DISCUSSION ON RECONCILATION AND ERRORS

Q1.
On 31 January 20X8, Randall's cash at bank account balance for its current account showed a
credit balance of £150 which did not agree with the bank statement balance. In performing the
reconciliation the following points come to light.
Not recorded in the cash at bank account
+ Bank charges: 36
+ Transfer from savings account to current account: 500
Not recorded on the bank statement
+ Unpresented cheques 116
+ Uncleared lodgements 630
It was also discovered that the bank had debited Randall's account with a cheque for £400 in
error. This should have been debited to Hopkirk's account. What was the original balance on
the bank statement?
A. £200 DR
B. £428 DR
C. £600 CR
D. £1,600 CR

Q2.
A bank reconciliation statement for Worth Ltd at 31 December 20Y1 is in course of preparation.
In the light of the information given below, compute the final balance shown by the cash at
bank account.
1. Overdrawn balance per bank statement is £1,019.
2. An amount of £250 credited in the bank statement under a standing order arrangement has
not been entered in the cash at bank account.
3. Cheques drawn and entered but not presented total £2,467.
4. Bank charges of £1,875 debited by the bank have not been entered in the cash at bank account.
5. Cash and cheques received and entered but not credited in the bank statement total £4,986.
6. An uncorrected bank error has resulted in a cheque for £397 debited to Worth's account in
error.
The final balance shown by the cash at bank account, after making all necessary corrections,
should be:
A. £6,831 DR
B. £3,141 DR
C. £1,897 DR
D. £228 DR

Q3.
The bookkeeper of Rico plc has prepared the supplier statement reconciliation for the year
ended 30 April 20X1. She discovered the following differences which have not yet been
corrected:
 Balance per Balance per
payables ledger supplier statement
Supplier at at Explanation
30 April 20X1 30 April 20X1 (£)
(£)
A cheque was posted to the supplier on 30
Turks 2,880 3,140 April 20X1 which was not recorded by
the supplier until 3 May 20X1
The supplier agreed a contra with the
Caicos 1,200 1,100 receivables ledger which has not been
recorded by Rico plc
Before these discoveries, the balance on trade payables was £12,450. In its statement of
financial position as at 30 April 20X1, Rico plc will have a figure for trade payables of:
A £12,350
B £12,550
C £12,290
D £12,090

Q4. \
The following three matters were discovered by Daisy when she prepared her month end bank
reconciliation.
(1) The electronic banking transaction report includes a receipt of £560 in respect of a
payment from a credit customer. This was not automatically matched to a transaction
by the accounting system. On investigation, it was discovered that there was a bank
error and the correct amount was £650.
(2) Bank charges debited by the bank have not yet been entered in the cash at bank
account.
(3) The value of unpresented cheques exceeded the value of uncleared lodgements.
Which of these matters will require adjustments to the cash at bank account?
A (1) and (2) only
B (2) and (3) only
C (2) only
D (1) and (3) only

Q5.
Goods invoiced at £25 had been returned by Samson Ltd to the supplier for a full refund. The
only accounting entry made for the return was to debit the purchases account and credit
the suspense account with £52.
Which of the following journal entries should be made to correctly record the return in
the nominal ledgers?
A Dr Suspense £52, Cr Purchases £52
B Dr Suspense £52, Cr Trade payables £52
 C Dr Suspense £52, Dr Trade payables £25, Cr Purchases £77
D Dr Trade payables £27, Cr Purchases £27

Q6.
Peter's draft accounts show a loss of £22,000 for the year. On investigation you discover the
following.
(1) £2,000 of repairs had been incorrectly recorded as a purchase of machinery on the
last day of the year.
(2) Cash of £500, received in respect of a debt written off many years ago, had been
credited to receivables.
(3) Closing inventory includes items costing £1,000 which were sold and delivered to
the customer on the year end date.
What is the adjusted loss for the year?
A £25,500
B £24,500
C £23,500
D £19,500

Q7.
The bookkeeper of Sivewright plc has entered an invoice for a new computer bought on credit
for £1,010 into the accounting records as £1,100, debiting computer consumables.
Which two of the following error types have occurred?
A Error of commission
B Transposition error
C Compensating error
D Error of principle
E Error of omission

Q8.
Carl's draft financial statements show a profit of £10,000. The following errors are
discovered.
(1) A debt of £2,000 needs to be written off as irrecoverable. The bookkeeper has
incorrectly recorded this write-off as £200.
(2) Carl has drawn cash of £7,000 from the business and failed to record this in the
accounting records.
(3) Sales include £5,000 in respect of goods with a gross margin of 20% which do not
meet the revenue recognition criteria and need to be reversed.
After adjusting for the above, what is Carl's revised profit?
A £200
B £3,200
C £7,000
D £7,200
Q9.
During the year ended 31 July 20X1, Feltz Co sold equipment which cost £70,000 for
£25,000 on which it made a loss of £5,000. The proceeds on sale have been correctly recorded
in cash at bank but the other side of the transaction has been recorded in the suspense account.
What is the correct journal entry to record the disposal of the equipment in the year ended
31 July 20X1?
A Dr Suspense account £25,000; Dr Loss on disposal £5,000; Cr Equipment cost
£30,000
B Dr Suspense account £25,000; Dr Loss on disposal £5,000;
Dr Accumulated depreciation £40,000; Cr Equipment cost £70,000
C Dr Equipment cost £30,000; Cr Suspense account £25,000; Cr Loss on disposal
£5,000
D Dr Equipment cost £70,000; Cr Suspense account £25,000; Cr Loss on disposal £5,000;
Cr Accumulated depreciation £40,000

