
Usually the bank column balance and bank statement balance are not always in agreement and they need to be reconciled.
The disagreement between the two may be traced to the following factors:-
(a) Unpresented cheques: - These are the cheques drawn on the bank and given to the payees but they have not been presented for payment to the bank. The cash book of the business has been credited (that is it has been treated as payment through the bank by the business) this transaction would appear on the credit side of the cash book but missing from the debit side of the bank statement.
(b) Uncredited cheques: - these are cheques deposited in the business bank account and not yet recorded in the bank statement until three or four days thereafter, whereas it would have been recorded on the debit side of the cash book.
The transaction will appear on the debit side of the cash book but missing from the credit side of the bank statement.
(c) Bank charges:- These are charges made by the bank to cover the expenses in handling bank account. The major charges are based on the volume (i.e. turnover) of the transactions on the account. It is sometimes called commission on turnover (COT). Other charges are charges for cheque book, interest charges on bank overdraft facilities from the bank, administration expenses etc.
These charges would have been recorded in the bank statement but will be missing on the credit side of the cash book.
(d) Direct Debits: These are direct payments of expenses on behalf of the business. These have the same effect as the bank charges.
(e) Direct Credits: These are amounts received on behalf of the business directly by the bank. The bank statement would have been credited but the entry will be missing from the debit side of the cash book.
(f) Error of the customer or of the bank
8.7.1 Steps Involved In the Recognition of Discrepancies
(a) Tick items on the debit side of the cash book against items on the credit side of the bank statement. Outstanding items on the debit side of the cash book but missing on the credit side of the bank statement are uncredited cheques. List them.
(b) Tick items on the credit side of cash book against items on the debit side of the bank statement. Items outstanding on the credit side of the cash book but missing on the debit side of the bank statement are unpresented cheques. List them.
(c) The remaining items on the debit side of the bank statement are bank charges and standing order. List them.
(d) The remaining items on the credit side of the bank statement are amounts paid into the bank directly for the benefit of the business entity by its customers (i.e. direct credits).
(e) After all these have been adjusted, it should be possible to reconcile the cash book balance with the balance on the bank statement. If it is not, then there are some errors which further investigation would reveal and be traced to their sources.
8.7.2 Preparation of the Bank Reconciliation Statement
Two main steps are involved in the preparation of a bank reconciliation statement.
(1) Determine the adjusted cashbook balance. This adjustment will not be affected by items (a) and (b) above. The adjustment will be affected mainly by items (c) and (d).
(2) Reconciling the adjusted cash book balance with the bank statement balance.
Step 1 - Determining the adjusted Cash Balance
Format
Cash Book (with Adjustment)
N N
Balance b/d x Standing order x
Direct debit x Cheque earlier lodged
now dishonoured x
Add: - Direct Credit x Bank charges x
Understatement x Overstatement of cash x
_ Adjusted cash balance x
xx xx
The adjusted cash book balance is the amount that will be shown in the statement of financial position
Step 2 - Reconciling the adjusted cashbook with the bank statement
N
Adjusted Balance as per cash book xx
Add: Unpresented cheques xx
Error of overstatement by bank xx xx
Less: Uncredited cheques xx
Error reducing the business balance
committed by bank xx xx
Balance as per bank statement xx
Using an Alternative Method
N
Balance as per bank statement xx
Add: Uncredited cheques xx
Bank error reducing cash balance xx
Less:
Unpresented cheques xx
Bank error overstating cash balance (xx)
Adjusted Balance as per cash book xx
Illustration 8.3
The following bank account and bank statement relate to the firm of Mohammed and Sons for the period of 1 to 12 September, 2007
Bank Account
2007 N 2007 N
Sept 1 Bal b/f 6000 Sept 2 Cheque Owen 400
3 Cash 500 2 Cheque Peter 150
5 Cheque Kuku 85 6 Cheque Ringo 105
7 Cheque Labe 220 8 Cheque Smith 365
9 Cheque Michael 155 10 Cheque Thomas 1,120
11 Cheque Ndidi 360 12 Balance c/d 5,180
7,320 7,320
Balance b/d 5,180
Bank statement as at 12 September, 2007
2007 Debit Credit Balance
N N N
Sept 1 Balance 6,000
2 Cheque no. 98876 400 5,600
3 Cash 500 6,100
4 Charges 20 6,080
5 Cheque deposits 85 6,165
6 Cheque no.98877 150 6,015
7 Cheque deposit 220 6,235
8 Cheque deposit (by Umoru) 600 6,835
9 Cheque dishonoured 85 6,750
10 Standing order
(Insurance Premium) 560 6,190
11 Cheque 98878 105 6,085
You are required to:
(a) Effect the necessary adjustment to the bank account and prepare the adjusted balance.
