A. th
On 30 April 2016, Mary Wacheke's bank
statement reflected a balance of sh. 922,260 while her
cash book balance stood at sh. 1,607,000. On
comparing the cash book with the bank statement, the
following discrepancies were identified:
1. A cheque paid to a creditor for sh. 19,740 was
entered as sh. 17,940 in the cash book.
2. Dividends from investments received through the
bank amounted to sh. 15,300 but were not entered in
the cash book
3. Cheques drawn by Mary Wacheke totaling sh.
14,500 had not been presented to the bank.
4. Bank charges for sh. 1,600 were not yet entered in
the cash book.
5. Standing order payments amounting to sh.
112,400 had not been entered in the cash book.
6. A cheque for sh. 13,000 received from a debtor
had been returned by the bank marked "refer to
drawer" but had not been written back in the cash book
7. The bank had not credited Mary Wacheke's
account with receipts of sh. 119,700 paid into the bank
on 30 April 2006.
th
8. Mary Wacheke had brought down her opening
cash book balance of sh. 165,850 as debit balance
instead of a credit balance.
9. A cheque of sh. 18,800 had been written back in
the cash book but the bank had already honoured it.
10. Mary Wacheke's customers had agreed to settle
their debts by direct debit but the bank had credited
some direct debits amounting to sh. 115,540 to another
customer's account.
Required:
i. A statement of Mary Wacheke's adjusted cash book
balance. (8 Marks)
th
ii. Bank reconciliation statement at 30 April 2016.
(4 Marks)

Adjusted cash balance = sh. 1,027,460

Balance as per bank statement = $922,260

Explanation:

i. A statement of Mary Wacheke's adjusted cash book balance. (8 Marks)

Adjusted cash book balance is obtained by adding to the cash book balance all transactions that have increasing effect on the cash balance and deducting all the transactions that have reduicing effect from the cash book balance. This can be prepared as follows.

Mary Wacheke

Statement of Adjusted Cash Book at 30 April 2016

Particulars                                        Amount (sh)              Total (sh)    

Balance as per cash book                                                1,607,000

Add:

Dividends from investments                                                 15,300

Less:

Cheque error (19.740 - 17,940)          (1,800)

Bank charges                                      (1,600)

Standing order                                (112,400)

Cheque returned                              (13,000)

Posting error (165,850 * 2)             (331,700)

Dishonored cheque                         (18,800)

Direct debit mistake by bank          (115,440)                  (594,840)

Adjusted cash balance                                                   1,027,460

ii. Bank reconciliation statement at 30 April 2016. (4 Marks)

To prepapare this reconciliation, unpresented cheques are added to the adjusted cash book while uncredited cheques are deducted from it. This can be prepared as follows:

Mary Wacheke

Bank Reconciliation Statement at 30 April 2016

Particulars                                                       Amount (sh)  

Adjusted cash balance                                    1,027,460

Add:

Unpresented cheque                                           14,500

Less:

Uncredited cheque                                             (119,700)  

Balance as per bank statement                       922,260