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Difficulty: MediumCauses of Discrepancies Between Cash Book and Bank Statement

The bank column of Chukwuma Ltd's Cash Book showed a debit balance of NGN 45,000\text{NGN } 45,000 on 31 October 2025. Upon receiving the bank statement, the accountant discovered that a standing order payment of NGN 4,500\text{NGN } 4,500 for insurance and bank charges of NGN 1,200\text{NGN } 1,200 were listed only on the bank statement. Additionally, uncredited lodgements of NGN 8,000\text{NGN } 8,000 and unpresented cheques of NGN 6,200\text{NGN } 6,200 were outstanding. What is the corrected Cash Book balance prior to preparing the bank reconciliation statement?

  1. NGN 39,300\text{NGN } 39,300Answer
  2. B
    NGN 37,500\text{NGN } 37,500
  3. C
    NGN 50,700\text{NGN } 50,700
  4. D
    NGN 43,800\text{NGN } 43,800

Answer

NGN 39,300\text{NGN } 39,300
To arrive at the corrected Cash Book balance, only unrecorded bank transactions reflected on the bank statement need to be posted into the Cash Book. Subtracting the standing order of NGN 4,500\text{NGN } 4,500 and bank charges of NGN 1,200\text{NGN } 1,200 from the unadjusted balance of NGN 45,000\text{NGN } 45,000 yields NGN 39,300\text{NGN } 39,300. Timing differences such as uncredited lodgements and unpresented cheques are handled separately in the bank reconciliation statement.

Step-by-Step Solution

1
Identify items requiring Cash Book adjustment
Standing order (NGN 4,500\text{NGN } 4,500) and bank charges (NGN 1,200\text{NGN } 1,200) are unrecorded in the Cash Book.
Direct items on the bank statement not yet entered in the Cash Book must be adjusted in the Cash Book before reconciliation.
2
Identify timing items for the reconciliation statement
Uncredited lodgements (NGN 8,000\text{NGN } 8,000) and unpresented cheques (NGN 6,200\text{NGN } 6,200) are timing differences.
These items are already correctly recorded in the Cash Book and will appear on the Bank Reconciliation Statement rather than the adjusted Cash Book.
3
Calculate the corrected Cash Book balance
NGN 45,000−NGN 4,500−NGN 1,200=NGN 39,300\text{NGN } 45,000 - \text{NGN } 4,500 - \text{NGN } 1,200 = \text{NGN } 39,300
Deduct unrecorded payments/charges from the initial debit balance.

Key Concept

Adjusted Cash Book Preparation
Estimated Time:1m 30s
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Topics

Causes of Discrepancies Between Cash Book and Bank Statement

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