CIE Accounting Paper-2: Specimen Questions with Answers 30 - 32 of 103

Passage

The following transactions are shown in the books of Mr. Ringon for the month of January 2007.

Jan 1st Received a cheque from Mr. Fatso to whom goods were sold for £20000, allowed him 1%

Jan 2nd Mr. Fatso’s cheque was deposited in bank

Jan 5th Mr. Fatso’s cheque was dishonored (bank charges £100)

Jan 8th Mr. Fatso settled his account by means of a cheque £20250, £150 being interest charged.

Question number: 30 (5 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What are the advantages enjoyed by Mr. Ringon while maintaining a three columnar cash book?

Explanation

In a three columnar cash book three separate columns are maintained for cash, bank and discount on each side respectively Mr. Ringon, who has large volumes of business transactions has an advantage in maintaining a three columnar cash book, as the cash and bank balances of the business concern is known at a glance. A cash book is prepared periodically mostly monthly.

Passage

1. Mr. Stanley had 2 accounts with HSBC Bank named A/c 1 and A/c 2. As on 31.12. 2015, his cash book showed balances of £540 and £27040 in the two A/c’s respectively.

On examining the bank statements, the following were noticed:

(i) £2700 has been transferred from A/c 2 to A/c 1 by the bank without intimating Mr. Stanley.

(ii) £10 have been bank charges in both the accounts, which is not intimated to Mr. Stanley

(iii) Cheque for £542 issued on A/c 1 in November not yet presented in bank

(iv) A cheque of £427 deposited by Mr. Stanley in A/c 2 has been credited by bank in A/c 1

Question number: 31 (1 of 5 Based on Passage) Show Passage

One Liner Question▾

Write in Brief

Is it important for Mr. Stanley to prepare this reconciliation statement?

Explanation

Yes it is important for Mr. Stanley to prepare the Bank reconciliation statement, as it is necessary to find the accuracy of the accounting records maintained by the accountant. The entries omitted by the accountant are brought into light with the help of such a reconciliation statement.