On 31st May 2017, the bank column of Katota's Cash Book showed a debit balance of...

 

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On 31st May 2017, the bank column of Katota's Cash Book showed a debit balance of K4, 400. The Bank Statement on the same date showed a balance of K8, 785 credit. You have been recently recruited to help with bank reconciliation. You compare the Bank Statement and Cash Book and establish the following: (i) A standing order to Pang' no Building Society for K600 had been paid by the bank. (ii) A direct credit amounting to K720 had not been entered in the Cash Book. (iii) The Bank Statement showed bank charges of K155 not recorded in the business's books. (iv) Katota earned interest of K380 on her bank account. This has not been entered in the account. (v) Katota's fixed deposit account had matured; K4,200 had been transferred into her current account. (vi) An error was discovered in the cash book where a cheque received from a customer, B. Banja, was credited to the cash book. (vii) The bank statement showed an entry for a dishonoured cheque of K210 returned from Nyati, a customer. (viii) Two cheques issued in May 2017 had not been presented for payment, payable to K.Kalati for K700 and another to B. Bweupe for K800. (ix) Katota also received cheques amounting to K2, 090 which were deposited by 31st May 2017, but were only credited to her bank account on 4 June, 2017. Required: (a) Update the Cash Book balance as at 31st May, 2017. (6 Marks) (c) Draw up a bank reconciliation statement as at 31 May 2017, starting with the Bank Statement balance. (5 Marks) (c) Give THREE reasons why it is important to prepare a bank reconciliation. (3 Marks) (d) Explain the difference between (i) Standing order and direct credit (ii) Fixed deposit account and current account (iii) Outstanding deposits and un-presented cheques (6 Marks) On 31st May 2017, the bank column of Katota's Cash Book showed a debit balance of K4, 400. The Bank Statement on the same date showed a balance of K8, 785 credit. You have been recently recruited to help with bank reconciliation. You compare the Bank Statement and Cash Book and establish the following: (i) A standing order to Pang' no Building Society for K600 had been paid by the bank. (ii) A direct credit amounting to K720 had not been entered in the Cash Book. (iii) The Bank Statement showed bank charges of K155 not recorded in the business's books. (iv) Katota earned interest of K380 on her bank account. This has not been entered in the account. (v) Katota's fixed deposit account had matured; K4,200 had been transferred into her current account. (vi) An error was discovered in the cash book where a cheque received from a customer, B. Banja, was credited to the cash book. (vii) The bank statement showed an entry for a dishonoured cheque of K210 returned from Nyati, a customer. (viii) Two cheques issued in May 2017 had not been presented for payment, payable to K.Kalati for K700 and another to B. Bweupe for K800. (ix) Katota also received cheques amounting to K2, 090 which were deposited by 31st May 2017, but were only credited to her bank account on 4 June, 2017. Required: (a) Update the Cash Book balance as at 31st May, 2017. (6 Marks) (c) Draw up a bank reconciliation statement as at 31 May 2017, starting with the Bank Statement balance. (5 Marks) (c) Give THREE reasons why it is important to prepare a bank reconciliation. (3 Marks) (d) Explain the difference between (i) Standing order and direct credit (ii) Fixed deposit account and current account (iii) Outstanding deposits and un-presented cheques (6 Marks)