You have recently started a part time job in the accounting department of Home Energy Limited. The accountant, Joe Kool, had prepared the company's bank reconciliation for June 2015. After completing the reconciliation he made the following journal entry:

Jun 30 Cash........................................................................................... 2,390

Bank Charges Expense................................................................. 124

Accounts Receivable ($3,000 collection less $500 NSF)........ 2,500

Interest Earned.................................................................. 14

Joe was reviewing the bank reconciliation with you when unfortunately you spilled your coffee on it. He asks you to rewrite the reconciliation, in good form. He remembers that the only outstanding deposit was the last deposit for the month. You check the general ledger and the bank balance at June 30 was $24,527 (credit). You also check the bank statement and the balance was $22,314 (debit on the bank statement, that is, overdrawn). You look up the last deposit for the monthit was for $21,789.

Note: To solve, you complete the bank reconciliation with the information you knowthe outstanding cheques and the adjusted cash per bank will be unknown. After you arrive at the adjusted balance per books, you enter this as the adjusted cash per bank and solve for the unknown.

Instructions

1. Explain the purpose of testing the client's bank reconciliation. Is it a test of control or test of detail? (1.5 Mark)

2. Using the above information prepare, in good form, the bank reconciliation for Home Energy Limited for June