(b) Prepare a Bank Reconciliation Statement
Solution to Illustration 8.3
(A) Adjusted Bank Account
Date N N
Sept 2007 Balance b/d 5,180 Bank charges 20
Direct credit (Umoru) 600 Standing Order 560
Dishonoured cheques 85
_____ Bal c/d 5,115
5,780 5,780
Balance b/d 5,115
(B) Bank Reconciliation Statement at 12 September, 2007
N
Adjusted balance as per cash book
Add:- unpresented cheques:- 5,115
Smith 365
Thomas 1,120 1,485
less:- Uncredited cheques: 6,600
Micheal 155
Ndidi 360 515
Balance as per Bank statement 6,085
Illustration 8.4
The following is the summary of the cash book of Akintola Enterprises for the month ended 31/12/20X5
Cash Book
N N
Balance b/d 2,110 sundry payment 23,280
Sundry receipt 22,610 bal. c/d 1,440
24,720 24,720
Balance b/d 1,440
On investigation the following errors were discovered.
i. Bank charges of N53 showed on the bank statement had not been entered in the cash book.
ii. A cheque drawn for N27 had been returned by the bank marked “Returned to Drawer” but this had not been recorded in the cash book.
iii. The opening balance in the cash book was wrongly brought down as N2,110 instead of N2,205.
iv. The last page of the pay-in-slip book showed a deposit of N2,178 which had not yet been credited to the account by the bank.
v. The bank had debited a cheque for N108 in error to the entity‟s account.
vi. The bank statement showed an overdrawn balance of N50
vii. A payment of N70 cheque was treated as a receipt in the cash book.
viii. Three cheques issued to suppliers for N321, N555 and N45 had not been presented for payment.
You are required to
(a) Write up the cash book.
(b) Prepare a bank reconciliation statement.
Solution to Illustration 8.5
Akintola Enterprises
(a) Adjusted Cash Book
N N
Balance b/d 1,440 Bank Charges 53
Difference in opening bal. 95 Error in cheques drawn 140
Dishonoured cheque 27
_____ Balance c/d 1,315
1,535
Balance b/d 1,315
1,535
(b) Bank Reconciliation Statement at 31 December 1996
N N
Adjusted balance as per cash book
Add: unpresented cheques 321
555 1,315
45 921
Less: Uncredited cheque 2,178 2,236
Debit in error by the bank 108 2,286
Balance as per Bank Statement (Overdraft) 50
Note: Payment of N70 cheque recorded in error as receipt gave a correction of N140 in the cash book because the error will be cancelled first before the N70 is reinstated on the credit side.
Illustration 8.5
The following information was extracted from the records of a petty trader as at 30th of June 20X9.
Balance as per Bank Statement was N1,000 credit. Cash Book balance showed N37,000 credit in the Bank Account column.
The following had been reflected in the Bank Statement but not in the Cash book.
Bank charges N5,000
Bank loan interest N1,000
Interest from investments N2,000
Dividends from shares N12,000
In addition a cheque for N20,000 issued to Kete was dishonoured because of insufficient fund. Another cheque for N30,000 issued to Jimoh remained unpresented.
A cheque for N20,000 from Kudiratu was yet to be credited
You are required to produce an adjusted Cash Book and then a Bank Reconciliation as at 30th June 20X9.
Solution to Illustration 8.5Adjusted Cash Book Account
N N
Interest on Investments 2,000 Balance b/f 37,000
Dividends 12,000 Bank charges 5,000
Kete (dishonoured Cheque) 20,000 Interest on loan 1,000
Balance c/f 9,000 ___
43,000 43,000
Balance c/d 9,000
Bank Reconciliation Statement as at 30th June 20X9
N
Adjusted Cash Book Balance (9,000)
Add: unpresented cheques 30,000
21,000
Less: Uncredited cheque 20,000
Balance per Bank statement 1,000
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