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Difficulty: MediumPreparation of Adjusted Cash Book

The Cash Book balance of Kalu Traders on 31st December 2025 showed a debit balance of ₦45,000. Upon comparing the Cash Book with the Bank Statement, the following items were identified:

- Bank charges not entered in Cash Book: ₦1,500
- Standing order payment for insurance: ₦2,000
- Credit transfer (direct deposit) by a customer: ₦6,000
- Unpresented cheques: ₦12,000
- Uncredited lodgements: ₦8,500

What is the adjusted cash book balance?

  1. ���47,500 debit balanceAnswer
  2. B
    ₦51,000 debit balance
  3. C
    ₦42,500 debit balance
  4. D
    ₦44,000 debit balance

Answer

₦47,500 debit balance
To arrive at the adjusted cash book balance, start with the unadjusted debit balance of ₦45,000, add the credit transfer of ₦6,000 received directly into the bank, and subtract bank charges of ₦1,500 and the standing order payment of ₦2,000. This yields a net corrected debit balance of ₦47,500. Unpresented cheques and uncredited lodgements are timing differences between the bank statement and cash book, so they must be excluded from cash book adjustments.

Step-by-Step Solution

1
Identify items that require adjustment in the Cash Book
Items to include: Bank charges (₦1,500), Standing order (₦2,000), Credit transfer (₦6,000). Exclude timing differences: Unpresented cheques and Uncredited lodgements.
Only items omitted from the cash book or errors made within it are adjusted in the cash book. Timing differences are handled strictly in the bank reconciliation statement.
2
Apply debit and credit entries to the initial Cash Book balance
Add direct deposit: ₦45,000 + ₦6,000 = ₦51,000; Deduct bank charges and standing order: ₦51,000 - ₦1,500 - ₦2,000 = ₦47,500.
Direct deposits increase the cash book balance (debit), while bank charges and standing order payments decrease the cash book balance (credit).

Key Concept

Adjusted Cash Book Preparation
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Topics

Preparation of Adjusted Cash Book

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