a) Show the necessary adjustments in the cash book of Multi Data Inc. carrying down the correct balance on 31st December, 2006. (b) Prepare a bank reconciliation statement as at that date.
Multi Data Inc. received its bank statement for the period ended 31st December, 2006.
This did not agree with the balance shown in the
An examination of the cash book and bank statement disclosed the following:
(i) A customer of the company who received a cash discount of 5% of his account of
$10,000 paid the company by check on December 10. The cashier, in error, entered the
gross amount in the bank column of the cash book.
(ii) A deposit of $20,450 paid in on 28th December had not been credited by the bank
until January 2nd, 2007.
(iii) Checks issued amounting to $10,780 has not been presented to the bank for
payment until after 31st December 2006.
(iv) Bank charges amounting to $230 has not been entered in the cash book.
(v) A check of $10,900 paid into the bank has been entered twice in the cash book.
(Vi) A debit of $20,870 appeared on the bank statement for an unpaid check which has
been retured marked out of date. The check has been re-dated by the customer of
Interpro Micro system Inc.and paid into the bank again on January 5, 2007.
vii) On 30th September 2006, the company had entered into hire purchase agreement
to pay by banker's order a sum of $1,7000 on
the 10th day of each month, commencing in October. No entries has been made in the
cash book.
(viii) On 25th December, 2006, the Managing Director has given the cashier a check for
$800 to pay into his personal account at the bank. The cashier had paid it into the
company's account in error, but did not enter it in the company's cash book.
ix) On December 27, 2006 two customers of the company had paid direct to the
company's bank account $2,680 and $907 respectively in payment for goods supplied.
The advises were not received by the company until January 2, 2007 and were entered
in the cash book on that date.
(x) A standing order for the payment of an annual subscription amounting to $800 had
not been entered in the cash book.
You are required to;
a) Show the necessary adjustments in the cash book of Multi Data Inc. carrying down
the correct balance on 31st December, 2006.
(b) Prepare a
While adjusting the cash book the following adjustments are considered:
1. All the errors ( like Entry posted twice in the cash book, incorrect amount recorded in cash book, under/overcasting of the balance etc.) and
2. Omissions in Cash book ( like Interest charged by bank not updated in Cash book, Direct receipt or payment by bank)
Only above transactions are considered for updating Cash Book. Apart from this transactions, is directly taken to Bank Reconciliation Statement.
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