Examkin

Question

Difficulty: MediumBalancing Ledger Accounts and Extracting Trial Balance

On 1 January 2025, the Bank account in the ledger of Alaba Traders had an opening credit balance (overdraft) of ₦45,000₦45,000. During January, the following summary transactions were recorded:

- Cash deposited into the bank: ₦260,000₦260,000
- Direct transfer received from a trade customer: ₦85,000₦85,000
- Cheques issued to trade suppliers: ₦190,000₦190,000
- Bank charges debited by the bank: ₦12,000₦12,000
- Customer's cheque dishonoured and returned by bank: ₦25,000₦25,000

What is the balance carried down (c/d) of the Bank account as at 31 January 2025?

  1. ₦73,000₦73,000 DebitAnswer
  2. B
    ₦163,000₦163,000 Debit
  3. C
    ₦123,000₦123,000 Debit
  4. D
    ₦97,000₦97,000 Debit

Answer

The correct balance carried down (c/d) of the Bank account at 31 January 2025 is ₦73,000₦73,000 Debit.
To balance the bank ledger account, entries are classified by double-entry principles. The debit side records increases (cash deposit of ₦260,000₦260,000 and direct transfer of ₦85,000₦85,000, total ₦345,000₦345,000). The credit side records decreases and opening liabilities (overdraft b/d of ₦45,000₦45,000, cheques issued of ₦190,000₦190,000, bank charges of ₦12,000₦12,000, and customer dishonoured cheque of ₦25,000₦25,000, total ₦272,000₦272,000). The difference gives a net debit balance carried down (c/d) of ₦73,000₦73,000.

Step-by-Step Solution

1
Identify and sum all Debit side entries (receipts/increases to bank)
Total Debits = Cash deposited (₦260,000₦260,000) + Direct transfer (₦85,000₦85,000) = ₦345,000₦345,000
Bank account is an asset account; increases in bank funds are posted to the debit side.
2
Identify and sum all Credit side entries (overdraft/payments/reductions)
Total Credits = Opening Overdraft b/d (₦45,000₦45,000) + Cheques issued (₦190,000₦190,000) + Bank charges (₦12,000₦12,000) + Dishonoured cheque (₦25,000₦25,000) = ₦272,000₦272,000
Opening bank overdraft, payments, and dishonoured customer cheques decrease bank balance and are posted to the credit side.
3
Calculate the balance carried down (c/d)
Balance c/d = Total Debits (₦345,000₦345,000) - Total Credits (₦272,000₦272,000) = ₦73,000₦73,000 (Debit balance)
The excess of total debits over total credits represents a positive cash at bank balance to be extracted to the debit column of the Trial Balance.

Key Concept

Balancing T-accounts and determining the nature of bank account balances (debit asset vs credit overdraft)
Rate this question

Topics

Balancing Ledger Accounts and Extracting Trial Balance

More questions from this topic