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Topic: Bank Reconciliation The owner of Babasiga Hardware has completed bank reconciliation and cannot get the bank's records to agree with the cash records of

Topic: Bank Reconciliation

The owner of Babasiga Hardware has completed bank reconciliation and cannot get the bank's records to agree with the cash records of his business. He concludes that internal control has somehow failed and cash is being misappropriated. He asks you to check the records and confirm otherwise his suspicions. He supplies the reconciliation statement at the end of last month, his cash records, and the most recent bank statement.

Last Month's Reconciliation statement is presented below:

a) Recalculate and present the general ledger Cash at Bank account balance as it should be at 30 June 2010. (5 marks)

b) Prepare the bank reconciliation statement at 30 June 2010. (5 marks)

c) Advice the owner of Babasiga Hardware whether cash is being misappropriated, assuming that the records maintained by the bank are accurate. (5 marks)

d) Special attention should be given to the handling of cash and cheques. State and explain 3 basic forms of good internal control system Babasiga Hardware should use to avoid misappropriation of cash.

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