a) Explain the term "bank reconciliation. State the reasons for its preparation.(4 mks) b) Wepukulu, a sole trader received his bank statement for the month of June 2022. At the date the bank balance was sh706,500 , whereas his cash book bank balance was sh 2,336,500. His accountant investigated the matter and discovered the following discrepancies;- 1. Bank charges of sh3000 had not been entered into the cashbook. 2. Cheques drawn by Wepukulu totaling sh. 22 ,500 had not yet been presented to the bank. 3. He had not entered receipts of sh26,500 in his cashbook. 4. The bank had not credited Mr. Wepukulu with receipts of Sh98500 paid into the bank on 30^th June 2022 5. Standing order amounting to Sh62000 had not been entered in the cash book 6. A cheque for Sh15000 from a debtor had been returned by the bank marked "refer to drawer" but had not been written back into the cash book 7. Wepukulu had brought forward the opening cash balance of 329250 as a debt balance instead of a credit balance 8. An old cheque payment amounting to Sh44000 had been written back in the cashbook but the bank had already honored it. 9. In the cashbook Wepukulu had entered a payment of Sh74900 as 79400 10. Some of Wepukulu's customers had agreed to settle their debts by paying directly into his bank account. Unfortunately the bank had credited some deposits amounting to Sh 832,500 to another customers account. However , acting on information from his customers Wepukulu had actually entered the expected receipts from the debtors in his cash book Required: (i) Adjusted cashbook and (6 marks) (ii) bank reconciliation statement as at 30^th June 20022 (5 marks)

Question

a) Explain the term "bank reconciliation. State the reasons for its preparation.(4 mks) b) Wepukulu, a sole trader received his bank statement for the month of June 2022. At the date the bank balance was sh706,500 , whereas his cash book bank balance was sh 2,336,500. His accountant investigated the matter and discovered the following discrepancies;- 1. Bank charges of sh3000 had not been entered into the cashbook. 2. Cheques drawn by Wepukulu totaling sh. 22 ,500 had not yet been presented to the bank. 3. He had not entered receipts of sh26,500 in his cashbook. 4. The bank had not credited Mr. Wepukulu with receipts of Sh98500 paid into the bank on 30^th June 2022 5. Standing order amounting to Sh62000 had not been entered in the cash book 6. A cheque for Sh15000 from a debtor had been returned by the bank marked "refer to drawer" but had not been written back into the cash book 7. Wepukulu had brought forward the opening cash balance of 329250 as a debt balance instead of a credit balance 8. An old cheque payment amounting to Sh44000 had been written back in the cashbook but the bank had already honored it. 9. In the cashbook Wepukulu had entered a payment of Sh74900 as 79400 10. Some of Wepukulu's customers had agreed to settle their debts by paying directly into his bank account. Unfortunately the bank had credited some deposits amounting to Sh 832,500 to another customers account. However , acting on information from his customers Wepukulu had actually entered the expected receipts from the debtors in his cash book Required: (i) Adjusted cashbook and (6 marks) (ii) bank reconciliation statement as at 30^th June 20022 (5 marks)

Answer 1

a) Bank reconciliation is the process of comparing and matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement. The purpose of bank reconciliation is to ensure that the accounting records are accurate and complete, and to identify any discrepancies or errors that may have occurred. The reasons for preparing a bank reconciliation include:1. Identifying and correcting errors or discrepancies in the accounting records or bank statement.2. Ensuring that the accounting records accurately reflect the cash transactions and balances.3. Detecting and preventing potential fraud or unauthorized transactions.4. Providing a basis for preparing financial statements that accurately reflect the entity's financial position and performance.b) (i) Adjusted cashbook:To adjust the cashbook, we need to make the necessary adjustments based on the discrepancies identified by the accountant. The adjusted cashbook will be as follows:| Date | Description | Debit | Credit | Balance || --- | --- | --- | --- | --- || 30th June 2022 | Opening balance (debt balance) | | | (329250) || | Receipts not entered | | 26500 | (329250 + 26500) || | Cheques not presented | 22500 | | (329250 + 26500 - 22500) || | Bank charges not entered | 3000 | | (329250 + 26500 - 22500 - 3000) || | Receipts not credited by bank | | 98500 | (329250 + 26500 - 22500 - 3000 + 98500) || | Standing order not entered | 62000 | | (329250 + 26500 - 22500 - 3000 + 98500 - 62000) || | Cheque returned marked "refer to drawer" | 15000 | | (329250 + 26500 - 22500 - 3000 + 98500 - 62000 - 15000) || | Old cheque payment written back in cashbook | 44000 | | (329250 + 26500 - 22500 - 3000 + 98500 - 62000 - 15000 - 44000) || | Payment entered incorrectly in cashbook | | 5000 | (329250 + 26500 - 22500 - 3000 + 98500 - 62000 - 15000 - 44000 + 5000) || | Deposits credited to another customer's account | | 832500 | (329250 + 26500 - 22500 - 3000 + 98500 - 62000 - 15000 - 44000 + 5000 + 832500) |(ii) Bank reconciliation statement as at 30th June 2022:| Description | Bank statement balance | Adjusted cashbook balance || --- | --- | --- || Opening balance (debt balance) | | (329250) || Receipts not entered | | 26500 || Cheques not presented | | 22500 || Bank charges not entered | | 3000 || Receipts not credited by bank | | 98500 || Standing order not entered | | 62000 || Cheque returned marked "refer to drawer" | | 15000 || Old cheque payment written back in cashbook | | 44000 || Payment entered incorrectly in cashbook | | 5000 || Deposits credited to another customer's account | | 832500 || Adjusted bank balance | | |

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