(a) Peter Lee started business with £500 in his current account at Midclay Bank plc. He issued cheques totalling £3,638 during July, his first month of trading.

He also banked cheques received totalling £4,003. Calculate the balance in Peter Lee’s cash book at 31 July.

(b) A few days later, Peter receives a bank statement dated 31 July which shows a balance of £622. By checking each item against his cash book he is able to determine that;

Bank charges of £232 entered on the bank statement had not been entered in the cash book.

A cheque received for £240 and paid into the bank account during July had been returned by the bank marked ‘No funds available’. The original receipt had been entered in the cash book, and is accordingly included in the total amount shown above, but no adjustment had been made in the cash book for the fact that the cheque has turned out to be worthless.

A cheque paid for £87 had been incorrectly entered in the cash book as

£78. The total for the month shown above therefore includes £78 in respect of this transaction.

Calculate the new balance shown by the cash book.

(c) Checking of the bank statement against the cash book also revealed some outstanding items, namely,

Cheques written and sent to suppliers amounting to £843 had been entered in the cash book in July, and so are included in the totals for the month given above, but were not presented to the bank for payment until August.

Cheques received totalling £605 had been entered in the cash book and paid into the bank, but had not been credited by the bank until 2 August. Draft the Bank Reconciliation Statement at 31 July.