HKDSE (2014, 9)(Bank Rec)

Bank Rec

HKDSE (2014, 9)(Bank Rec)

Nice Company is a retail shop selling computer hardware. The balance of the company’s cash at bank account as at 31 December 2013 amounted to $56,000 and did not agree with the bank statement balance on that date. The following information relating to the financial year ended 31 December 2013 was available:

(i)A payment by cheque to a supplier for $2,700 had been wrongly recorded as a receipt in the cash at bank account and posted to the related personal account in the purchases ledger accordingly.

(ii)Dividend income amounting to $1,250 had been credited by the bank but had not been recorded in the company’s cash at bank account.

(iii)A credit transfer of $3,500, from a source unknown to the company and dated 15 December 2013, was recorded in the bank statement. Subsequent investigation revealed that the transfer should have been made to another customer of the bank with a similar name.

(iv)A debit of $3,260 was recorded in the bank statement for a dishonoured cheque.

(v)The cash at bank account included a post-dated cheque for $6,750 received from a customer. The cheque was still kept in the cashier’s desk on 31 December 2013.

(vi)As at December 2013, unpresented cheques amounting to $5,500 and a deposit of $53,100 had not been recorded by the bank.

(vii)In launching a new product, samples were sent free of charge to a customer in November 2013 but this had been wrongly recorded as a credit sale of $22,900 to the customer. The cost of these goods was $16,000.

(viii)Rental amounting to $20,400 for the year ended 31 March 2014 was paid on 1 April 2013 and the whole amount had been debited to the rental expenses account.

(ix)Starting from November 2013, Nice Company provides maintenance services to customers, who are required to pay a maintenance fee in advance. The following receipts were credited to the maintenance expenses account:

REQUIRED:

(a)Update the cash at bank account as at 31 December 2013.

(b)Write up a bank reconciliation statement as at 31 December 2013, commencing with the updated balance of the cash at bank account.

(c)Prepare the journal entries necessary for item (vii) to (ix). Narrations are not required.

(d)Identify the relevant revenue recognition principle and explain your accounting treatment for item (ix).

HKDSE (2013, 1)(Bank Rec)

The two directors of Amy Ltd believed that the company had a very good reputation in the industry. Director Lee proposed to quantify that at an amount of $300,000 as goodwill. Director Chan agreed and the bookkeeper credited the amount to sundry revenue on 31 March 2013.

REQUIRED:

(a)State and explain the accounting principle or conceptthat has been violated and show the journal entries to correct the above. (Narration is not required.)

Additional information:

(i)The bank reconciliation statement as at 28 February 2013 was as follows:

(ii)The cheque 201542, dated 3 September 2012, remained unpresented at 31 March 2013. It is the practice of the bank not to honour cheques outstanding for more than six months.

(iii)Total receipts from customers and total payments to suppliers by cheque in the month of March 2013 were $287,000 and $82,750 respectively. All receipts were banked in March 2013. However, a cheque of $32,110 from a customer was then found dishonoured on 28 March 2013.

(iv)During the month of March 2013, a credit transfer of $125,000 from a customer and dividend income of $2,840 were credited by the bank.

(v)A management fee of $8,800 accrued for February 2013 was paid by cheque on 4 March 2013.

(vi)A standing order for rent of $165,500 for the month of March 2013 was executed by the bank on 8 March 2013.

REQUIRED:

(b)Write up the cash at bank account for the month of March 2013.

HKDSE(2012, 5) (Bank Rec)

The following information was extracted from the cash book of Doris Ltd for the month ended 31 December 2011:

Doris Ltd received the following bank statement for the month of December 2011:

Additional information:

(i)A cheque for $23 500 received from Connie Fashion Co was wrongly recorded in the cash book as $25 300. Also, it was discovered that the cheque received from Carmen Co on 28 December 2011 was dated 2 January 2012.

(ii)The credit transfer on 30 December 2011 shown on the bank statement was made by a customer of Doris Ltd.

(iii)Doris Ltd had been informed by its bank that Cheque 982277 was an incorrect debit entry and the correction would be made by the bank on 5 January 2012.

(iv)The reason for the difference in the opening balances of the cash at bank account and the bank statement was due to two cheques, 532009 and 532010, issued in November 2011 remained unpresented on 30 November 2011.

REQUIRED:

(a)Update the cash at bank account of Doris Ltd.

(b)Prepare a bank reconciliation statement as at 31 December 2011, commencing with the updated cash at bank balance.

(c)List two possible reasons why the cheque deposit made on 20 December 2011 was returned by the bank on 23 December 2011.

HKDSE Sample 2 (2A, 1)(Bank Rec)

The bank account of VM Ltd as at 31 December 2011 has a debit balance of $4000, which was different from the ending balance shown on the bank statement for the month of December 2011. Subsequent comparison of the cash book with the bank statement revealed the following:

(i)Bank charges of $469 shown on the bank statement had not been recorded in the cash book.

