Tutorial Bank Recon question and answer PDF

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Tutorial 9QDillman Food Store developed the following information in recording its bank statement for the month of March.Balance per books March 31 RM 2, Balance per bank statement March 31 RM10,————————————————————————————————————(1) Checks written in March but still outstanding RM6,000.(2) Checks ...

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Tutorial 9

Q1

Dillman Food Store developed the following information in recording its bank statement for the month of March.

Balance per books March 31

RM 2,905

Balance per bank statement March 31

RM10,900

———————————————————————————————————— (1) Checks written in March but still outstanding RM6,000. (2) Checks written in February but still outstanding RM2,800. (3) Deposits of March 30 and 31 not yet recorded by bank RM5,200. (4) NSF check of customer returned by bank RM1,200. (5) Check No. 210 for RM594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for RM549. (6) Bank service charge for March was RM50. (7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for RM824 when Check No. 318 was correctly prepared for RM284. The check cleared the bank in March. (8) The bank collected a note receivable for the company for RM5,000 plus RM150 interest revenue.

Required: Prepare the bank reconciliation statement at 31 March 2018

Q2 The following is a summary from the cash book of Delish Enterprise for May 2018:

Date Item 31-May Balance b/d Receipts

Cash Book RM Date Item 2,814 31-May Payments 30,146 Balance c/d 32,960

RM 31,040 1,920 32,960

Upon investigation, the following were discovered: 1. Bank charges of RM70 shown on the bank statement have not been entered in the cash book. 2. A cheque drawn for RM94 has been entered in error as a receipt in the cash book. 3. An error has occurred in the opening balance in the cash book where the opening balance should have been carried down as RM2,940. 4. Three cheques paid to suppliers for RM428, RM740 and RM60 have not yet been presented to the bank. 5. Credit transfer of RM600 from Marvin was entered in the bank statement but not in the cash book. 6. A cheque received from Moonlight Berhad for RM606 and credited in the bank statement on 15 May 2018 has now been dishonoured and debited in the bank statement on 19 May 2018. The only entry in the cash book for this cheque was its receipt on 12 May 2018. 7. The last page of the cash book shows a deposit of RM3,084 which has not yet been credited to the account by the bank. 8. The bank has debited a cheque for RM144 in error to Delish’s account. 9. A payment of RM210 of Delish’s loan repayment has been recorded in the bank statement but is not updated in the cash book. 10. The bank statement shows an overdrawn balance of RM428 for the month of May 2018.

Required:

Prepare the bank reconciliation statement at 31 May 2018 Q3 The following control procedures are used at Aldean Berhad for over-the-counter cash receipts. 1) To minimize the risk of robbery, cash in excess of RM100 is stored in an unlocked attaché case in the stockroom until it is deposited in the bank. 2) All over-the-counter receipts are registered by three clerks who use a cash register with a single cash drawer. 3) The company accountant makes the bank deposit and then records the day’s receipts. 4) At the end of each days, the total receipts are counted by cashier on duty and reconciled to the cash register total. 5) Cashier are experienced, they are not bonded.

Required: a) For each procedures, explain the weakness in internal control, and identify the control principle that is violated. b) For each weakness, suggest a change in procedure that will result in good internal control.

Q4 The following control procedures are used at Monique Boutique Shoppe for cash disbursements 1) The company accountant prepares the bank reconciliation and report any discrepancies to the owner. 2) The store manager personally approves all payment before signing and issuing checks. 3) Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. 4) After payment, bills are filed in a paid invoice folder. 5) The company checks are unnumbered.

Required: a) For each procedures, explain the weakness in internal control, and identify the control principle that is violated.

b) For each weakness, suggest a change in procedure that will result in good internal control. Extra Question

Q5 On May 31, 2017, Terell Berhad had a cash balance per books of RM6,781.50. The bank statement from HomeTown Bank on that date showed a balance of RM6,824.60. A comparison of the statement with the cash account revealed the following facts:

1. The statement included a debit memo of RM60 for the printing of additional company checks. 2. Cash sales of RM836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for RM886.15. The bank credited Terell Company for the correct amount. 3. Outstanding checks at May 31 totaled RM276.25. Deposit in transit were RM1,916.15. 4. On May 18, the company issued check No. 1181 for RM685 to Barry Dietz on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terell for RM658. 5. A RM3,000 note receivables was collected by the bank for Terell on May 31 plus RM80 interest. The bank charged a collection fee of RM20. No interest has been accrued on the note. 6. Included with cancelled checks was a check issued by Bridges PLC to Jon Newton RM600 that was incorrectly charged to Terell by the bank. 7. On May 31, the bank statement showed an NSF charge of RM640 for a check issued by Sandy Grifton, a customer, to Terell on account.

Required: A) Prepare bank reconciliation at May 31, 2017 B) Prepare the necessary adjusting entries.

