George had completed his company financial statements for the year ended 31st March, which showed a profit of 81,208, when he realised that no bank reconciliation statement had been prepared at that date.

When checking the cash book against the bank statement and carrying out other checks, he found the following:

1. A cheque for 1,000 had been entered in the cash book but had not yet been presented at the bank.

2. Cheques from customers totalling 2,890 entered in the cash book at 31st March were credited by the bank on 1st April.

3. Bank charges of 320 appear in the bank statement on 30th March but have not been recorded by George.

4. A cheque for 12,900 drawn by George to pay for a new item of plant had been mistakenly entered in the cash book and plant account as 2,900. Depreciation of 290 had been charged to the profit and loss account for this plant.

5. A cheque for 980 form a credit customer paid in on 26th March was dishonoured after 31st March and George decided that the debt would have to been written off, as the customer was now untraceable.

6. A cheque for 2,400 in payment for some motor repairs had mistakenly been entered in the cash book as a debit and posted to the credit of motor vehicles cost account. Depreciation at 25% per annum (straight line) is charged on motor vehicles, with a full years charge on the balance at the end of each year.

7. The total of the payments side of the cash book had been understated by 1,000. On further investigation it was found that the debit side of the purchases account had also been understated by 1,000

8. George had instructed his bank to credit the interest of 160 on the deposit account maintained for surplus business funds to the current account. This the bank had done on 28th March. George had made an entry on the payment side of the cash book for this 160 and had posted it to the debit of interest expense account.

9. George had mistakenly paid an account for 870 for repairs to his house with a cheque drawn on the business account. The entry in the cash book had been debit to repairs to premises account.

10. George had also mistakenly paid 540 due to Paul, a trade supplier, to clear his account in the accounts payable ledger, using a cheque drawn on Georges personal bank account. No entries have yet been made for this transaction.

The cash book showed a debit balance of 4,890 before any correcting entries had been made. The balance on the bank statement is to be derived in your answer.

Required

(a) Prepare an adjusted cash book showing the revised balance which should appear in Georges statement of financial positing at 31st March.

(b) Prepare a bank reconciliation statement as at 31st March

(c) Draw up a statement for George showing the effect on his profit of the adjustments necessary to correct the errors found.

(d) Prepare double entry journals to correct items (9) and (10). Narratives required