On 31st October 2025, the Cash Book of Tunde & Sons Enterprises showed a bank overdraft balance of ₦50,000. Upon comparing the Cash Book with the Bank Statement, the following items were discovered:
- Bank charges of ₦3,500 had not been recorded in the Cash Book.
- A customer made a direct deposit of ₦12,000 into the bank account, which was omitted from the Cash Book.
- A standing order for insurance of ₦6,500 was paid by the bank but not recorded in the Cash Book.
- Unpresented cheques amounted to ₦18,000, while uncredited lodgements totaled ₦22,000.
What is the corrected (adjusted) cash book balance as at 31st October 2025?
- Overdraft balance of ₦48,000Answer
- BOverdraft balance of ₦52,000
- COverdraft balance of ₦59,000
- DDebit balance of ₦48,000
Answer
Overdraft balance of ₦48,000
The adjusted cash book is prepared by posting items omitted from the cash book (unrecorded bank charges, standing orders, and direct deposits) to update the balance before preparing the bank reconciliation statement. Starting with a credit overdraft balance of ₦50,000: adding the direct deposit of ₦12,000 and deducting bank charges of ₦3,500 and the standing order payment of ₦6,500 leaves a net credit (overdraft) balance of ₦48,000. Unpresented cheques and uncredited lodgements are timing differences that appear only in the bank reconciliation statement.
Step-by-Step Solution
Key Concept
Adjusted Cash Book Preparation