Q10.
Riley plc has drawn up draft financial statements as at 31 December 20X8, which show a
draft profit for the year of £150,000 and a suspense account with a £600 debit balance.
The following issues have now been discovered.
(1) An early settlement discount of £600 received from a supplier was credited to trade
payables and debited to a suspense account as the bookkeeper wasn't sure how to
record the transaction. Riley plc had not expected to take advantage of the discount
on the date the invoice was recorded.
(2) Maintenance costs of £1,200 incurred on 1 January 20X8 were debited to plant and
machinery. Riley plc depreciates plant and machinery at 20% per annum.
After adjusting for these issues Riley plc's profit for the year will be:
A £148,800
B £149,640
C £150,960
D £152,160

Q11.
School plc is a large company with a share capital of 4 million 25p equity shares. To raise
funds it has made a 1 for 5 rights issue of its equity shares at £2 per share. The rights
issue was fully taken up but only £1,500,000 had been paid up at the end of the reporting
period, 30 June 20X4. The only entries in the accounting records have been to debit cash
at bank with £1,500,000 and credit the suspense account with the same amount.
As well as debiting the suspense account with £1,500,000, which of the following entries
should School plc now make to correctly record the share issue?
A Dr Other receivables £100,000, Cr Share capital £200,000,
Cr Share premium £1,400,000
 B Dr Other receivables £100,000, Cr Share capital £200,000,
Cr Share premium £1,400,000
C Dr Other receivables £100,000, Cr Share capital £800,000,
Cr Share premium £800,000
D Cr Share capital £200,000, Cr Share premium £1,300,000

Q12.
Sneaky plc acquired a truck on 31 December 20X1, the end of its reporting period, for
£60,000. It transferred £15,000 to the seller and handed over an old truck with a carrying
amount at that date of £18,200. This truck had cost £55,000. A further sum of £25,000
was then due to the supplier of the truck as the final payment.
The only entries made before the initial trial balance was drawn up were to debit suspense
with £40,000, credit cash at bank £15,000 and credit other payables £25,000.
As well as crediting suspense with £40,000, which of the following sets of adjustments
should Sneaky plc record when preparing its final trial balance?
A Dr Truck – cost £5,000, Dr Truck – accumulated depreciation £18,200,
Dr Disposal £16,800
B Dr Truck – cost £60,000, Dr Truck – accumulated depreciation £36,800,
Cr Disposal £56,800
C Dr Truck – cost £5,000, Dr Truck – accumulated depreciation £36,800,
Cr Disposal £1,800
D Dr Truck – cost £60,000, Dr Truck – accumulated depreciation £18,200,
Cr Disposal £38,200

Q13.
A summarised version of Leah plc's initial trial balance for the year ended
30 September 20X3 is as follows:
Initial trial balance Trial balance
(summary)
£ £
Profit after tax 68,574
Total non-current and current assets 998,230
Current and non-current liabilities 150,344
Share capital 50,000
Retained earnings 734,656
Suspense 5,344
1,003,574 1,003,574
It has now been discovered that the bookkeeper was unsure where to record insurance
costs for the current year of £5,344, so he credited cash at bank and posted the other side
of the entry to the suspense account.
When this error is corrected, the balance of retained earnings for inclusion in the
 statement of financial position will be:
A £729,312
B £740,000
C £797,886
D £808,574

Q.14
Brassie plc has an allowance for receivables of £1,200 on 1 October 20X4. During the
reporting period ending 30 September 20X5 the following events take place:
(1) A cheque for £106 previously received and included in the cash at bank account was
returned unpaid on 29 September 20X5. The amount was correctly credited to the
cash at bank account but the other side of the transaction was debited to the suspense
account. The directors wish to write the debt off as irrecoverable.
(2) An allowance of £1,500 is required at the year end.
(3) A cheque received for £36 in respect of an amount written off in August 20X4 was
debited to the cash at bank account and credited to the suspense account.
What journal entries are required as at 30 September 20X5?
A Dr Trade Receivables £106, Dr Irrecoverable debts expense £264,
Cr Suspense account £70, Cr Allowance for receivables £300
B Dr Irrecoverable debts expense £370, Cr Allowance for receivables £300,
Cr Suspense account £70
C Dr Suspense account £70, Dr Irrecoverable debts expense £200,
Cr Allowance for receivables £300
D Dr Irrecoverable debts expense £406, Cr Allowance for receivables £300,
Cr Suspense account £70, Cr Trade receivables £36