Silicon Corporation is operating an official bank account with TIP Commercial Bank and is enjoying a good credit history for the last 8 years. The Finance Manager of Silicon Corporation considers the banking channel as a safe mode of payments and receipts. Therefore, most of the transactions of Silicon are being done through banking system. But one day, upon scrutiny of entries in the Corporation’s Cash Book and Pass Book of the official bank account, the finance manager found the following discrepancies:
I. The cash book of Silicon Corporation showed an overdraft balance of Rs. 60,000 on 31stDecember, 2011.
II. On 22nd December, cheques totaling Rs. 8,000 were sent to the bank for collection, out of which cheque for Rs. 1,000 was wrongly debited to cash book by Rs.1,000 and credited to XYZ. The cheque amounting to Rs. 500 could not collected by the bank till date.
III. An amount of Rs. 1,500 received by the bank on behalf of the corporation, from Mr. ABC was not appearing in the cash book at all.
IV. A cheque of Rs. 8,000 was issued to a supplier on 28th of December, 2011. This cheque was presented to the bank on 4th January, 2012.
V. There were two entries of Rs. 4,000 and Rs. 1,200 debited in the Pass Book as interest on overdraft and bank charges respectively, but both have not been recorded in the Cash Book.
VI. A direct payment by the bank for insurance premium of Rs. 200 has not been recorded by the depositor at all.
VII. A cheque for Rs. 1000 was issued to a creditor on 27th December but unfortunately, the cheque was not en-cashed till 31st December 2011.
VIII. As per the standing instructions, the banker collected dividend of Rs. 1,000 on behalf of Silicon Corporation and credited the same till 31st December 2011. This fact was however, intimated to Silicon Corporation on 3rd January, 2011.
IX. A cheque of Rs. 1,500 was drawn on his personal account by the Owner was wrongly debited to his wife’s account by the bank.
i. Prepare a Bank reconciliation statement of Silicon Corporation as on December 31st 2011. (Marks: 18+2)
Note: 2 marks for formatting
ii. Pass necessary journal entries to correct bank column of the cash book. (Marks: 10)
Outcomes of this Assignment:
Students will be able to
• Sort all those entries that could be recorded mistakenly either by customer or by bank.
• Update the cash book of their business or the business which they will serve in near future.
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