Bank Reconciliation Statement

June sitting 2022
Bank reconciliation
statement
FINANCIAL ACCOUNTING
LEVEL 1
PAPER ONE
BY- KIMULI FRED
Lecture notes - 2022
0752818204 / 0787818404
0|Page by kimuli fred 0752818204

BANK RECONCILIATION STATEMENT
Learning objectives
By the end of this chapter, you should be able to:
✓ Meaning of Bank Reconciliation statement.

✓ Causes of Differences in Bank Balance as per Cash Book and Pass Book.
✓ Importance of Bank Reconciliation Statement.
✓ Procedure of preparation of bank Reconciliation statement
✓ Preparation of Adjusted Cash Book.
A bank reconciliation statement summarizes banking and business activity, reconciling an entity's
bank account with its financial records. Bank reconciliation statements confirm that payments have
been processed and cash collections have been deposited into a bank account.
Bank statement. This is the document that shows the firm’s or customer’s amount of money as it
stands at the bank. Holders of current accounts in banks are served with monthly statements, which
summarize the transaction of the business and the bank.
It records money paid into and out of the firm’s bank account. The accounts are entered in the firm’s
cash book at one point in time, but the bank will enter the same items in the accounts in their books at
a different point of time.
The bank balances at a given date according to the firm’s books will normally be different from that
according to the bank’s books. Some items will have been entered in the firm’s books but not in the bank
books and vice versa.
Therefore there are always discrepancies in either the books of the firm or the bank. Therefore in order
to ensure that the differences between the two balances is due time difference in entering items, a bank
reconciliation statement is drawn up to reconcile them.
Bank reconciliation statement. This is a detailed statement reconciling at a given date the cash balance
reported by the bank ie in the bank statement with that shown in the records of the business ie in the
cash book.
The major purpose of drawing up the reconciliation statement is to ensure that the customer’s records
are in agreement with those of his bank.
The transaction which take place between the bank and a trader who is a customer of the bank are
recorded in.
i. trader’s cash book

ii. bank books
In the traders cash book
Most businessmen operate bank accounts. All the transactions in a bank account are recorded in the
cash book in the bank column.
i. In this account cheques and cash paid into the bank are debited.
ii. Cheques issued by business are credited.
Recording transactions in the bank statement and customers’ cash book.
When a bank receives money on behalf of its customer, the amount is credited to the customers’ bank
statement. When it pays out an amount on behalf of the customer, it debits the customer’s bank

statement. It can, therefore, be deduced that amounts deposited on a customer’s account are credited
on the bank statement and payments are debited on the bank statement. This is a direct opposite of the
treatment in the customer’s cash book and credit it with payments made.
Therefore, the entries on the debit side of the customer’s cash book (bank column) should correspond
to the entries on the credit side of the bank statement. Likewise, the entries on the credit side of the
cash book should correspond to the entries on the debit side of the bank statement.
Advantages of bank reconciliation statement
It guarantees accurate balancing: Bank reconciliation statement reveals those transactions that have not
been cleared, for example, cheques issued but not yet presented, etc.
It may also help prevent theft: Especially where some spot transactions could have been in bank account
without your knowledge or where unauthorized persons may be initiating transactions in your system
without your knowledge.
Prevention of mistakes. A good business puts in place procedures to avoid mistakes though they may
happen. Such mistakes, if they happen, can only be identified when a bank reconciliation statement is
prepared.
Preparing bank reconciliation statements helps to keep the accounts in good standing.
The business will be able to know which transactions were reflected in the bank, for example, direct
payments by their customers, fees collections, etc.
It helps in detecting accounting errors. By reconciling, the accounts assistant will be able to detect
common accounting errors such as double payments, missed payments, posting of wrong figures, etc.
The factors which contribute to the disagreement are;
i. un presented cheques. These are cheques that have been paid out by a business and credited in its
cash book but have not been presented to the bank for payment. Whereas these cheques would have
been credited in the cash book, they would not have been debited in the bank statement. Therefore,
the balance per bank statement would appear higher than the balance per cash book.
ii. un credited cheques. These are cheques deposited and recorded in the cash book, but have not yet
been credited to the bank statement by the bank at the time of reconciling. When an entity has
deposited cheques or cash in bank, it will debit its cash book, hence increasing the bank balance in the
cash book. However, since the bank would not have credited the amount on the entity’s bank account,
the balance as per bank statement will be lower than that of the cash book.
iii. Clerical errors. An error is a misstatement or unintentional mistake made in the books of account. An
error by the bank may lead to the differences in the bank statement balance and the balance per cash
book, and vice versa. These errors may include complete omission of an entry, recording an account
wrongly, recording of a transaction on the wrong side of the account, wrong totals or balancing off
accounts.
iv. Interest charged by the bank on overdrafts. When overdrafts are advanced, customers pay
interest on the amount overdrawn.
v. Bank commissions / charges. These are charged by bank for the services, it offer to its customers.
These are various fees charged by the bank for services rendered to their customers. They include
ledger maintenance fees, cheques book charges, cheques clearing charges, collection charges and fund
transfers. These appear on the bank statement but do not usually appear in the cash book. Therefore,
the balance as per bank statement would be lower than that as per cash book.
vi. Bills of exchange, dividend etc. which may be collected or paid on the customer’s benefit.
N.B. bill can be receivable or payable.

vii. Standing order. This is an instruction given by a customer to the bank to pay a fixed amount of
money at specific dates to other persons. Examples may include rent payment, monthly life insurance
premiums, and loan repayments. Standing orders are for specific amounts and dates, where direct
debits may be for varying amounts and dates. These may not be known to the customer not until he
receives the bank statement.
viii. Dishonoured cheques. These are cheques that the bank has refused to pay or recognize as an
instrument for transferring money from one person to another. Dishonored cheques are recorded in
the cash book but are either not recorded in the bank statement or recorded in such a way that there
is no effect on the bank statement. There are many reasons for a bank to dishonour a cheque
✓ When the funds on the drawer account are not sufficient the cheque will be labeled (IF) insufficient
funds or R/D refer to drawer.
✓ When there is difference in the specimen signature possessed by the bank and the one on cheque.
✓ When the cheque is stale (cheque exceeding 6 months) presented to the bank six months after the
date it was prepared.
✓ When the cheque is postdated (before date) presented to the bank before the date written on the
cheque.
✓ When the drawer stops the bank from cashing the cheque.
✓ When the amount in words is not the same as in figures etc.
✓ When date is not stated for payment.
✓ When the drawer is dead, insane or bankrupt and the bank is informed about it.
✓ If the payee’s identity is doubted
ix. Direct credits (credit transfer). These are deposits made by an entity’s customers direct to the
bank. In this case, the bank credits the entity’s account with the amount received. The amount will
be reflected on its bank statement, but will not have been debited in the cash book. Hence the balance
per bank statement will be higher than the balance as per cashbook.
x. TIMING. Sometimes a transaction is recorded at two different times in cash book and the pass book.
This may happen in the following cases:-w Mr. A has issued a cheque to PQR ltd., now it will be
recorded in his cash book immediately but the bank will recognize this transaction only when the
same cheque will be presented to it by PQR ltd. w Similarly for PQR ltd. entry in the cash book will be
made immediately as the cheque is received from Mr. A but the bank account will be credited when
it collects money in respect of that cheque.
Note. The un-presented and un-credited cheques appear in the cash book but not in the bank statement
while other items like bank charges appear in the bank statement and not the cash book.
The procedure of preparing a bank reconciliation statement.
The bank reconciliation statement is prepared at any particular date to reconcile the cash book and bank
balance usually at the end of every month.
This is because the cash book is balanced at the end of the month likewise bank statement is issued at
the end of the month.
When preparing a reconciliation statement we can start with a balance either on the cash book as bank
statement.

