- 20 Marks
Question
a) A bank reconciliation statement matches the cash balance on a company’s cash book to the corresponding amount on its bank statement. Reconciling the two accounts helps determine if accounting changes are needed. Bank reconciliations are completed at regular intervals to ensure that the company’s cash records are accurate. They also help detect fraud and any cash manipulations.
Required:
Identify FOUR (4) features of a bank reconciliation statement.
(4 marks)
b) Nyantakyi Ltd (Nyantakyi) was preparing its reconciliation for the month of November 2018 and noted a difference between its bank statement balance and the balance on the bank account in its general ledger. The bank statement shows a balance of GH¢1,596 cash at the bank, while the bank account in the general ledger shows a balance of GH¢1,022 overdrawn.
The following information was discovered:
i) The bank debited the company’s account with GH¢7,028 for a cheque previously drawn, but the cheque had not yet been presented.
ii) A cheque deposit of GH¢5,950 on 28 November 2018 was not credited by the bank until 2 December 2018.
iii) A cheque of GH¢1,540 incorrectly credited by the bank to Nyantakyi’s account was later reversed by the bank.
iv) A bank loan of GH¢8,000 was credited to Nyantakyi’s account but was not recorded in the cash book.
v) Bank charges of GH¢130 had not been recorded in the cash book.
vi) An interest charge of GH¢60 was debited by the bank but was not recorded in the cash book.
Required:
i) Prepare the adjusted cash book for Nyantakyi Ltd for the month of November 2018. (5 marks)
ii) Prepare the bank reconciliation statement for Nyantakyi Ltd as at 30 November 2018. (5 marks)
c)
i) Errors that can be detected by the trial balance are:
- Transposition: A transposition error occurs when digits in a transaction are reversed. For example, recording 654 instead of 564. This can affect the trial balance.
- Omission: An omission error occurs when an entry is completely left out. If it’s a one-sided entry, it will affect the trial balance. (2 marks)
ii) Reasons for having control accounts:
- They provide a check on the accuracy of entries made in personal accounts in the receivables and payables ledger.
- Control accounts assist in the location of errors.
- They provide a quick summary of transactions recorded in individual accounts. (3 marks)
Answer
a) Features of Bank Reconciliation Statement
- It is not part of the books of accounts.
- It is prepared periodically depending on the volume of transactions, such as weekly, monthly, or quarterly.
- It ensures that the cash book and bank statement balances match.
- It helps in detecting errors, fraud, or any cash manipulation. (4 marks evenly spread)
b) Adjusted Cash Book for Nyantakyi Ltd for November 2018
c) i) Errors that can be detected by the trial balance are:
Transposition
A transposition error is a simple error of data entry that occurs when two digits
that are either individual or part of a larger sequence of numbers are accidentally
reversed when posting a transaction. If one is reversed and the other is correct.
Omission (if it’s one sided)
Commission ( If one sided, or two debit entries are made)
(2 errors explained @1.5 marks each = 3 marks)
ii) Reasons for having control accounts
They provided a check on the accuracy of entries made in the personal accounts in
the receivables and payables ledger.
Control accounts also assist in the location of errors.
Where there is a separation of clerical duties, the control account provides an internal check.
- Tags: Bank Reconciliation, Cash Book, Control Accounts
- Level: Level 1
- Topic: Bank reconciliations, Control accounts and account reconciliations
- Series: MAY 2019
- Uploader: Theophilus