QUESTION ONE
The following is a summary of cash book as presented for the month of October:
£ £
Receipts 1.469 Balance b/f 761
Balance
c/d 554 1,262
2,023
===== 2,023
=======
All receipts are banked and payments are made by cheque.
On investigation you discover:
Bank charges of £136 entered on the bank statement have not been entered in the cash book.
Cheques drawn amounting to £267 had not been presented to the bank for payment.
Cheques received totaling to £762 had been entered in the cash book and paid into the bank, but had not been credited by the bank until 3 November.
A cheque for £22 for sundries had been entered in the cash book as a receipt instead of as payment.
A cheque received for £80 had been returned by the bank and marked ‘No funds available’. No adjustment has been made in the cash book.
A standing order for a business rates instalment of £150 on 30 October had not been entered in the cash book.
All dividends received are credited directly to the bank account. During October amounts totaling £62 were credited by the bank but no entries were made in the cash book.
A cheque drawn for £66 for stationery had been incorrectly entered in the cash book as £60.
The balance brought forward in the cash book should have been £711, not £761.
Required:
Show the adjustments required in the cash book. [5 marks]
Prepare a bank reconciliation statement as at 31 October. [5 marks]
Explain what is meant by incomplete records and set out three features which
Characterize incomplete records. [8 marks]
a sole trader who prepares his financial statements annually to 30 April. His summarized balance sheets for the last two years are shown below.
Balance Sheets as at 30 April
2008 2009
Shs Shs Shs Shs
Non-current assets 15,500 18,500
Less provision for depreciation -1,500 -1,700
14,000 16,800
Current assets
Inventory 3,100 5,900
Trade accounts receivable 3,900 3,400
Bank 1,500 ____-____
8,500 9,300
Total assets 22,500 26,100
Current liabilities
Trade accounts payable 2,000 2,200
Bank overdraft ____-______ 900
-2,000 -3,100
Net assets 20,500
======= 23,000
=======
Capital account:
Balance at 1 May 20,000 20,500
Add Net profit for the year 7,000 8,500
Additional capital introduced ___-___ 2,000
27,000 31,000
Less drawings -6,500 -8,000
Total capital 20,500
====== 23,000
======
John is surprised to see that he now has an overdraft, in spite of making a profit and bringing in additional capital during the year.
Required:
Draw up a suitable financial statement which will explain how his overdraft has arisen. [7 marks]
“Statements of cash flows have many uses other than the legal need for some companies to prepare them.” Discuss this stamen. [5 marks]
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