$($TOTAL: $20$ MARKS$)$

QUESTION FOUR

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

K$4,400.$ The Bank Statement on the same date showed a balance of K$8,785$ 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 K$600$ had been paid by the bank.

$($ii$)$ A direct credit amounting to K$720$ had not been entered in the Cash Book.

$($iii$)$ The Bank Statement showed bank charges of K$155$ not recorded in the business's books.

$($iv$)$ Katota earned interest of K$380$ on her bank account. This has not been entered in the

account.

$($v$)$ Katota's fixed deposit account had matured; K$4,200$ 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 K$210$ returned from

Nyati, a customer.

$($viii$)$ Two cheques issued in May $2017$ had not been presented for payment, payable to

K$.$Kalati for K$700$ and another to B$.$ Bweupe for K$800.$

$($ix$)$ Katota also received cheques amounting to K$2,090$ which were deposited by $31$ st

May $2017,$ but were only credited to her bank account on $4$ June, $2017.$

Required:

$($a$)$ Update the Cash Book balance as at $31$st May, $2017.$

$($c$)$ Draw up a bank reconciliation statement as at ${31}^{st}$ May $2017,$ starting with the Bank

Statement balance.

$($c$)$ Give THREE reasons why it is important to prepare a bank reconciliation.

$($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