Question 4

Robinson Ltd has just received the bank statement for July 2020, showing a credit balance of 65 as at 31^st July 2020. The cash book has a debit balance of 3,435 on the 31^st July 2020.

Upon investigation, the following items were found:

1. bank charges of 500 shown on the bank statement have not yet been entered in the cash book.

2. a cheque received from a customer for 925 has been dishonoured. This has not been entered in the cash book.

3. 300 received as interest income on investments was paid straight into the bank account and has not been entered in the cash book.

4. A cheque for 1,250 had been credited in error by the bank to the account of Robinson Ltd.

5. Cheques totalling 3,100 had been issued by Robinson Ltd but have not yet been presented to the bank.

6. Cheques totalling 2,500 were received by Robinson Ltd on the 30^th July 2020 but have not yet been credited by the bank.

7. A direct debit of 1,050 paid to the Landlord has not been recorded in the cash book.

8. A cheque issued for 980 was incorrectly recorded in the cash book as 890.

9. A transfer of 2,000 from the current account to a deposit account has not been entered into the cash book.

10. A customer, J Black, has made an electronic transfer of funds totalling 1,415 to the current account that has not been reflected in the cash book.

Required:

a) Make the necessary amendments to the cash book and prepare a bank reconciliation statement as at 31^st July 2020, using the above information.

(12 marks)

b) Explain the purpose of preparing a bank reconciliation statement.

(6 marks)

c) Describe the differences between the internal and external auditors.

(7 marks)

(Total 25 marks)