Question 2 [10 marks] 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 doesn't 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 500.00 200.00 3,600.00 2,200.00 190.00 $12,060.00 $12,560.00 $12,360.00 $15,960.00 $13,760.00 $13,570.00 $17,770.00 $17,490.00 $17,240.00 $12,940.00 $16,340.00 4,200.00 1/08/2019 Opening balance 2/08/2019 Deposit 5/08/2019 Cheque 3 7/08/2019 Cash deposit 12/08/2019 EFT - Red Bikes Rock Ltd 16/08/2019 EFT - Fast Freight Ltd 16/08/2019 Cash deposit 19/08/2019 Cheque 5 20/08/2019 Cheque 6 23/08/2019 EFT - Red Bikes Rock Ltd 23/08/2019 Cash deposit 25/08/2019 Cheque 7 26/08/2019 Cheque 10 30/08/2019 Cash deposit 31/08/2019 Annual bank fee 31/08/2019 Interest 31/08/2019 Closing balance 280.00 250.00 4,300.00 3,400.00 $14,340.00 2,000.00 260.00 5,000.00 60.00 $14,080.00 $19,080.00 $19,020.00 $19,040.00 $19,040.00 20.00 ...vodafone AU 4G 3:13 am @ 20% Little Red Riding's 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 banked Date Detail 2/08/2019 Cheque 3 15/08/2019 EFT - Fast Freight Ltd 16/08/2019 Cheque 4 18/08/2019 Cheque 5 18/08/2019 Cheque 6 EFT-Red Bikes Rock 23/08/2019 Ltd 22/08/2019 Cheque 7 23/08/2019 Cheque 8 25/08/2019 Cheque 9 Amount $200.00 $199.00 $160.00 $280.00 $250.00 7/08/2019 16/08/2019 23/08/2019 30/08/2019 $3,600.00 $4,200.00 $4,300.00 $500.00 $3,400.00 $2,000.00 $260.00 $390.00 25/08/2019 Cheque 10 $260.00 $7,399.00 $12,600.00 The bank did not make any errors. i) Prepare a letter to Mr & Mrs Wheeler, explaining why the bank balance in the ledger account (or T- Account) won't 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 business's 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