(ii)Cash of $7933 deposited by a customer on 20 December 2011 had been credited by the bank but no record had been made in the cash book.

(iii)The following cheques issued to suppliers were not shown on the bank statement:

(iv)A cheque with an amount of $5100 deposited into the bank on 31 December 2011 was shown on the bank statement for the month of January 2012.

REQUIRED:

(a)Update the bank account in the books of VM Ltd.

(b)Prepare for VM Ltd a bank reconciliation statement as at 31 December 2011, commencing with the updated bank account balance in (a).

(c)List two uses of bank reconciliation statement for a company.

HKDSE Sample 1 (2A, 8) (Bank Rec)

Good Prospect Limited commences its business on 1 January 20X6 and has made a net profit of $3,000,000 for the year ended 31 December 20X6. However, the company experienced problems in getting $1,800,000 to finance the acquisition of a plant in Tai Po for expansion. Lee, the managing director, could not understand why the amounts in each of the following pairs of items were not equal:

(i)net profit for the year and net increase in cash and bank balances for the year

(ii)bank balance in the cash book and the bank statement balance as at 31 December 20X6

REQUIRED:

(a)Explain to the managing director why the amounts in each of the above of items would differ.

Longman(2013, 3)(Bank Rec)

1The bank column of Linfield Ltd’s cash book showed a credit balance of $39,580 as at 31 March 2013. However, the company’s March 2013 bank statement showed a credit balance of $23,763 as at 31 March 2013. Upon investigation, the following items were discovered:

(i)A cheque payment of $3,700 for goods purchased was debited twice to the cash book.

(ii)Dividends of $12,980 directly credited by the bank were omitted from the cash book.

(iii)Bank charges of $1,900 were not recorded in the cash book.

(iv)An autopay for electricity charges of $7,180 shown in the bank statement did not appear in the cash book.

(v)A cheque of $7,064 deposited on 28 March 2013 was cleared on 2 April 2013.

(vi)A cheque payment of $14,785 for advertisingwas dishonoured as the cheque signature did not match the bank’s records.

(vii)As at 31 March 2013, the following cheques were unpresented:

Cheque no.Cheque date Amount

30999015 Sept 2012 $18,999

3105988 Jan 2013 $16,988

31235520 Mar 2013 $26,835

Required:

(a)Prepare a bank reconciliation statement as at 31 March 2013, starting with the unadjusted cash book balance.

(b)Calculate the correct bank balance as at 31 March 2013.

1ST Mock Exam 2012-2013(Bank Rec)

1.On 31 December 2010, the bank statement of Winter Company did not agree with the cash book balance of $1000 (Dr). On checking the cash book with the bank statement, he discovered the following:

(i)Some cheques of $1440 issued by Peter were returned by the bank and marked as “wrong signature-refer to drawer”. No entries have been made.

(ii)The following cheques were found to be unpresented on 31 December 2010.

(iii)The receipt side of the cash book had been overcast by $100;

(iv)A sum of $9000 was deposited to the bank on 30 December 2009 but had not been credited by the bank.

(v)A cheque of $500 received from a customer was mistakenly credited by the bank as $5000.

(vi)No entries have been made regarding an autopay item of $1500 for an electricity bill.

(vii)A credit transfer of $1900 from Nicole had not been recorded.

(viii)The bank had wrongly charged overdraft interest of $900.

(ix)The bank balance as at 30 November of $1500 (Dr) in the cash book was wrongly brought down as $5100 (Cr).

REQUIRED:

(a)Prepare an updated cash book showing the corrected balance at 31 December 2010.

(b)Prepare a bank reconciliation statement as at 31 December 2010, staring with the adjusted cash book balance.

(b)Apart from a wrong signature, under what conditions would the bank return a cheque?

Pre-Mock Exam 2012-2013(Bank Rec)

1.The cash book of Capital Company showed a debit balance of $5,360 on the bank account, on 30 April 2011 while the bank statement showed a credit balance different from the company’s record. The following information has been obtained:

(i)On 30 April 2011, the following cheques remained unpresented:

(ii)Cheques totaling $5,200 were banked on 28 April 2011 but only credited by bank on 2 May 2011, except for one cheque amounted to $950 was dishonoured. A cheque of $370 dated 15 May 2011 received from a customer was recorded but was still in the hand of the cashier.

(iii)The bank debited the company’s account in error for $870.

(iv)Salaries to staff are paid by autopay at the end of each month. However, the autopay for April 2011 salaries amounted to $3,400 was not executed until 3 May 2011. The amount had not been accounted for and recorded in the books of the company.

