Question

At 31st August 2020 Lackson’s bank statement showed a balance at bank of K12, 500. When Lackson checked his Cash book he found the following:

i. A payment of K25, 000 into the bank on 31st August 2020 does not appear on the bank statement.

ii. Cheques totalling K40, 6250 sent to customers on 29th August 2020 did not appear on the bank statement.

iii. The bank statement shows that Wilson’s account has been debited with bank charges of K500.

These have not been recorded in the cash book

. Required: a) Prepare Lackson’s bank reconciliation at 31st August 2020.

b) Calculate Lackson’s cash book balance at 31 August 2020 before it was corrected.

c) Describe THREE reasons why the bank may not honour a chequ

Answer 1

I'm assuming that this point has a typo:

ii. Cheques totalling K40, 6250 sent to customers on 29th August 2020 did not appear on the bank statement.

So, I've taken the amount to be K40, 625. Also, I don't see why you'd send cheques "to" customers. It could be cheques sent "by" customers to the bank.

In any case, I'll prepare bank reconciliation statements considering the two scenarios - "to customers" and "by customers"

CASE 1 - "TO CUSTOMERS"

Lackson's cash book shows a credit balance of 2625 before the correction.

CASE 2 - 'FROM CUSTOMERS"

Lackson's cash book shows a debit balance of 78625 before the correction.

There are many reasons a bank may not honour a cheque. Some of them are:

1. When the signature on cheque does not match the specimen signature in the bank's database, the bank will not honour the cheque.

2. If the drawer of the cheque orders the bank to stop payment of the cheque, the bank will not honour the cheque.

3. If there is not enough fund to meet the payment of the cheque in the drawer's account, the bank will not honour the cheque.