Tutorial 9 Answer

Q1 Dillman Food Store Bank reconciliation statement/ As at 31 May 2018

RM Cash balance per bank statement Add : Deposit in transit

Less : Outstanding check March February Adjusted cash balance per bank

6,000/ 2,800/

RM Cash balance per books Add : Error on check No.318 : Collect RM5000 & RM150

540/ 5,150/

Less : NSF Check Error on check No.210 Bank service charge

1,200/ 45/ 50/

Adjusted cash balance per books

RM 10,900/ 5,200/ 16,100

(8,800) 7,300/ RM 2,905 5,690 8,595

(1,295) 7,300/

Q2 Delish Enterprise Bank reconciliation statement As at 31 May 2018/

RM Cash balance per bank statement Add : Deposit in transit : Error in recording

3,084/ 144 /

Less : Outstanding check

RM (428) 3,228 (1228)/

Adjusted cash balance per bank

1572/ RM

RM 1,920

Cash balance per books Add : Error in opening balance : Credit transfer

126/ 600/

726

Less : Bank charges Check entered as receipt (94x2) Check dishonored Loan repayment

70/ 188/ 606/ 210/

(1,074)

Adjusted cash balance per books

Q3

1,572/

( a) Pr ocedur e

Weakness

( b) Pr i nci pl e

1.

Cashi snot adequat el y pr ot ect ed f r om t hef t .

2.

I nabi l i t yt o Est abl i shment est abl i sh ofr esponsi bi l i t y. r esponsi bi l i t y f orcashwi t h aspeci ficcl er k.

Physi cal cont r ol s.

( a)

Recommended Change Cashshoul dbe st or edi nasaf e unt i li ti sdeposi t ed i nbank. Ther eshoul dbe separ at ecash dr awer sand r egi st ercodes f oreachcl er k. ( b)

Weakness

3.

Theaccount ant shoul dnot handl ecash.

Segr egat i on ofdut i es.

Thecashi er ’ s depar t mentshoul d maket hedeposi t s.

4.

Cashi snot i ndependent l y count ed.

I ndependent i nt er nal ver i ficat i on.

Acashi eroffice super vi sorshoul d countcash.

5.

Cashi er sar e notbonded.

Humanr esour ce cont r ol s.

Al lcashi er sshoul d bebonded.

Q4

Pr i nci pl e

Recommended Change

Pr ocedur e

( a) Pr ocedur e

Weakness

( b) Pr i nci pl e

Recommended Change

1.

Thebank r econci l i at i on i snot i ndependent l y pr epar ed.

I ndependent i nt er nal ver i ficat i on.

Someonewi t hno ot hercash r esponsi bi l i t i es shoul dpr epar et he bankr econci l i at i on.

2.

Theappr oval andpayment ofbi l l si sdone byt hesame i ndi vi dual .

Segr egat i on ofdut i es.

Thest or emanager shoul dappr ovebi l l s f orpaymentandt he t r easur ershoul dsi gn andi ssuechecks.

3.

Checksar e notst or edi n asecur ear ea.

Physi cal cont r ol s.

Checksshoul dbe st or edi nasaf eor l ockedfil edr awer .

( a) Pr ocedur e

Weakness

Pr i nci pl e

( b) Recommended Change

4.

Af t erpayment , Document at i on Bi l l sshoul dbest amped bi l l sar esi mpl y pr ocedur es. pai dbef or ebei ngpl aced fil edi naf ol der . i nt hef ol der .

5.

Checksar enot pr enumber ed.

Document at i on Checksshoul d pr ocedur es. bepr enumber ed andsubsequent l y account edf or .

Q5 extra question

( a)

TERRELLCOMPANY BankReconci l i at i on May31,2014

Cashbal anceperbankst at ement . . . . . . . . . . . . . . . . . . . . £6, 824. 60 Add: Deposi ti nt r ansi t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £1, 916. 15 Banker r or —Br i dgescheck. . . . . . . . . . . . . . . . . . . . 600. 00 2, 516. 15  9, 340. 75 Less:Out st andi ngchecks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276. 25 Adj ust edcashbal anceperbank. . . . . . . . . . . . . . . . . . . . . . £9, 064. 50 Cashbal anceperbooks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £6, 781. 50 Add: Col l ect i onofnot er ecei vabl e ( £3, 000not epl us£80i nt er est l ess£20f ee) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3, 060. 00 9, 841. 50

Less:NSFcheck. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £ 640. 00 Er r ori nMay12deposi t ( £886. 15–£836. 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    50. 00 Er r ori nr ecor di ngcheckNo.1181. . . . . . . .    27. 00* Checkpr i nt i ngchar ge. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60. 00 797. 00 Adj ust edcashbal anceperbooks. . . . . . . . . . . . . . . . . . . . £9, 064. 50 * £685–£658 ( b) May31 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mi scel l aneousExpense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not esRecei vabl e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 000 I nt er estRevenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

3, 060   20   

31

Account sRecei vabl e—SandyGr i f t on. . . . . . . . Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 640

Sal esRevenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  50

Account sPayabl e—Bar r yDi et z. . . . . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  27

Mi scel l aneousExpense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  60

 

640 31

  

50 31

  

27 31 60

  ...