Updating cash book for bank statement items and errors

Steps:

• Review bank statement: identify double interest charge as bank error and unrecorded dividend receipt.
• For bank error, adjust cash book by recording only the correct single interest charge to reflect accurate books.
• For dividend, enter the receipt in cash book as omitted income.
• Balance the updated cash book, then prepare reconciliation for timing differences.

Why B is correct:

• Per double-entry accounting, cash book must be updated for all valid transactions and corrections from bank statement before reconciliation to ensure accurate financial records.

Why the others are wrong:

• A: BRS handles timing issues, not book updates for omissions or corrections.
• C: Bank error requires cash book adjustment for correct recording, not just BRS notation.
• D: Identical to B, but listed as distractor with no distinction.

Final answer: B