Format one
Name of business
BANK RECONCILIATION STATEMENT AS AT
Details Shs Shs
Balance as per bank statement xxx
Add
Uncredited cheques xxx
Errors that reduce bank balance xxx xxx
Less:
Unpresented cheques xxx
Errors that increase bank balance xxx (xxx)
Balance as per updated cash book xxx
Format two
Name of business
BANK RECONCILIATION STATEMENT AS AT
Details Shs Shs
Balance as per amended cash book xxx
Add
Unpresented cheques xxx
Errors that increase bank balance xxx xxx
Less:
Uncredited cheques xxx
Errors that decrease bank balance xxx (xxx)
Balance as per bank statement xxx
The credit balance on the cash book or debit balance on the bank statement is known as an overdraft.
Note:
Errors in the bank statement that reduce bank balance
Understatement of deposits into the bank account
Overstatement of payments from the bank account
Errors that increase bank balance

Overstatement of deposits
Understatement of payments
Bank overdraft. This is the drawing of money exceeding what stands on account. This will be with
special authority from the bank after offering a security. Credit balance in the cash book as a debit
balance in the bank statement reflect it. The adjustment needed to reconcile the bank overdrafts
according to the firm’s books with that shown in the bank books are the complete opposite of that needed
when the account is not drawn. The letter overdraft will be put after the amount of the balance to indicate
overdraft.
The adjustment needed to reconcile a bank overdraft is similar to that of an account that is not
overdrawn. A bank overdraft has a credit balance in the cash book and a debit balance in the bank
statement.

Preparing bank reconciliation with an adjusted cash book
Usually, to simplify the procedure of preparing the bank reconciliation, the items not entered in the cash
book are first posted in the bank account in the cash book. Those ie found in the bank statement and on
receiving the bank statement a bank reconciliation statement is prepared thereafter.
the cheque not presented for payment and not credited by the bank are to be adjusted in the bank
reconciliation statement since all the other difference are to adjusted in the cash book the methods
commonly in use.
Adjusted cash book (bank column).

Details Shs Details Shs
Balance c/f xxx Standing order xxx
Credit transfer xxx Bank charges xxx
Dividends xxx Dishonoured cheques (deposited) xxx
Dishonoured cheque (issued) xxx Errors xxx
Errors xxx Balance c/d xxx
Balance c/d xxx
xxx xxx
Preparing the bank reconciliation statement with an extract from the cash book and bank statement.
Sometimes the items which give rise to the difference in the balance shown in the cash book and bank
reconciliation statement are not given. In this case, the extracts from the cash book and the bank
statements are given. Here, you will be required to examine the extracts to find out the items causing
difference and then prepare the bank reconciliation statement. The procedure is given below
i. the items in the cash book debit column are cross checked with the items in the credit column of
the bank statement (if any) then items which do appear in the bank statement, but are in the
cash book are un credited cheques because they are not credited by the bank.
ii. Items on the credit side of the cash book are checked with items on debit column of the bank
statement (if any) these items are unpresented cheques.
iii. Then the items in the bank statements but not in the cash book are the omissions.
a) If debited in the bank statement, credit the adjusted cash book.
b) If credited in the bank statement, debit the cash book.
Features or characteristics of bank reconciliation statement

From the above, the following features of the statement emerge:
a) It is merely a statement not an account.
b) This is a periodical statement.
c) It is prepared on a particular day or this statement is valid for the day it is prepared.
d) The preparation of bank reconciliation statement is not a part of the double entry book-keeping.
e) The causes which are responsible for the disagreement of the two balances can easily be found
out.
Objectives
1. Which of the following items will NOT be found in a bank reconciliation statement?
A. Bank errors. C. Standing orders.
B. Uncredited cheques. D. Unpresented cheques.
2. Which of the following statements about bank reconciliations is correct?

A. Adjusted cash book balance + unpresented cheques – uncredited cheques = bank statement
balance.
B. Bank statement balance + unpresented cheques – uncredited cheques = cash book balance.
C. Cash book balance + uncredited cheques – unpresented cheques+ direct debits = bank statement
balance.

D. Bank statement balance + uncredited cheques – unpresented cheques – direct credits = cash book
balance.
3. A bank reconciliation is performed in order to:

A. Verify the accuracy of the company’s recorded cash balance.
B. Ensure that all bank loans have been properly accounted for.
C. Verify that all cash disbursements are for a legitimate business purpose.
D. Verify that only authorized personnel signed the disbursement cheques.
4. Which of the following statements are NOT correct? A bank reconciliation statement is:
i. not part of the double entry system
ii. Part of the double entry system.
iii. Sent by the firm to the bank.
iv. Posted to the ledger accounts.
A. (i), (iii) and (iv). C. (i), (ii) and (iv).
B. (i) and (ii). D. (ii), (iii) and (iv).
5. During bank reconciliation, which of the following would be entered in the cash book but NOT on
the bank statement?
A. Bank charges.
B. A dishonoured cheque.
C. Payment into the bank not yet credited.
D. A credit transfer received from a customer.
6. A bank reconciliation is performed in order to:

A. Verify the accuracy of the company’s recorded cash balance.
B. Ensure that all bank loans have been properly accounted for.
C. Verify that all cash disbursements are for a legitimate business purpose.
D. Verify that only authorized personnel signed the disbursement cheques.
7. Which of the following is not updated in the cash book when reconciling the cash book balance
within the bank statement balance?
A. Errors made by the bank.
B. Bank charges.
C. Cheques paid in and subsequently dishonoured.
D. Direct bank credits.
8. Which of the following is not shown on a bank statement?

A. Direct lodgements.
B. Unpresented cheques.
C. Direct payments by the bank on behalf of customers.
D. Ledger fees.
9. Which of the following is NOT a reconciling item on the bank reconciliation statement?
A. Cheques debited to the cash book but not on the bank statement.
B. Cheques dishonoured by the bank due to insufficient balance.
C. Errors made by the bank staff on the bank statement.
D. Cheques credited to the cash book but not on the bank statement.
10. ………is a cheque paid out, but has not yet passed through the banking system.
A. A dishonoured cheque. C. A standing order.
B. An uncredited cheque. D. An unpresented cheque.

