It is now May 2021, and two months have passed since you first met with Mr and Mrs Speedy to assist them with implementing their new accounting system and preparing their accounting records.

They have come to you for some assistance as the balance in the ledger in their Xero system at the end of April 2021 doesn’t agree with the closing balance on the April bank statement... and they are not sure what they have done wrong.

The April 2021 bank statement appeared as follows:

Date	Description	Deposit	Withdrawal	Balance
1/04/2021	Opening balance			$29,220.00
2/04/2021	EFT Deposit - sales	440.00		$29,660.00
4/04/2021	EFT Deposit - Happy Kids Preschool	1,520.00		$31,180.00
4/04/2021	Cheque 1		88.00	$31,092.00
4/04/2021	EFT Deposit - sales	780.00		$31,872.00
8/04/2021	EFT Deposit - sales	780.00		$32,652.00
12/04/2021	Cheque 3		75.00	$32,577.00
12/04/2021	EFT Payment - Advertising		230.00	$32,347.00
13/04/2021	Cheque 4		400.00	$31,947.00
14/04/2021	EFT Payment - Direct Freight Express		740.00	$31,207.00
16/04/2021	Cheque 6		330.00	$30,877.00
16/04/2021	EFT Deposit - sales	1,900.00		$32,777.00
18/04/2021	EFT Deposit - sales	1,800.00		$34,577.00
19/04/2021	EFT Payment - stationery expenses		72.00	$34,505.00
21/04/2021	EFT Payment - Top Notch Bikes Ltd		6,150.00	$28,355.00
22/04/2021	EFT Deposit - PCYC Sydney	4,000.00		$32,355.00
25/04/2021	EFT Payment - Telstra		180.00	$32,175.00
27/04/2021	EFT Payment - Advertising		440.00	$31,735.00
30/04/2021	EFT Deposit - sales	880.00		$32,615.00
30/04/2021	Bank fees		20.00	$32,595.00
30/04/2021	Interest	1.60		$32,596.60

The business’s accounting records for April 2021 showed an opening balance for the ‘bank’ account of $29,220, which agreed with the bank statement at 31 March 2021. Following is a summary of deposits and withdrawals recorded by Mr and Mrs Speedy in their accounting records during April:

Withdrawals:
Date	Detail	Amount
2/04/2021	Cheque 1 - Office equipment repairs	$88.00
8/04/2021	Cheque 2 - Advertising	$110.00
9/04/2021	Cheque 3 - Stationery expenses	$75.00
12/04/2021	EFT Payment - Advertising	$230.00
12/04/2021	Cheque 4 - Accountancy expenses	$440.00
14/04/2021	EFT Payment - Freight	$740.00
14/04/2021	Cheque 5 - Advertising	$200.00
14/04/2021	Cheque 6 - Electricity expense	$330.00
19/04/2021	EFT Payment - Stationery expenses	$72.00
21/04/2021	EFT Payment - Supplier payment	$6,500.00
27/04/2021	EFT Payment - Advertising	$440.00
		$9,225.00

Deposits:
Date	Amount banked
2/04/2021	$440.00
4/04/2021	$1,250.00
8/04/2021	$780.00
16/04/2021	$1,900.00
18/04/2021	$1,880.00
22/04/2021	$4,000.00
30/04/2021	$808.00
	$11,058.00

The bank did not make any errors.

Required:

1. Prepare a letter to Mr and Mrs Speedy, explaining why the bank balance in the ledger account (or T-Account) won’t always equal the balance on the bank statement on a particular date, and common reasons for differences. Also provide an introduction and overview of bank reconciliations – What is a bank reconciliation? What is its purpose? Can it help to safeguard a business’s money? How is it prepared? (4 marks)
2. Prepare the bank reconciliation (manually, not in Xero) for the business as at 30 April 2021.