Test 2_sem2_06 - Question 1 Accounting for Cash Bank...

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(18 marks) Bank Reconciliations Harrison Brown is a landscape architect, trading under the name of BJ Harrisons. His accountant is on leave and Harrison has asked you for help with his monthly bank reconciliation. Both cash receipts and cash payments journals will need updating and the cash at bank ledger account will need to be completed for the month before the reconciliation is done. The business is registered for GST on the invoice basis. The following information is available for BJ Harrisons as of 31 March 2006. 1. Cash at bank as shown in the ledger on 31 March 2006 amounted to $730.21 (credit). The closing balance on the bank statement for March showed an amount of $331.26 (credit). 2. The cash receipts journal has a balance to date of $4980.60 and the cash payments journal balance is $4455.61. These balances are taken before consideration of the bank statement. 3. Unpresented cheques totalled $968.40. 4. Bank service charges for March, showing on the bank statement, amounted to $12.50. 5. A deposit of $261.47, representing cash receipts on 31 March 2006, did not appear on the bank statement until 1 April 2005. 6. A cheque for $480 was recorded incorrectly in the cash payments journal as $840. The cheque was made to Express Copying for the printing of brochures and advertising material on account. 7. A cheque for $820 from a customer, Linda Arnold, was returned by the bank, and noted on the bank statement on 29 March 2006 as dishonoured. 8. The bank statement showed that the bank had debited the BJ Harrisons account for $318.20 in interest. 9. The bank directly credited the BJ Harrisons account with $620.25. This amount was paid by Ken Gardener Ltd, a customer of the firm, to settle its account for February. REQUIRED: a) Calculate the updated balance of the Cash at Bank ledger account at 31 March 2006. Show your working. (7 marks) b) Prepare the Bank Reconciliation Statement for BJ Harrisons at 31 March 2006. (5 marks) c) Cash is one of the most important assets of a business. Effective cash management involves protecting cash from situations such as theft, fraud or loss through carelessness and errors. Identify three common internal controls of the cash system. Explain the purpose of each procedure that you have identified.
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Test 2_sem2_06 - Question 1 Accounting for Cash Bank...

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