Read the following and answer the questions below. On 31 December 2011 the bank column of C. Tench’s cash book showed a debit balance of £1,500. The monthly bank statement written up to 31 December 2011 showed a credit balance of £2,950. On checking the cash book with the bank statement it was discovered that the following transactions had not been entered in the cash book: Dividends of £240 had been paid directly to the bank. A credit transfer – HM Revenue & Customs VAT refund of £260 – had been collected by the bank. Bank charges £30. A direct debit of £70 for the RAC subscription had been paid by the bank. A standing order of £200 for C. Tench’s loan repayment had been paid by the bank. C. Tench’s deposit account balance of £1,400 was transferred into his bank current account. A further check revealed the following items: Two cheques drawn in favour of T. Cod £250 and F. Haddock £290 had been entered in the cash book but had not been presented for payment. Cash and cheques amounting to £690 had been paid into the bank on 31 December 2011 but were not credited by the bank until 2 January 2012.

(a) Starting with the debit balance of £1,500, bring the cash book (bank columns) up to date and then balance the bank account.

(b) Prepare a bank reconciliation statement as at 31 December 2011. (Midland Examining Group: GCSE)