11. Which of the following are the causes of differences between the cashbook balance and the bank
statement balance when preparing a bank reconciliation?
i. Cheque paid in, subsequently dishonoured.
ii. Bank charges.
iii. Error by bank.
iv. Outstanding cheques not yet presented.
v. Lodgments credited after date.
A. (i), (ii) (iii) and (iv). D. (i), (ii) and (iii).
B. (i) and (ii).
C. (ii), (iv) and (v)
12. When a bank statement shows an overdraft

A. Money paid into the bank decreases the overdraft
B. Money drawn by the client reduces the overdraft
C. Additional charges made by the bank reduce the overdraft
D. Deposits into the bank by customer increase the overdraft
13. When cash is refunded to a credit customer, we debit the:

A. Receivables account and credit the cashbook.
B. Refunds account and credit the cashbook.
C. Cash-book and credit the receivables account.
D. Sales account and credit the receivables account.
14. A cheque issued by a banker and drawn upon itself is known as:
A. A standing order. C. A direct debit.
B. A bank draft. D. A bill of exchange.
15. Which of the following would necessitate the preparation of a bank reconciliation statement?
i. Cheques drawn by the firm in favour of suppliers have been paid by the bank.
ii. Cash paid into the bank by the firm has not yet been recorded by the bank.
iii. Telegraphic money transfer from USA to the firm’s bank account has not yet been notified to
the firm.
iv. An error made by the bank.
A. (ii) and (iii). C. (ii) (iii) and (iv).
B. (i), (iii) and (iv). D. (i), (ii), (iii) and (iv).
16. Which of the following are false? A bank reconciliation statement is:
i. Part of the double entry system.
ii. Not part of the double entry system.
iii. Sent by the firm to the bank.
iv. Posted to the ledger accounts.
A. (i), (iii) and (iv). C. (i), (ii) and (iv).
B. (i) and (ii). D. (ii), (iii) and (iv).
17. Your cashbook shows an overdrawn bank balance of Shs 5,650,000 at 31 December 2002. On
comparing this with your bank statement on the same date; you discover that:
✓ A cheque for Shs. 570,000 drawn by you on 29 December 2002 has not yet been presented for
payment.
✓ A cheque for Shs. 920,000 from a customer, which was paid into the bank on 24 December 2002,
was dishonoured on 31 December 2002.
The correct bank balance to be shown in the balance sheet at 31 December 2002 is:
A. Shs 7,140,000 overdrawn. B. Shs 6,570,000 overdrawn.

C. Shs 6,000,000 overdrawn. D. Shs 5,300,000 overdrawn.
18. Where a business gives permission to a person to collect amounts owing direct from its bank
account, the transaction is called …………… when preparing a bank reconciliation statement.
A. A standing order.
B. An unpresented cheque.
C. A direct credit.
D. A direct debit.
19. Which of the following statements is correct? A bank reconciliation statement is usually:
A. Prepared by the firm on a regular basis to check the accuracy of the cash book.
B. Prepared by the bank as part of their checking system.
C. Part of the double entry system of the company.
D. Prepared by the firm to highlight a bank overdraft.
20. A cheque will have the following impact on the bank overdraft per the bank statement when
presented:
A. Increase the debit balance per the bank statement.
B. Increase the credit balance per the bank statement.
C. Decrease the debit balance per the bank statement.
D. Decrease the credit balance per the bank statement.
Question 21.
Anne Opio has asked you to reconcile the balance on the bank statement to the bank account balance
in her nominal ledger. You have checked her bank statement and other records and have noted the
following:
a) Cheque No. 200132 from a credit customer is recorded in the cashbook as Shs. 560,000, but the
bank statement shows that the correct figure is Shs. 650,000.
b) Anne has paid for a number of items whose total value is Shs 390,000 by standing orders that have
been omitted from the cashbook.
c) The bank has charged Shs 22,000 for ledger fees and paid interest of Shs. 17,400 on Anne’s account.
These amounts have not yet been entered in the cashbook.
d) One of Anne’s customers made a direct deposit of Shs 358,000 into the bank that has not been
recorded by Anne.
e) The following cheques have not been debited by the bank but are entered in the cashbook:
Cheque number shs
100029 400,000
100683 560,000
100687 120,000
100688 100,000
f) Cheque No. 100029 was sent to a supplier almost a year ago, but it did not arrive and the supplier
was paid in cash.
g) A lodgment of Shs 487,000 has not yet been credited on the bank statement.
h) A cheque received from Jane Murungi for Shs 500,000 was entered twice as a credit in the cashbook.
i) The bank account credit column was under cast by Shs 120,000.
j) The bank column of the cashbook had a debit balance of Shs 641,000.
Required:
a) Prepare an adjusted cashbook.
b) Prepare the bank reconciliation statement
c) Briefly explain why a bank reconciliation statement should be prepared

