Question 3

Mr A Mathews, a client of your firm, has provided you with the following bank statement and bank account details in respect of the month ended 31 December 2016.

STATEMENT OF ACCOUNT - YOUR BANK LTD

Statement date - 31 December 2016.

Account No 123456

Date Particulars Debit Credit Balance

01-Dec-16 Balance forward				61,526 Cr
01-Dec-16 Cheque 1233		5,000		56,526 Cr
01-Dec-16 Lodgement			6,000	62,526 Cr
03-Dec-16 Cheque 1234		6,600		55,926 Cr
05-Dec-16 Direct Debit ESB		1,350		54,576 Cr
06-Dec-16 Credit Transfer VAT Refund			4,800	59,376 Cr
07-Dec-16 Cheque 1235		2,820		56,556 Cr
10-Dec-16 Lodgement			5,550	62,106 Cr
15-Dec-16 Cheque 1236		25,488		36,618 Cr
18-Dec-16 Credit Transfer Receivables Payment			11,550	48,168 Cr
20-Dec-16 Bank Charges for qtr ended Sept 09		660		47,508 Cr
21-Dec-16 Cheque 1237 21-Dec-16 Cheque 1238 22-Dec-16 Lodgement		3,885 9,645	1,500	43,623 Cr Cr 33,978 Cr 35,478
23-Dec-16 Standing Order Leasing		4,500		30,978 Cr

The books and records of A Mathews show the followings transactions through the bank account for the month of December 2016:

Date	Receipts		K Date	Payments		K
2/12/16	Balance		62,526 1/12/16	Direct debit ESB		1,350
			2/12/16	Cheque 1234		6,060
9/12/16	Lodgement		5,400 5/12/16	Cheque 1235		2,820
			12/12/16	Cheque 1236		14,688
			14/12/16	Bank charges		660
			19/12/16	Cheque 1237		3,885
			20/12/16	Cheque 1238		9,645
23/12/16	Lodgement		1,500 24/12/16	Cheque 1239		12,921
			24/12/16	Cheque 1240		4,233
28/12/16	Lodgement		12,900 28/12/16	Cheque 1242		6,291
			31/12/16 Balance			19,773
			82,326			82,326
1/1/2017	Balance		19,773

You are required to:

Outline in brief why the regular preparation of bank reconciliations is important.

3 Marks

Write up the adjustments that are necessary to correct the bank account in A Mathews books.

10 Marks

Prepare the bank reconciliation statement for A Mathews as at 31 December 2016.

7 Marks Total 20 Marks