Question

  

Question 3

Mr A Mathews, a client of your firm, has provided you with the following bank statement and bank account details in respect of the month ended 31 December 2016.

STATEMENT OF ACCOUNT - YOUR BANK LTD

Statement date - 31 December 2016.

Account No 123456

Date              Particulars           Debit     Credit    Balance

01-Dec-16 Balance forward				61,526 Cr
01-Dec-16 Cheque 1233		5,000		56,526 Cr
01-Dec-16 Lodgement			6,000	62,526 Cr
03-Dec-16 Cheque 1234		6,600		55,926 Cr
05-Dec-16 Direct Debit ESB		1,350		54,576 Cr
06-Dec-16 Credit Transfer VAT Refund			4,800	59,376 Cr
07-Dec-16 Cheque 1235		2,820		56,556 Cr
10-Dec-16 Lodgement			5,550	62,106 Cr
15-Dec-16 Cheque 1236		25,488		36,618 Cr
18-Dec-16 Credit Transfer Receivables Payment			11,550	48,168 Cr
20-Dec-16 Bank Charges for qtr ended Sept 09		660		47,508 Cr
21-Dec-16 Cheque 1237 21-Dec-16 Cheque 1238 22-Dec-16 Lodgement		3,885 9,645	1,500	43,623 Cr Cr 33,978 Cr 35,478
23-Dec-16 Standing Order Leasing		4,500		30,978 Cr

The books and records of A Mathews show the followings transactions through the bank account for the month of December 2016:

Date	Receipts		K            Date	Payments		K
2/12/16	Balance		62,526   1/12/16	Direct debit ESB		1,350
			2/12/16	Cheque 1234		6,060
9/12/16	Lodgement		5,400   5/12/16	Cheque 1235		2,820
			12/12/16	Cheque 1236		14,688
			14/12/16	Bank charges		660
			19/12/16	Cheque 1237		3,885
			20/12/16	Cheque 1238		9,645
23/12/16	Lodgement		1,500 24/12/16	Cheque 1239		12,921
			24/12/16	Cheque 1240		4,233
28/12/16	Lodgement		12,900 28/12/16	Cheque 1242		6,291
			31/12/16              Balance			19,773
			82,326			82,326
1/1/2017	Balance		19,773

You are required to:

Outline in brief why the regular preparation of bank reconciliations is important.

3 Marks

Write up the adjustments that are necessary to correct the bank account in A Mathew’s books.

10 Marks

Prepare the bank reconciliation statement for A Mathews as at 31 December 2016.

7 Marks Total 20 Marks

Answer 1

A monthly reconciliation helps to catch and identify any unusual transactions that might be caused by fraud or accounting errors, especially if the business uses more than one bank account. Reconciling your account also helps you identify account management or administrative issues that need attention.

Adjustments
Balance as per books		$19,773
Add: Lodgement of 9/12/2016 recorded less in books	150
Add: Vat Refund received on Dec,6	4,800
Add:Account Receivables directly received at bank	11,550
		$ 500
Less: Cheque no 1234 wrongly entered in books as 6060 instead of 6600	540
Less: Chequ0e no 1236 wrongly entered in books as 14688 instead of 25488	10800
Less: amount paid for leasing as per standing order by bank	4500
		$-15,840
True Book Balance		$ 20,433

Bank Reconciliation Statement
as at December 31,2016
Balance as per bank		$      30,978
Add: Lodgements in transit		12900
Less:Oustanding Cheques
Cheque 1239	12,921
Cheque 1240	4,233
Cheque 1242	6,291	(23,445)
Balance as per books		$      20,433