Question 22
a) Give three reasons why the cash book bank balance may not be the same as the bank statement
balance at any particular date.
b) On 31 December 2008, Temangalo’s cash book showed a positive balance in the bank of Shs
1,616,960 but at the same date the monthly statement from his bank showed a balance of Shs
1,702,000. The difference between the two balances was found to be due to the following:
i. On 10 December, a charge of Shs 5,800 for foreign exchange commission had been made by
the bank. Temangalo had forgotten to account for it in his cash book.
ii. An annual subscription to the Association of Accounting Technicians of Uganda of Shs 21,000 had
been paid by standing order on 21 December. This had also been over looked by Temangalo.
iii. Cheques for Shs 101,200, and Shs 169,800 drawn in favour of Apollo and Milton respectively
had not been presented for payment to the bank.
iv. A cheque of Shs 159,160 from Stephen paid into the bank on 15 December had been returned marked
“Refer to the Drawer”. No entry of this dishonoured cheque had been made in the cash book.
Required:
a) Prepare the adjusted cash book for Temangalo.
b) Prepare a bank reconciliation statement for Temangalo as at 31 December 2008.
Question 23
a) Briefly explain why it is necessary to prepare a bank reconciliation statement.
b) Mudomo’s bank column of his cash book showed a debit balance of Shs 6,000,000 on 31 May
2012.The bank statement received from his bank on the same date showed a credit balance of Shs
11,600,000. On comparing the bank statement and the cash book, the following transactions had
not been accounted for in the cash book and/ or bank statement:
i. The bank had credited Mudomo’s account with interest of Shs 960,000. The cashier had not yet
captured this transaction in the cash book.
ii. Shs 1,040,000 appearing on the bank statement was for a credit customer who had directly deposited
the amount in Mudomo’s bank account but had not notified Mudomo to make an entry in his cash
book.
iii. The bank had charged Mudomo’s account with Shs 120,000 for ledger fees. This was reflected on the
bank statement but an entry had not yet been made in the cash book.
iv. A direct debit of Shs 280,000 in respect of membership fees to ICPAU had been made by the bank.
An entry of this transaction had also not yet been made in the cash book.
v. A standing order of Shs 800,000 had been paid to UMEME on Modomo’s behalf. This transaction had
not been entered in the cashbook.
vi. The bank had transferred Shs 5,000,000 from Mudomo’s fixed deposit account to his current account.
No entry of this transaction had been made yet in the cash book.
vii. Two cheques issued of Shs 1,000,000 and Shs 1,160,000 to Mukolo and Mwanza respectively were
entered in the cash book but had not yet been presented to the bank for payment.
viii. A cheque of Shs 2,760,000 received from a customer and entered in the cash book was deposited by
the cashier on 31 May 2012 when he picked the bank statement
Required:
i. Prepare an adjusted cash book for Mudomo as at 31 May 2012.
ii. Prepare Mudomo’s bank reconciliation statement as at 31 May 2012
Question 24
On 1 February 2019, the cashbook (bank column) of Pepe Traders had a debit balance Shs
37,500,000 while the bank statement had a credit balance Shs 40,855,000 due to un-
reconciled items below:
Direct credits: Shs ‘000’ Direct debits: Shs ‘000’
Credit memo 2,000 Ledger fees 53
Interest on deposits 3,215 Excise duty 7
Un-credited cheques: Standing order (airtime) 200
Cheque no. 111 4,000 Un-presented cheques:
Cheque no. 222 2,500 Cheque no. 25 6,500
On 28 February 2019, the cashbook balance (bank column) was Shs 45,850,000 while
the bank statement balance was Shs 58,845,000. The following were discovered:
i. Interest on deposits, ledger fees and excise duty were reflected in the cashbook.
ii. Cheque nos. 111 and 345 were credited in the bank statement and cheque no. 27 was
presented to the bank.
iii. The ledger fees, standing orders, loan interest and annual subscription Shs 35,000,
Shs 2,500,000, Shs 800,000 and Shs 400,000 respectively had not been posted to the
cashbook.
iv. Cheques written to suppliers: Makwato Enterprises, Kaka Traders, Mabwete Ltd and
Obweke Traders Shs 4,000,000, Shs 1,500,000, Shs 2,000,000 and Shs 5,500,000
respectively were still with the suppliers.
v. A cheque received from a customer J &K Ltd Shs 6,000,000 was returned together with
the bank statement unpaid.
vi. A cheque written to a supplier DM Enterprises Shs 4,800,000 was unpaid.
vii. Cheques received from customers: Dede Shs 1,100,000; Bebe Shs 2,150,000; Tete Shs
5,400,000 and Gege Shs 3,500,000 were uncredited.
viii. A cheque received from a customer Shs 430,000 was recorded in the cashbook as Shs
340,000 while a cheque written to a supplier Shs 1,500,000 was recorded in the cashbook
as Shs 150,000.
ix. Customers transferred to Pepe Traders account: Shs 6,540,000 by A & A Ltd; Shs
4,000,000 by B & B Enterprise and Shs 2,000,000 by D & D Traders.
Required:
Prepare, for pepe Traders, for the month of February 2019
i. An adjusted cash book
ii. A bank reconciliation statement
Question 25
a) Explain three advantages of trading as a partnership business compared to operating as
a sole trader.
b) The following entries relate to the cashbook of a stationery sole proprietor, Akimba Godwin
for the month of December, 2016. The cash book balance indicated a credit balance of
Shs 540,000 whereas the bank statement shows a debit balance of Shs 973,000 as at that
date. Further scrutiny of the available information reveals the following details:
i. Cheque payments to the following suppliers: Katooko Shs 80,000; Atima Shs 50,000;
Nawiita Shs 70,000; Nancy Shs 81,000; Brenda Shs 99,000, were still safely kept in
the safe by the end of December, 2016.
10 | P a g e b y k i m u l i f r e d 0 7 5 2 8 1 8 2 0 4
ii. A cheque in favour of Akimba worth Shs 870,000 for stationery supplied was entered in
the cash book as Shs 780,000.
iii. A cheque payment to Matovu and company for Shs 315,000 was entered in the opposite
side of the cash book.
iv. Cheques Shs 70,000 and Shs 69,000 that had been drawn in favour of Juliana and Jane
respectively were dishonored by the bank and remained unpaid at the month end.
v. A cheque received and recorded in the cash book from Masika Shs 83,000, dated 20 May,
2016 was presented in December, 2016.
vi. In November, 2016, stationery sold for Shs 100,000 by cheque was not recorded in the
cashbook.
vii. Interest paid of Shs 560,000 was recorded by the book keeper as Shs 530,000.
viii. A payment for electricity of Shs 877,000 was recorded in the cashbook as Shs
788,000.
ix. Direct credits of Shs 700,000 and Shs 20,000 in respect of dividend income and interest
respectively, were made by the bank during the month.
x. Rent amounting to Shs 240,000 in favour of Mabirizi was directly settled by the bank.
xi. Bank account management fees amounted to Shs 90,000 and cheque book charges were
Shs 40,000. These were not recorded in the cashbook.
xii. The book keeper did not record a cheque Shs 180,000 received from Mukasa.
xiii. On 31 December, 2016, cheques received from the following customers were duly
recognized in the cash book, the book keeper presented them to the bank on 1 January,
2017; Tadeo and sons Shs 140,000; Mufumbiro Shs 190,000; Matata Shs 173,000;
Odokonyero Shs 120,000 and Batanda Shs 100,000.
xiv. By 31 December, the following cash receipts were not banked but had been recorded in
the cashbook: RCT: 00100, amounting to Shs 20,000; RCT: 00101 amounting to Shs
10,000; RCT: 00102, amounting to Shs 5,000; RCT: 00103, amounting to Shs 2,000. A
cheque payment to Water Corporation Shs 100,000 made in January, 2017 was
mistakenly recorded in the cash book in December, 2016.
Required
Prepare Akimba’s
i. Adjusted cash book
ii. Bank reconciliation statement
Question 26
a) What is the purpose of preparing bank reconciliation statements?
b) The cashbook of Top Traders Ltd for the period ended 31 March 2003 showed a favourable
balance of Shs 18,916,000. This did not agree with the bank statement balance for the same
period. On further examination, the following discrepancies were discovered:
i. A cheque of Shs 1,092,000 paid into the bank had been entered in the cashbook.
ii. A cheque of Shs 820,000 received from Supplies Ltd was debited by the bank on 10 March 2003.
iii. A standing order for payment of security expenses amounting to Shs 234,000 had not been
entered into the cash book.
iv. Nina Mukasa, a credit customer, who received a cash discount of 5% on her account of Shs
1,200,000 paid the company a cheque on 12 march 2003. The bookkeeper, in error, entered
the gross amount in the cash book.
v. A cheque received from Market Traders Co. on 20 March 2003 for Shs 300,000 was returned
unpaid by the bank on 2 April 2003.
vi. On 25 March 2003, a credit customer deposited Shs 2,300,000 to the company’s bank account.
The company was advised by the bank on 3 April 2003.
vii. Cheques for Shs 3,910,000 sent to credit customers on 28 March 2003 were not recorded by the
bank until 2 April 2003.
viii. A cheque of Shs 258,000 paid to Shah & Company was returned unpaid, because of an error
made while writing the cheque.
ix. Cheques amounting to Shs 2,400,000 received from upcountry customers were paid into the
bank on 30 March 2003 but were credited on 4 April 2003.
x. Bank charges of Shs 53,200 were not entered in the cashbook.
Required:
a) Show the necessary adjustments in the books of Top Traders Ltd.
b) Prepare a bank reconciliation statement as at 31 March 2003.
c) What is the bank balance figure that will appear in the balance sheet as at 31 March 2003?
QUESTION 27
a) Giving four reasons, explain the importance of preparing bank reconciliation statements.
b) On 31 May 2019, River Valley Ltd’s bank statement showed a balance Shs 223,501,000 (credit)
while the cashbook (bank column) had a balance Shs 127,000,000 (debit).
On examination, the following issues were discovered:
➢ Bank charges Shs 400,000 and commission fees paid Shs 500,000 for the month of April 2019
were not reflected in the previous adjusted cashbook.
➢ The following cheques were issued out but not reflected on the bank statement as at 31 May
2019:
Cheque No. Shs ‘000’
12019 5,600
12020 11,278
12022 24,067
12032 36,700
12036 75,000
➢ Ledger fees for the month of May 2019Shs 35,000 and an amount due from Joy Ltd. Shs
19,000,000 were debited and credited respectively on the company’s bank account. These
transactions were not reflected in cashbook.
➢ The following cheques, deposited by the company on 28 May, 2019 had not been cleared by the
bank by 31 May, 2019:
Cheque No. Shs ‘000’
12356 4,000
13245 56,089
31212 8,000
14200 23,000
1007 5,756
➢ A cheque paid to Okello Shs 32,678,000 was posted in the credit side of the cashbook as Shs
23,786,000
➢ Standing instruction charges Shs 4,000 directly debited by the bank for the month of May2019
had not been reflected in the cashbook by the month end.
➢ Rental income Shs 17,000,000 due to the company and payment of 5% of the rental income to
the property agent had not been reflected in the cashbook but was reflected in the bank
statement.
➢ River Valley Ltd. paid Mr. Musana Shs 1,500,000 by cheque on 25 May but because he had no
bank account, he returned the cheque on 27May and was paid cash instead.
➢ Interest on deposits for the month Shs 450,000 was reflected on the bank statement only.
➢ A cheque Shs 5,000,000 received from Mr. Tamale on 23 May and banked that same day was
cancelled and returned by the bank.
➢ A cheque no: 2043 Shs 6,780,000 paid to another bank customer on 23 May was credited in
error on the bank statement.
➢ Cheque No: 12003 paid to a supplier (Mary) Shs 4,300,000 had been credited twice in the
cashbook while VAT refund Shs 2,200,000 was received by the bank but had not been reflected
in the cashbook.
➢ A cheque paid to a supplier Jonathan Shs 1,318,000 was returned unpaid.
➢ A cheque received from MM Enterprises Shs 610,900 was debited as Shs 56,500.
➢ Dividends Shs 6,500,000 paid to the shareholders accounts and interest received from
investments Shs 3,000,000 were all not reflected in the cashbook.
Required:
Prepare, for River Valley Ltd., for the month of May 2019:
i. An adjusted cashbook
Question 28
a) Explain the advantages of preparing bank reconciliation statements to an organization.
b) BSG Ltd has recently sacked their accountant because of incompetence. You have been
approached by the company to prepare their bank reconciliation statement for the month of
September, 2016. Below are the details of the cash book (bank column) and bank statement for
the month.
Cash book
Date Details Shs ‘000’ Date Details Shs ‘000’
Cheque No.:
3rd 006531 6,700 Balance b/f 4,000
5th 02351 3,400 1st Cheque No.:
6th 000324 10,000 5th 002543 1,200

