Question Tag: reasons

a) Bank Reconciliation is a process that compares and matches the financial records of a business with the Bank Statements to ensure they are consistent and accurate. It verifies that transactions made align with those recorded by the bank for the same period. You are required to:

i) Explain THREE (3) reasons for carrying out a Bank Reconciliation. (3 marks)

ii) State THREE (3) items which may appear in the Bank Reconciliation Statement (3 marks)

b) Akoto is preparing his Bank Reconciliation for the month of February 2024. His bank statement shows a balance of GHȼ1,824 cash at the bank. The balance on the Cash Book in his General Ledger is GHȼ645 (Credit) He has identified the following reasons for the difference

1. The bank has credited the account in error with GHȼ485 which belongs to another customer.
2. A cheque drawn, amounting to GHȼ345, has been entered in the Cash Book as GHȼ354.
3. Bank charges of GHȼ320 on the Bank Statement have not been entered in the Cash Book.
4. Cheques totalling GHȼ664 have been correctly entered on the debit side of the Cash Book, but have not been paid in at the bank.
5. A customer’s cheque for GHȼ460 was returned by Akoto’s bank in February as the customer had insufficient funds in his account. Akoto has not recorded the return of the cheque in his Cash Book.
6. Six cheques have not yet been presented at the bank. These are: Cheque No. GHȼ 845763 550 845739 1,540 846435 480 846502 380 846548 269 846582 200 3,419
7. Cheque number 845739 was lost and was cancelled. Akoto has not recorded the cancellation of the cheque.

You are required to:

i) Prepare the Adjusted Cash Book for Akoto in a format which clearly indicates whether each entry is a debit or credit. (7 marks) ii) Prepare a Reconciliation of the Bank Statement Balance to the Adjusted Cash Book Balance. (7 marks)

[Total: 20 marks]