Question

Question 18.
On 31st March, 2018, Cash Book of a merchant showed bank overdraft of ₹ 1,72,985. On comparing the Cash Book with Bank Statement, following discrepancies were noted:
(i) Cheques issued for ₹ 60.000 were not presented in the bank till 7th April, 2018.
(ii) Cheques amounting to ₹ 75.000 were deposited in the bank but were not collected
(iii) A Cheque of ₹ 15,000 received from Mahesh Chand and deposited in the bank was dishonoured but the non-payment advice was not received from the bank till 1st April, 2018.
(iv) ₹ 1,50,000 being the proceeds of a bill receivable collected appeared in the Pass Book but not in the Cash Book.
(v) Bank charges ₹ 1,500 and interest on overdraft 8,500 appeared in the Pass Book but not in the Cash Book.
(vi) Overdraft balance as per Cash Book of ₹ 500 on 28th February, 2018 was wrongly carried forward as debit balance. The error was noted at the time of preparing the Bank Reconciliation Statement as on 31st March, 2018.
Prepare Bank Reconciliation Statement and show what balance the Bank Pass Book would indicate on 31st March, 2018.

Answer 1

All the error is easy but you need to understand and focus more on the last error as it is a bit complicated.

Explanation:

Overdraft of Merchant cash book                    (172985)

Add : Cheque issued not presented                 60000

Less: Cheque deposit not collected                  (75000)

Less: Cheque deposited and dishonoured       (15000)

Add: Bill receivable collected in bank                150000

Less: Bank charges                                                 (1500)

Less: Bank Interest                                                 (8500)

Less: Overdraft Balance*                                          (1000)

Note* Overdraft balance was wrongly credited instead of debiting so we need to credit it two times one to correct the error as we debited and one because the amount is credit.