10 th
01228 23,400 8th 002546 2,400
11th Cash deposit 15,000 11th 002545 6,500
12th 002547 1,205 12th 002433 2,210
13th 15463 760 15th 002432 830
13th 3896 2,500 21st 002549 320
17th 89652 625 22nd 002541 127
18th 432567 4,271 24th 002553 440
19th 65432 367 25th 002548 6,340
24th Cash deposit 12,000 26th Cash payment (note 1) 250
25th 9651 625
26th 2896 500
27th 0102743 5,032 Balance c/f 61,768
86,385 86,385
Bank statement
Dr. Cr. Balance
Date Details Shs ‘000’ Shs ‘000’ Shs ‘000’
1st Balance b/ f (4,000)
Cheque No.:
3rd 006531 6,700 2,700
5th 002543 1,200 1,500
5th 02351 3,400 4,900
8th 002546 2,400 2,500
6th 000324 10,000 12,500
10 th
01228 3,400 9,100
11th 002545 5,600 3,500
11th Cash deposit 15,000 18,500

12th 002547 1,025 17,475
13th 15463 760 18,235
14th Interest 72 18,307
17th 89652 625 18,932
20th Interest on loan 800 18,132
20th Loan deduction 4,000 14,132
18th 432567 2,741 16,873
19th 65432 367 17,240
21st 002553 4,400 12,840
25th Bank charges 10 12,830
25th Excise duty 2 12,828
25th 0102743 532 12,296
Additional Information
1. The cash payment was in relation to one of the petty cash expenses and was not paid by
cheque but actual cash.
2. The bank made errors on cheque no. 01228 and 0102743. Any other errors, if found, should
be deemed to have occurred in the cash book.
3. Cheque no. 2896 and 002541 were dishonoured by the bank and returned together with the
bank statement.
Required:
Prepare, for BSG Ltd for the month of September; 2016:
i. an adjusted Cashbook.
ii. a bank reconciliation statement beginning with the balance as per adjusted cash book in
(b) (i) above.
Question 29
a) Explain any four reasons why a bank may dishonour a cheque.
b) The following information relates to transactions that were passed through bank for Towakana
Enterprises Ltd for the month of March, 2018:
Cashbook (bank column)
Balance b/ f 40,000,000 Cheque No. 014024 3,200,000
Bank interest 4,000 Cheque No. 014025 42,000,000
Cheque No. 01670 55,000,000 Cheque No. 014027 11,000,000
Cash deposit 6,000,000 Cheque No. 014032 4,890,000
Cheque No. 108800 7,500,000 Cheque No. 014031 560,000
Cheque No. 0481 4,500,000 Balance c/ f 47,454,000
136,104,000 136,104,000
Bank statement
Details Debit (Shs) Credit (Shs) Balance (Shs)
Balance b/ f 40,000,000
Bank charges 12,000 39,988,000
Cheque No. 014024 3,200,000 36,788,000
Cheque No. 014032 8,490,000 45,278,000
Cheque No. 00800 17,000,000 62,278,000
Cheque No. 014027 11,000,000 51,278,000
Excise duty 1,200 51,276,800
Cash deposit 6,000,000 57,276,800
Cheque No. 014030 10,000,000 47,276,800
Cheque No. 108800 7,500,000 54,776,800
Standing order 5,000 54,771,800
Cheque No. 0481 4,500,000 50,271,800
Cash deposit 17,000,000 67,271,800
Bank interest 4,000 67,275,800
Additional information:
1. Cheque numbers 01670 and 014025 were dishonoured by the bank at the time they were
presented.
2. All errors, if found, should be deemed to have occurred in the cashbook.
Required:
Prepare, for Towakana Enterprises Ltd for the month of March, 2018:
i. An adjusted cashbook.
ii. A bank reconciliation statement.
QUESTION 30
The following information relates to bank transactions of Mabugu Traders for the month of March
2019. The cashbook (bank column) had a debit balance Shs 160,054,000 while the bank statement
had credit balance Shs 245,641,000 as at 31 March, 2019. On further examination, the cashier
discovered the following discrepancies:
1. On 12 March, a payment to Mabugu Traders from Budadiri Traders by direct deposit Shs
3,500,000 was not cleared by the bank due to insufficient funds on the latter’s account. The
bank fined Budadiri Traders Shs 250,000.
2. On 15 March, Wekomba Ltd made a direct transfer Shs 16,300,000 to Mabugu Traders bank
account. This information had not yet been reflected in the cashbook of Mabugu Traders by 31
March.
3. On 20 March, a customer paid Mustapha Shs 4,360,000 by cheque. The bank erroneously
credited this payment to Mabugu Traders account.
4. A cash deposit Shs 1,282,000 by Mabugu Traders was entered, in error by the bank, as a credit
Shs 1,228,000.
5. Mabugu Traders paid Sironko Traders by cheque Shs 12,460,000 but recorded it as a credit Shs
11,460,000 in the cashbook.
6. On 22 March, Oundo made a direct credit transfer Shs 5,140,000 to Mabugu Traders bank
account. The cashbook had not been updated with this payment by 31 March.
7. The following cheques were deposited in the bank by Mabugu Traders on 30 March but were
not reflected on the bank statement: No. 2132 Shs 7,450,000; No. 0345 Shs: 4,000,000; No.
3340 Shs 5,600,000 and No. 4770 Shs 6,700,000.
8. A cheque payment Shs 7,600,000 by Gagula Traders to Mabugu Traders account was debited
by the bank as Shs 6,700,000.
9. Cheques: No. 00105 Shs 25,300,000; No. 00106 Shs 35,200,000; No. 00107 Shs 27,346,000;
No. 00109 Shs 5,000,000 and No: 00110 Shs 2,390,000, paid to clients on 31 March were not
reflected on the bank statement.
10. Other transactions during the period that were reflected in the bank statement but not in the
cashbook were as follows:
Item Shs ‘000’
Bank charges 245
Ledger fees 25
Insurance payments 190
Loan deductions 545
Interest on deposit 250
Dividend income 6,500
Excise duty 90
11. Wagogo who provides meals to staff was paid by cheque No: 00106 Shs 1,500,000 on 23 March.
He returned it on 29 March and was given cash of the same amount. This payment had initially
been captured in the cashbook (bank column).
Required:
Prepare, for Mabugu Traders as at 31 March, 2019:
a) An adjusted cashbook
b) A bank reconciliation statement
Question 31
Mambopotea Ltd (dealers in computers and computer accessories) has approached you for advice
because their cash book balance (bank column) is more than what the bank has given them in the
bank statement for the month of March, 2017. You have been provided with the following
