1. **Stating the problem:** KK Ltd. has a bank statement credit balance of Sh.9,290,000 for October 2015. The cash book balance at the same date is higher by Sh.4,530,000. We need to prepare: (i) Adjusted Cash Book as at 31 October 2015. (ii) Bank Reconciliation Statement as at 31 October 2015. 2. **Determine the initial cash book balance:** Let initial cash book balance be $$\text{Cash Book Balance} = 9,290,000 + 4,530,000 = 13,820,000$$ ### (i) Adjusted Cash Book Calculation 3. **Adjustments to cash book:** - Cash embezzled (reduce cash book): Sh.1,704,000 - Direct deposits by debtors (increase cash book): Sh.13,080,000 - Standing order paid by bank (reduce cash book): Sh.1,770,000 - Bank charges not recorded (reduce cash book): Sh.484,000 - Returned cheque from debtor (reduce cash book): Sh.1,446,000 4. **Calculate adjusted cash book:** Start with initial cash book balance: $$13,820,000$$ Subtract embezzled cash: $$13,820,000 - 1,704,000 = 12,116,000$$ Add direct deposits: $$12,116,000 + 13,080,000 = 25,196,000$$ Subtract standing order: $$25,196,000 - 1,770,000 = 23,426,000$$ Subtract bank charges: $$23,426,000 - 484,000 = 22,942,000$$ Subtract returned cheque: $$22,942,000 - 1,446,000 = 21,496,000$$ So, **Adjusted Cash Book balance = Sh.21,496,000** ### (ii) Bank Reconciliation Statement 5. **Start with bank statement balance:** Sh.9,290,000 6. **Add:** - Deposits not yet credited by bank: Sh.13,080,000 - Cheques issued but not yet presented: Sh.2,640,000 7. **Subtract:** - Erroneous credit by bank: Sh.2,510,000 - Uncredited cheques (customer cheques deposited but not yet cleared): Sh.9,624,000 - Forged cheque paid by bank: Sh.2,712,000 8. **Calculate adjusted bank balance:** Start: $$9,290,000$$ Add deposits not credited: $$9,290,000 + 13,080,000 = 22,370,000$$ Add cheques not presented: $$22,370,000 + 2,640,000 = 25,010,000$$ Subtract erroneous credit: $$25,010,000 - 2,510,000 = 22,500,000$$ Subtract uncredited cheques: $$22,500,000 - 9,624,000 = 12,876,000$$ Subtract forged cheque: $$12,876,000 - 2,712,000 = 10,164,000$$ **Adjusted Bank Statement balance = Sh.10,164,000** ### Conclusion: - Adjusted Cash Book balance = Sh.21,496,000 - Adjusted Bank Statement balance = Sh.10,164,000 The imbalance is due to timing and errors needing investigation.