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Difficulty: HardCauses of Discrepancies Between Cash Book and Bank Statement

On 31st December 2025, the Cash Book of Folake Trading Enterprise showed an overdrawn bank balance of NGN 14,800\text{NGN } 14,800. Upon comparing the Cash Book with the Bank Statement, the accountant identified the following items:

1. Unpresented cheques totaling NGN 6,200\text{NGN } 6,200
2. Uncredited lodgements amounting to NGN 4,500\text{NGN } 4,500
3. A direct credit transfer from a customer, Mr. Audu, of NGN 3,400\text{NGN } 3,400 recorded only on the bank statement
4. Bank charges debited by the bank amounting to NGN 850\text{NGN } 850
5. A standing order payment for business insurance of NGN 1,200\text{NGN } 1,200 paid by the bank but not entered in the Cash Book
6. A cheque of NGN 2,100\text{NGN } 2,100 previously deposited and entered in the Cash Book was returned unpaid (dishonoured) by the bank

What is the adjusted Cash Book balance in NGN\text{NGN}? (Express an overdrawn balance as a negative number, e.g., −5000-5000).

Answer: -15550 NGN

Answer

The adjusted Cash Book balance is an overdraft of −NGN 15,550-\text{NGN } 15,550.
To calculate the adjusted Cash Book balance, start with the unadjusted overdraft of −NGN 14,800-\text{NGN } 14,800. Add unrecorded receipts such as the direct credit of NGN 3,400\text{NGN } 3,400. Deduct unrecorded payments and debits made by the bank, which include bank charges (NGN 850\text{NGN } 850), standing order (NGN 1,200\text{NGN } 1,200), and the dishonoured cheque (NGN 2,100\text{NGN } 2,100). Unpresented cheques and uncredited lodgements are timing differences that are reconciled only in the Bank Reconciliation Statement, so they are not included in adjusting the Cash Book. Calculating −NGN 14,800+NGN 3,400−NGN 850−NGN 1,200−NGN 2,100-\text{NGN } 14,800 + \text{NGN } 3,400 - \text{NGN } 850 - \text{NGN } 1,200 - \text{NGN } 2,100 gives −NGN 15,550-\text{NGN } 15,550.

Step-by-Step Solution

1
Identify the starting Cash Book balance
Initial balance = −NGN 14,800-\text{NGN } 14,800 (overdraft)
An overdrawn Cash Book balance is treated as a negative cash position.
2
Add items that increase the Cash Book balance
Add Direct Credit = +NGN 3,400+\text{NGN } 3,400. Running total = −NGN 11,400-\text{NGN } 11,400
Direct credits are receipts deposited straight into the bank account by third parties which must be added to the Cash Book.
3
Deduct items that reduce the Cash Book balance
Deduct Bank Charges (−NGN 850-\text{NGN } 850), Standing Order (−NGN 1,200-\text{NGN } 1,200), and Dishonoured Cheque (−NGN 2,100-\text{NGN } 2,100). Total deductions = −NGN 4,150-\text{NGN } 4,150
Bank charges, standing orders, and dishonoured cheques represent payments or uncollectible deposits recorded by the bank that must be debited/subtracted in the Cash Book.
4
Filter out items that do not belong in the Adjusted Cash Book
Unpresented cheques (NGN 6,200\text{NGN } 6,200) and uncredited lodgements (NGN 4,500\text{NGN } 4,500) are excluded from the Cash Book adjustment.
Unpresented cheques and uncredited lodgements are timing differences already correctly entered in the Cash Book, so they are adjusted in the Bank Reconciliation Statement rather than the Cash Book.
5
Calculate the final adjusted balance
Adjusted Cash Book balance = −NGN 11,400−NGN 4,150=−NGN 15,550-\text{NGN } 11,400 - \text{NGN } 4,150 = -\text{NGN } 15,550
Combining the initial overdraft with net adjustments gives the corrected balance.

Key Concept

Distinction between Cash Book adjustments (omitted items, errors, bank charges, direct debits) and Bank Reconciliation Statement items (timing differences like unpresented cheques and uncredited lodgements).
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Topics

Causes of Discrepancies Between Cash Book and Bank Statement

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