information relating to the company’s cashbook and bank transactions during the month:
On 31 March, 2017 the cashbook (bank column) had a debit balance Shs 64,251,500, and the bank
statement had a credit balance Shs 33,189,144. On close examination, you discovered the
following:
1. The bank had directly paid for magazine subscription Shs 400,000.
2. A loan repayment and interest thereon Shs 2,564,125 and Shs 1,450,250 respectively
had been directly effected in the bank statement.
3. Push and Pull Ltd, Lock and Open Enterprises, and Come Again Traders had directly paid
Mambopotea Ltd Shs 4,150,000, Shs 2,150,200 and Shs 900,500 respectively through the bank.
4. Mambopotea Ltd had deposited cash Shs 15,250,400 and cheques from Ouma & Sons Ltd
Shs 1,800,000, Mukamah Traders Shs 3,000,000, Musana Guest House Shs 1,100,000 and
Amanya & Co. advocates Shs 2,300,000 in the bank, but these were not credited in the account
by 31 March, 2017.
5. NWSC, MTN, UMEME and Computer World had been paid cheques Shs 150,000, Shs 240,000,
Shs 351,219 and Shs 3,050,000 respectively, but these cheques had not yet been presented to
the bank for payment by 31 March, 2017.
6. A cheque received from Nguvu Enterprises for supply of computer accessories Shs 12,500,000
was returned together with the bank statement unpaid.
7. The accountant of Mambopotea Ltd, by error, entered cheques Shs 560,000 received from MB
Beverages as a credit Shs 650,000 and Shs 3,200,000 paid to Computer World as a credit Shs
2,300,000 in the cashbook (bank column).
8. Bank charges and excise duty Shs 45,000 and Shs 4,500 respectively were directly charged to
the account.
9. The teller, by error, debited cash deposit by Mambopotea Ltd Shs 2,550,000 in the bank
statement.
10. A cheque paid to Computer World Shs 3,150,000 was returned unpaid.
Required:
i. Explain, to Mambopotea Ltd, reasons that may cause differences between the cash
book balance (bank column) and the bank statement balance.
ii. Prepare, for the company, an adjusted cashbook and thereafter a bank reconciliation
statement.
QUESTION 32
The following is a summary of the cashbook for MEM Ltd for the month of april 2018
Dr. shs 000 Cr. Shs 000
Balance c/f 25,500 Payment 43,400
Receipts 76,500 Balance c/f 58,600
102,000 102,000
Their summarized bank statement for the month of April, 2018 was as follows:
Details Dr. Cr. Balance
shs 000 shs 000 shs 000
1st April 2018 25,500
Deposits / credits 54,500 80,000
Withdrawals / charges 26,541 53,459
Subsequently, the following were observed:
1. Cheque number 0012 drawn in favour of NEC Enterprises Ltd Shs 3.4 million had been correctly
recorded in the bank statement but included in the cash book as 4.3million.
2. Excise duty and bank charges Shs 256,000 and Shs 450,000 respectively were recorded in the
bank statement but not included in the cashbook.
3. The bank statement showed that cheques 0004 and 0145 received from Jena Investments Ltd
and Quality Suppliers Ltd Shs 543,000 and 1,200,000 respectively were dishonoured by the
bank.
4. Cheque number 0015 Shs 345,000 which was payment to Nasser Investments Ltd (a supplier)
was entered in the wrong side of the cash book.
5. A standing order for electricity and bank interest earned Shs 234,000 and Shs 65,000 respectively
were not recorded in the cashbook.
6. Cheque number 0430 received from a customer Shs 765,000 was entered twice in the cashbook.
7. Cheques received in the last days of April, 2018 totalling to Shs 765,000 were not included in
the bank statement until 5 May, 2018.
8. The following cash receipts recorded in the cash book have not been banked:
Receipt No. Shs
0002 430,000
0003 354,000
0004 536,000
9. The following cheques were drawn by MEM Ltd to the following suppliers but are not reflected
in the bank statement:
Receipt No. Supplier Shs
0037 Joshua Honest Suppliers 875,000
0040 Mabirizi Suppliers Ltd 243,000
0050 Owino Investments 589,000
10. There was a transfer of Shs 1.5 million by the bank to MEM Ltd’s current account in another
bank. This is not yet recorded in the cash book.
Required:
Prepare, for MEM Ltd for the month of April, 2018:
i. An adjusted cash – book
Question 33
(a) Explain five reasons that may cause the bank statement balance to differ from the cash
book (bank column) balance at a point in time.
(b) The following information was extracted from the books of Corner Enterprise for the
month of March 2020:
Un-reconciled items in the month of February 2020 were:
Direct debits: Shs ‘000’
Stamp duty 48,000
Bank charges 480,000
Magazine subscription 400,000
Direct credits:
BB Stephens 2,550,000
A&A Co. Advocates cheque No. 88 8,200,000
Uncredited cheques:
KK Ltd cheque No.111 5,500,000
TIK Ltd cheque No. 555 11,450,000
Unpresented cheques:
UMEME cheque No. 51 2,500,500
NWSC cheque No. 54 6,150,000
Bank statements for the month of March:
Credit Shs ‘000’ Balance Shs ‘000’
Debit Shs ‘000’
Balance b/f 56,972,750
UMEME cheque no. 51 2,500,500 54,472,250
KK Ltd cheque no.111 5,500,000 59,972,250
Cheque no. 62 5,150,000 54,822,250
Cheque no.90 5,000,000 59,822,250
C.M -Gladys 5,400,000 65,222,250
Cheque no. 61 4,400,000 60,822,250
Cheque no.63 2,600,000 58,222,250
Cheque no.64 1,200,000 57,022,250
Cheque no.60 1,800,000 55,222,250
Cheque no.515 5,000,000 60,222,250
Cheque no.119 1,500,000 58,722,250
Cheque no. 616 2,400,000 61,122,250
Cash 6,900,000 68,022,250
Cheque no. 67 2,500,000 65,522,250

Cheque no.72 3,100,000 62,422,250
Cheque no.71 2,100,000 60,322,250
C.M -ASIO 3,300,000 63,622,250
Cheque no. 70 2,900,000 60,722,250
Cash 900,000 59,822,250
Ledger fee 50,000 59,772,250
Dividend 3,500,000 63,272,250
Cheque no. 999 3,000,000 66,272,250
Cheque no. 824 1,100,000 67,372,250
Cheque no. 311 13,300,000 80,672,250
Cash book (Bank column)
Debit Shs ‘000’ Credit Shs ‘000’

