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.