Bank reconciliations and cash

This question continues on from question 1 above.

It is now September 2019, and two months have passed since you first met with Mr and Mrs Wheeler to assist them with implementing their inventory system and preparing their accounting records.

They have come to you for some assistance as the balance in the bank T-Account at the end of August 2019 doesnt agree with the closing balance on the August bank statement... and they are not sure what they have done wrong.

The August 2019 bank statement appeared as follows:

Bank statement for August 2019:
Date	Description	Deposit	Withdrawal	Balance
1/08/2019	Opening balance			$12,060.00
2/08/2019	Deposit	500.00		$12,560.00
5/08/2019	Cheque 3		200.00	$12,360.00
7/08/2019	Cash deposit	3,600.00		$15,960.00
12/08/2019	EFT - Red Bikes Rock Ltd		2,200.00	$13,760.00
16/08/2019	EFT - Fast Freight Ltd		190.00	$13,570.00
16/08/2019	Cash deposit	4,200.00		$17,770.00
19/08/2019	Cheque 5		280.00	$17,490.00
20/08/2019	Cheque 6		250.00	$17,240.00
23/08/2019	EFT - Red Bikes Rock Ltd		4,300.00	$12,940.00
23/08/2019	Cash deposit	3,400.00		$16,340.00
25/08/2019	Cheque 7		2,000.00	$14,340.00
26/08/2019	Cheque 10		260.00	$14,080.00
30/08/2019	Cash deposit	5,000.00		$19,080.00
31/08/2019	Annual bank fee		60.00	$19,020.00
31/08/2019	Interest	20.00		$19,040.00
31/08/2019	Closing balance			$19,040.00

Little Red Ridings accounting records for August 2019 showed an opening balance for the bank account of $12,060, which agreed with the bank statement at 31 July 2019. Following is a summary of deposits and withdrawals recorded by Mr and Mrs Wheeler in their accounting records during August:

Withdrawals:				Deposits:
					Amount
Date	Detail	Amount		Date	banked
2/08/2019	Cheque 3	$200.00
15/08/2019	EFT - Fast Freight Ltd	$199.00		7/08/2019	$3,600.00
16/08/2019	Cheque 4	$160.00		16/08/2019	$4,200.00
18/08/2019	Cheque 5	$280.00		23/08/2019	$4,300.00
18/08/2019	Cheque 6	$250.00		30/08/2019	$500.00
23/08/2019	EFT - Red Bikes Rock Ltd	$3,400.00
22/08/2019	Cheque 7	$2,000.00
23/08/2019	Cheque 8	$260.00
25/08/2019	Cheque 9	$390.00
25/08/2019	Cheque 10	$260.00			__________
		$7,399.00			$12,600.00

The bank did not make any errors.

Required:

i) Prepare a letter to Mr & Mrs Wheeler, explaining why the bank balance in the ledger account (or T-Account) wont always equal the balance on the bank statement on a particular date, and common reasons for differences. Also provide an introduction and overview of bank reconciliations What is a bank reconciliation? What is its purpose? How is it prepared?

ii) Prepare the bank reconciliation for Little Red Riding at 31 August 2019.

iii) Prepare the journal entries to correct any errors made by Little Red Riding, and to record transactions that have not yet been entered into the businesss accounting records. (Note: The correction of any errors relating to the recording of cheques or EFT payments should be made to Accounts payable. The correction of any errors relating to deposits (other than interest received) should be made to Accounts receivable.)

iv) Prepare the bank T-Account account for August 2019, in order to determine the balance in the ledger account after the above journal entries have been recorded and posted.