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ACCA Applied Knowledge · Financial Accounting · Bank reconciliations

At 31 March, a company's cash book shows a bank balance of $8,400 debit. The bank statement shows a balance of $9,150. The only difference is a cheque for $750 issued to a supplier that has not yet been presented. Which statement correctly explains the position?

The bank statement balance is higher because the cheque has been recorded in the cash book but not yet paid by the bank. This is a timing difference, so no cash book entry is needed; the cheque is deducted in the bank reconciliation.

  1. AThe bank statement balance is higher because the unpresented cheque has not yet reduced the bank's record of the balanceCorrect
  2. BThe bank statement balance is higher because the cash book has not been updated for a cheque received
  3. CThe cash book balance should be increased by $750 to agree to the bank statement
  4. DThe cash book should be credited with a further $750 to record the unpresented cheque

Explanation

The company has already credited its cash book when it issued the cheque, but the bank has not yet paid it. So the bank statement shows $750 more than the cash book: 8,400 + 750 = 9,150. No cash book adjustment is needed because it is a timing difference.

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