A business discovers that the bank column of its cash book was overcast by Rs. 3,000. What effect does this error have on the recorded bank balance?
Correct answer: B. The recorded balance is overstated by Rs. 3,000
- A. The recorded balance is understated by Rs. 3,000
- B. The recorded balance is overstated by Rs. 3,000
- C. The bank statement balance is understated by Rs. 3,000
- D. The bank statement balance is overstated by Rs. 3,000
Explanation
An overcast means the total has been added by too much, so the cash book bank balance is higher than it should be by Rs. 3,000. The bank statement is not affected by an error made in the business's books.
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About Bank Reconciliation and Control Accounts
Bank reconciliation explains differences between the cash book and bank statement through unpresented cheques, outstanding deposits, bank charges, direct payments, credited amounts and recording errors. Control accounts summarise receivables and payables ledgers, and their balances are reconciled with individual accounts to locate discrepancies.
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