QUESTION 4 [16 Marks]

The 31 August 2018 bank statement of Wizard Supacentre has just arrived from United Bank. To prepare Wizards bank reconciliation, you gather the following data:

1. Wizards Cash account has a balance of $2,900 on 31 August.
2. The bank statement includes two dishonoured cheques from customers: B. Smith, $400 and A. Green, $110.
3. The following cheques appear in the cash payments journal of Wizard but have not yet been cleared by the bank at 31 August:

Cheque no. Amount

237 $190

288 170

291 520

294 630

4. Wizard collects from a few customers by EFT. The August bank statement lists a $1,300 EFT deposit for a collection on account.
5. The bank statement includes two special deposits that Wizard hasnt recorded yet: $970 for dividend revenue, and $80 interest revenue that Wizard earned on its bank balance during August.
6. The bank statement lists a $30 bank service charge and a $15 excess transaction fee.
7. On 31 August, Wizard deposited $350 from a customer, this deposit hasnt yet appeared on the bank statement.
8. The bank statement includes a $1,000 deduction for a cheque drawn by Interstate Freight Company, a business unrelated to Wizard. Wizard notified the bank of this error.
9. The 31 August balance on the bank statement is $4,855 Cr.

Required:

1. Record any required adjustments from the bank reconciliation in the Cash at bank account. Total and balance the account. [8 Marks]
2. Prepare the bank reconciliation statement for Wizard Supacentre at 31 August 2018. [4 Marks]
3. A manager of a small online business believes that because most of the transactions take place using electronic transfers instead of cash or cheques, the business no longer needs to do a bank reconciliation each month. Explain to the manager why a bank reconciliation is still necessary for the business. [4 Marks]