Balance b/f 55,450,250 Stamp duty 48,000
BB Stephens 2,550,000 Bank charges 480,000
Cheque no. 515 5,000,000 Cheque no. 60 1,800,000
Cash 6,900,000 Cheque no. 64 1,200,000
Cheque no 14 2,800,000 Cheque no. 616 4,200,000
Cheque no. 67 250,000 Cheque no. 95 3,700,000
Cheque no. 97 1,400,000 Cheque no. 72 310,000
Cheque no. 311 3,300,000 Cheque no.73 2,500,000
Cheque no. 71 2,100,000
Cheque no. 23 2,300,000
Cheque no. 001 5,000,000 Balance C/f 73,062,250
Total 110,250,250 Total 110,250,250
1. Cheque no. 14 and no.66 were dishonoured by the bank.
2. The bank made errors on cheque no. 311 and cheque no. 119.
3. Any other error(s) if found, should be deemed to have occurred in the cash book (bank
column).
Required:
Prepare for Corner Enterprise for the month of March 2020:
i. Adjusted cash book
Question 34
The accounts assistant of Mutale Ltd had just completed preparing the draft financial statements
for the year ended December 2012, showing a profit of Shs 406,040,000. On the same date the
cash book showed a debit balance of Shs 24,450,000. Subsequently the following issues came to
light:
i. Cheques amounting to Shs 5,000,000 paid to suppliers had been entered in the cash book but
had not yet been presented to the bank for payment.
ii. Cheques from customers totaling to Shs 14,450,000 entered in the cash book on 31 December
2012 were not credited by the bank until 3 January 2013.
iii. The bank had charged ledger fees amounting to Shs 1,600,000, which amount appeared on
the bank statement obtained from the bank on 31 December 2012. However, this amount had
not yet been credited in the cash book.
iv. A cheque for Shs 64,500,000 for new furniture had been mistakenly entered in the cash book
and the furniture account as Shs 14,500,000. A full year’s deprecation of 10% had been charged
in the statement of comprehensive income in respect of this furniture.
v. A cheque for Shs 4,900,000 from a credit customer paid into the bank on 28 December 2012
was subsequently dishonored by the bank. It was decided that the debt be written off because
the customer had become bankrupt.
vi. A cheque for Shs 12,000,000 in payment for motor vehicles insurance had mistakenly been
entered in the cash book as a debit and posted to the credit of motor vehicles account.
Depreciation of 25% per annum is charged on the balance of motor vehicles account at the
end of each accounting year on 31 December.
vii. The total of the payments side of the cash book had been under cast by 5,000.000. It was also
discovered that sales for the year were overstated by Shs 5,000,000.
viii. The bank had credited Shs 800,000 on the company’s current account on standing instructions
from the company is respect of interest on a fixed deposit account of the company maintained
at the same bank. In accounting for this transaction, the bookkeeper had made an entry on the
payments side of the cash book for this amount and had posted it to the debit of interest
payable account.
Required:
Prepare for Mutale Ltd for the year ended 31 December 2012:
a) an adjusted cash book showing the revised balance which should appear in Mutale Ltd’s
statement of financial position
b) bank reconciliation statement
c) statement of corrected net profit
Question 35
The following information was extracted from the books of Manya Saiziyo Enterprises, dealers in
used clothes, for the months of March and April, 2017:
(i) The un-reconciling items for the month of March, 2017 are as tabulated below:
Direct debits: Shs
EFT - Durable Importers Ltd 7,000,000
Standing order loan deduction 3,200
Direct credits:
Agent's commission 4,500,000
Agent's commission 6,700,000
Unpresented cheques:
Cheque no. 1400 512,000
Cheque no. 1390 1,526,000
Un credited cheques:
Cheque no. 00032 226,000
Cheque no. 6672 214,000
Cashbook for the month of April, 2017

Sales 340,000 Cheque no. 1469 350,000
- Balance c/ f 60,104,000
97,624,000 97,624,000
Bank statement for the month of April, 2017

Details Dr. Shs Cr. Shs Balance (Shs)
1,402,800
Cash deposit 4,600,000 6,002,800
Cheque no. 100342 5,600,000 11,602,800
Cheque no. 1465 8,700,000 2,902,800
Cheque no. 1469 250,000 2,652,800
EFT - MNL bank 2,200,000 452,800
EFT charge 1,100 451,700
Bank charges on EFT 110 451,590
Monthly flat fee-current account 35,000 416,590
Excise duty on bank charges 3,500 413,090
Cheque no. 705143 456,000 869,090
Monthly loan deduction 979,000 (109,910)
Cheque no. 1468 3,750,000 (3,859,910)
Cheque no. 3200165 23,000,000 19,140,090
Interest 40,000 19,180,090
Cheque no. 986732 21,250,000 40,430,090
Cheque no. 1466 8,760,000 31,670,090
Cheque no. 157220 3,400,000 28,270,090
Cheque no. 1484 1,256,000 27,014,090
Details Dr. Shs Cr. Shs Balance (Shs)

Cheque no. 66512 8,700,000 35,714,090
Cheque no. 1483 342,000 35,372,090
Cheque no. 511634 1,620,000 36,992,090
Cheque no. 1475 351,000 36,641,090
Cheque no. 20786 1,000,000 37,641,090
Cheque no. 1471 107,000 37,534,090
Cheque no. 445413 2,300,000 39,834,090
Cheque no. 1480 289,000 39,545,090
Cheque no. 1477 251,000 39,294,090
Cheque no. 1475 7,800,000 31,494,090
Cheque no. 1473 411,000 31,083,090
Interim bank statement charge 2,200 31,080,890
Excise duty on bank statement charge 220 31,080,670
Standing order loan deduction 3,000 31,077,670
1. The bank made errors on cheque numbers 1465 and 157220. Any other errors if found should
be deemed to have occurred in the cash book.
2. Cheque no. 15431 and Cheque no. 1464 were dishonoured by the bank and returned together
with the bank statement.
3. The sales were made in cash but erroneously recorded in the bank column of the cash book.
Required:
Prepare, for the month of April, 2017 Manya Saiziyo’s:
a) Adjusted cashbook.
b) Bank reconciliation statement.
Question 36
The following information was obtained from the books of Pamoja GeneralEnterprises. The
accounts assistant left without notice in April 2020 beforepreparing the bank reconciliation
statement for the month of March 2020. Un-reconciled items for the month of March 2020.
Un-presented cheques: Shs ‘000’ Direct debits: Shs ‘000’
Cheque no:85458 760 Ledger fees 36
Cheque no:85450 540 Excise duty 4
Un credited cheques: Direct credits:
Cheque no:0671 462 Interest 360
Cheque no:246341 843 Deposit 1,200
Cashbook for the month of April 2020.