(v)Tenants deposited rent of $6,800 directly into the bank account of the company but no entries have been made regarding this.

REQUIRED:

(a)Update the cash book of Capital Company.

(b)Prepare a bank reconciliation statement as at 30 April 2011, commencing with updated cash book balance.

HKET Mock(1, 2011)(Bank Rec)

The accountant of A Ltd has resigned suddenly in October. The newly employed accountant found that the records on the bank statement for October differed from the records in the cash book. On 31 October 2011, the bank balance in cash book was $629,000. Here are some findings after investigation:

(i) A cheque dated on August with value $100,000 from customer Mr. Chan was found inside the drawer, but has already recorded in the cash book.

(ii) On the bank statement of October, there was a record of cash withdrawal for $10,000, but on the cash book, the amount is recorded as $1,000 and the actual cash balance is also $1,000. After the confirmation from the bank, the accountant has indeed withdrawn $10,000 that day.

(iii)A cheque $50,000 given to supplier Mr. Lee has been rejected, the reason was incorrect payee name.

(iv)A cheque $30,000 given to supplier Mr. Ho has not yet been presented.

REQUIRED:

(a)Adjust the cash book of A Ltd (only show bank column).

(b)Prepare the bank reconciliation statement for 31 October 2011, starting from the adjusted cash book balance.

(c)If the resigned accountant in A Ltd is a professional accountant, based on the above four findings, this accountant may violate which principles under the Code of Ethics for Professional Accountants? State two principles that he may violate and explain.

Longman Mock(2, 2011)(Bank Rec)

The bank statement of Karen & Co for March 2012 is as follows:

The cash book (bank columns) for March 2012 is as follows:

You are required to:

(a)Update the cash book.

(b)Prepare a bank reconciliation statement as at 31 March 2012.

AAT 2011 (Pilot Paper 2, 6) (Bank Rec)

6.The following information relates to the banking transactions of Tai Sang Company for the month of August 2010:

REQUIRED:

(a)Update the cash book starting with the closing balance as at 31 August 2010.

(b)Prepare the bank reconciliation statement as at 31 August 2010, starting with the bank statement balance.

(c)Explain why the entry of Company A in the bank column of the company’s cash book on 31 August 2010 was not credited by the bank even it has already been deposited into the bank on that date.

(d)Explain with TWO reasons why business needs to use a bank reconciliation statement for cash control purpose.

HKCEE (2010, 3)(Bank Rec)

Jane Ho is a sole proprietor who keeps records of her cash and bank transactions in a three-column cash book. The balances in the cash book at 1 March 2010 were: cash $38,900 and bank overdraft $6,240. Jane made the following transactions during the month of March 2010:

Jane Ho received a bank statement which showed a credit balance of $27,194 as at 31 March 2010. An examination of the bank column in the cash book and the bank statement disclosed the following discrepancies:

(i)Bank lodgement on 31 March 2010 had not yet been recorded by the bank.

(ii)A bank service charge of $300 had been debited by the bank on 26 March 2010. However, an amount of $100 had been overcharged and was refunded by the bank on 31 March 2010.

(iii)Cheques drawn totaling $19,200 had not been presented to the bank.

(iv)An autopay payment of $18,000 was made by the bank for rent.

(v)A post-dated cheque of $4,100 received from a customer was banked on 29 March 2010, but it was returned by the bank.

REQUIRED:

(a)Prepare a three-column cash book for the month of March 2010, incorporating the necessary updates to be made on 31 March 2010.

(b)Prepare a bank reconciliation statement as at 31 March 2010 commencing with the bank statement balance and ending with the updated cash book balance in (a) above.

HKCEE (2007, 4)(Bank Rec)

Rex Lai is a sole proprietor who keeps records of his cash and bank transactions in a two-column cash book. The balances in the cash book at 1 March 2007 were: cash $16,400 and bank overdraft $4,590. In addition, a petty cash imprest amount of $5,000 was also kept on that date. Rex made the following transactions in the month of March 2007:

You are required to:

(a)Prepare the two-column cash book for the month of March 2007.

Rex received a bank statement which showed a credit balance of $86,920 at 31 March 2007. An examination of the bank column in the cash book and the bank statement disclosed the following:

(i)The cheque written back on 8 March 2007 was honoured by the bank on 9 March 2007.

(ii)The lodgement on 30 March 2007 had not yet been recorded by the bank.

(iii)Cheques drawn totaling $9,050 had not yet been presented to the bank.

(iv)An autopay was made by the bank for rates of $860.

(v)A direct deposit of $2,800 had been lodged by a customer in respect of a debt which had been written off in 2006.

You are required to:

(b)Prepare a bank reconciliation statement as at 31 March 2007 commencing with the balance as per cash book in (a) above and ending with the balance as per bank statement.