The financial year of John Company, a sole trader, ends on 30 September 2017. On 30 September 2017, his bank account in the ledger showed a debit balance of $59,204. This did not agree with the balance as shown on the bank statement.
An investigation of the records disclosed the following:
i) Direct debit of $7,100 to the electricity company and overdraft interest of $600 had been omitted in the companyâs bank account.
ii) A cheque for $17,000 from a customer was wrongly recorded as $17,800.
iii) A cheque for $16,000 received from a customer had been recorded in the bank account on 13 September 2017. It was subsequently dishonoured and returned by the bank. This transaction had not yet been recorded in the books.
iv) Cheques issued to suppliers amounting to $10,000 had not yet been presented to the bank for payment.
v) The bank statement showed that a customer had settled his debt of $45,300 to the firm by paying directly into the bank. No entries have yet been made in the companyâs bank account.
vi) A cheque for $46,000 was banked on 30 September 2017 but recorded by the bank on 3 October 2017.
vii) The bank statement revealed that the bank had mistakenly deducted a bank charge of $1,000 on 28 September 2017.
Required
a) Prepare a bank reconciliation statement for Steve Company as at 30 September 2017.
b) Explain the importance of preparing a bank reconciliation statement.
The financial year of John Company, a sole trader, ends on 30 September 2017. On 30 September 2017, his bank account in the ledger showed a debit balance of $59,204. This did not agree with the balance as shown on the bank statement.
An investigation of the records disclosed the following:
i) Direct debit of $7,100 to the electricity company and overdraft interest of $600 had been omitted in the companyâs bank account.
ii) A cheque for $17,000 from a customer was wrongly recorded as $17,800.
iii) A cheque for $16,000 received from a customer had been recorded in the bank account on 13 September 2017. It was subsequently dishonoured and returned by the bank. This transaction had not yet been recorded in the books.
iv) Cheques issued to suppliers amounting to $10,000 had not yet been presented to the bank for payment.
v) The bank statement showed that a customer had settled his debt of $45,300 to the firm by paying directly into the bank. No entries have yet been made in the companyâs bank account.
vi) A cheque for $46,000 was banked on 30 September 2017 but recorded by the bank on 3 October 2017.
vii) The bank statement revealed that the bank had mistakenly deducted a bank charge of $1,000 on 28 September 2017.
Required
a) Prepare a bank reconciliation statement for Steve Company as at 30 September 2017.
b) Explain the importance of preparing a bank reconciliation statement.