Details Shs ‘000’ Details Shs ‘000’
Balance b/f 1,245 Cheque clearance fee 1,000
Cheque no:6750 4,500 Excise duty 100
Cheque no:108431 7,800 Cheque no:85461 8,400
Cheque no:11023 420 Cheque no:85462 26,500
Cheque no:39014 670 Cheque no:85464 5,400
Balance c/d 7,355 Cheque no:85469 1,020
55,150 55,150
Bank statement for the month of April 2020.
Details Debit Credit Balance
Shs ‘000’ Shs ‘000’ Shs ‘000’
Balance b/f 2,760
Cheque no:6750 4,500 7,260
Cheque clearance fee 1,000 6,260
Excise duty 100 6,160
Cash deposit 560 6,720
Cheque no:108431 7,800 14,520
Cheque no:85461 8,400 6,120
Cheque no:00631 3,203 9,323
Interest 240 9,563
Commission 360 9,923
Cheque book replacement fee 20 9,903
Cheque no:11023 420 9,483
Cheque no:4214 6,150 3,333
Ledger fees 36 3,297
Excise duty-ledger fees 3 3,294
Cheque no:85464 4,500 7,794
Standing order 3 7,791
Loan repayment 8,700 (909)
Cheque no:85450 540 (1,449)
Cheque no:246341 843 (606)
Cheque no. 85460 was dishonored and returned together with the
Bank statement at end of April 2020. The bank made errors on cheques no. 11023 and
85464. Any other error if found, should be deemed to have occurred in the cashbook.
Required:
Prepare for Pamoja General Enterprises, for the month of April 2020:
i. Adjusted cashbook.
ii. Bank reconciliation statement.
Question 37
The books of Koboko Enterprises Limited (KEL) had a bank overdraft Shs 17,221,600 while their
bank statement had a debit balance Shs 12,910,600 at 31 July, 2017.
On further examination, the following discrepancies were discovered:
1. On 8 July, 2017 Yumbe Ltd, a debtor, deposited Shs 9,290,000 into KEL’s bank account.
KEL learnt about this deposit on the day they received their bank statement on 31 July,
2017.
2. A banking of Shs 8,866,000 had been entered as Shs 866,000 in the cash book.
3. A deposit for Musa Traders Ltd Shs 6,592,000 was erroneously entered into KEL’s bank
account by the bank.
4. A cheque from Holdings Traders Ltd Shs 7,484,000 and another Shs 10,666,000 from KBB
Coaches were dishonoured by the bank and reflected on the bank statement only. The bank
charged Shs 120,000 for the dishonoured cheques.
5. Cheques No. 123123 Shs 7,736,000 and No. 222111 Shs 9,862,200, which had been
deposited by KEL into the bank, had not yet been reflected on the bank statement.
6. On 28 July, 2017 KEL received a commission Shs 5,776,000 from Nile Products Ltd, as
reflected on its bank statement, for finding a buyer for the latter’s old machinery.
7. Cheque payments No. 333001 Shs 3,124,000 and 000076 Shs 4,550,000 had not yet been
captured by the bank.
8. On 30 July, 2017 the bank paid Shs 7,710,000 and Shs 856,800 for rent and Internet services
respectively, per KEL’s instructions issued at the beginning of the year.
9. A cheque of Shs 4,608,000 had been credited twice by the bank.
10. A cheque for rental income Shs 3,506,000 had been entered as payment in the cash book.
11. Bank charges Shs 206,000 appeared on the bank statement.
Required:
Prepare the following in the books of KEL as at 31 July, 2017
a) Adjusted cash book
b) Bank reconciliation statement, starting with the balance as per adjusted cash book
Question 38
The summary of transactions in the bank column of the cash book for Mutete, a sole proprietor,
for the year ending 30 April 2013 is given below:
Shs ‘000’
(i) Opening balance 1,640
Receipts 405,500
407,140
Payments 406,010
Closing balance 1,130
(ii) Two of Mutete’s debtors, Judith Nandutu and Wambedde, settled their debts by paying Shs 240,500
and Shs 102,500 respectively directly into Mutete’s bank account. The transactions have not yet
been recorded in the cash book.
(iii) The bank paid, on on standing order from Mutete, Shs 120,000 for DSTV subscription and Shs
310,000 as house rental for Mutete for the month of April 2013. The cashier for Mutete has not yet
made adjustments for these transactions in the cash book.
(iv) During the preparation of the cash book, Mutete’s assistant entered a cheque paid to one of the
suppliers of Shs 129,000 as Shs 192,000. He also under cast the debit side of the cash book by Shs
182,000.
(v) The bank had charged Mutete’s account Shs 19,500 for ledger fees. It had also credited Mutete’s
account with Shs 33,700 interest for the month of April 2013. These have not yet been entered in
the cash book.
(vi) The following cheques, paid to Mutete’s suppliers had been entered in the cash book but by the
time Mutete obtained his statement from the bank, they had not yet been presented for payment:
Reny Kasule Shs 702,000, Big Size Shs 225,000 and Bad Head Shs 422,800.
(vii) Cheques received from Brian Mutale Shs 590,000, Matia Mulumba Shs 100,500 and Peace Katale
Shs 156,100 paid into the bank had not yet been credited to Mutete’s account by the time Mutete
obtained his bank statement.
(viii) The bank statement showed a favourable balance of Shs 1,805,400 at 30 April 2013.
Required:
(a) Prepare an adjusted cash book and bank reconciliation statement for Mutete as at 30 April 2013.
(b) Give three reasons why it is necessary to prepare a bank reconciliation statement at the end of
each accounting period.
Question 39
The bookkeeper of Hakuna Mchezo Ltd was unable to do the reconciliation for the month of March
2018. The details provided below were for two months; March and April, 2018.
1Items for March 2018:
Unpresented cheques: Shs
Cheque No. 313 500,000
Cheque No. 411 5,000,000
Uncredited cheques:
Cheque No. 513 4,000,000
Cheque No. 550 2,500,000
Direct debits:
Bank charges 2,500
Excise duty 250
Direct credits
Interest received 500,000
Dividends 1,200,000
2 Cash book (bank column) and bank statement for the month of April, 2018:
Cash book
Balance b/f 28,950,000 Cheque No. 10 705,000
Cheque No. 300 500,000 Cheque No. 34 2,000,000
Cheque No. 54 680,000
Cash 2,250,000 Cheque No. 42 50,000
Cheque No. 5 100,000 Balance c/f 30,265,000
34,800,000 34,800,000
Bank statement:
Debit Credit Balance
Shs Shs Shs
Cheque No. 300 500,000 30,147,250
Cheque no. 45 300,000 30,447,250
Loan interest 175,000 30,272,250
Cheque No. 10 705,000 29,567,250
Cash 2,250,000 31,817,250
Cheque No 513 4,000,000 35,817,250
Transfer from Obwocha 230,000 36,047,250
Bank charges 2,500 36,044,750
Cheque No 411 5,000,000 31,044,750
Commission received 150,000 31,194,750
Cheque No. 34 2,000,000 29,194,750
Cheque No. 40 1,100,000 28,094,750
Cheque No. 54 680,000 28,774,750
3 The bank dishonored cheques No. 5 and No. 42.
4 Any error, if found, should be deemed to have been caused by the bank.
Required:
Prepare for Hakuna Mchezo Ltd for the month of April, 2018:
i. An adjusted cash book

Bank Reconciliation Statement

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Bank Reconciliation Statement

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June sitting 2022

BY- KIMULI FRED

Lecture notes - 2022

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By the end of this chapter, you should be able to:

✓ Meaning of Bank Reconciliation statement.

i. trader’s cash book

Recording transactions in the bank statement and customers’ cash book.

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Advantages of bank reconciliation statement

The factors which contribute to the disagreement are;

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The procedure of preparing a bank reconciliation statement.

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Errors that increase bank balance

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Adjusted cash book (bank column).

Features or characteristics of bank reconciliation statement

2. Which of the following statements about bank reconciliations is correct?

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3. A bank reconciliation is performed in order to:

6. A bank reconciliation is performed in order to:

8. Which of the following is not shown on a bank statement?

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12. When a bank statement shows an overdraft

13. When cash is refunded to a credit customer, we debit the:

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6th 000324 10,000 5th 002543 1,200

11th Cash deposit 15,000 18,500

Cheque no. 67 2,500,000 65,522,250

Debit Shs ‘000’ Credit Shs ‘000’

Cashbook for the month of April, 2017

Bank statement for the month of April, 2017

Details Dr. Shs Cr. Shs Balance (Shs)

Cashbook for the month of April 2020.

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