Why does a business reconcile its cash at bank general ledger account with the bank statement periodically?
A) It is a legal requirement.
B) It speeds up the posting of transactions to the general ledger accounts
C) It is a control measure checking for errors and omissions.
D) It enables the business to correct mistakes with the accurate bank records.
The cash at bank account balance in the general ledger is $165.40 in hand. Reference to the bank statement shows that a standing order of $10.00 to a supplier has not been recorded in the general ledger account but that every other item is the same in both the general ledger account and the bank statement. The omitted standing order is then recorded in the cash at bank general ledger account.
What are the balances shown in the cash at bank general ledger account and on the bank statement after updating has taken place?
A) Cash at bank general ledger $155.40 Cr, Bank statement: $155.40 Dr
B) Cash at bank general ledger $155.40 Dr, Bank statement: $155.40 Cr
C) Cash at bank general ledger $175.40 Cr, Bank statement: $175.40 Dr
D) Cash at bank general ledger $175.40 Dr, Bank statement: $175.40 Cr
A bank reconciliation identified that two additional receipts which total $300 are shown on the bank statement but do not appear in the cash at bank general ledger account.
The receipts comprise $200, dividend receipts from owning shares in another company and $100, interest received from the bank on current account balances.
Required:
How should these omissions be dealt with?
Given below is the cash at bank general ledger account for a business and the most recent bank statement, together with the previous bank reconciliation statement as at 31 March 20X7.
| Balance as per bank statement | $65.60 |
| Unpresented cheques: | |
| 144680 | 100.00 |
| Balance as per cash at bank ledger | 34.40 OD |
| Date | Details | Reference/Cheque number | Receipts Debit | Payments Credit | Balance |
|---|---|---|---|---|---|
| Opening balance | 34.40 Cr | ||||
| April 1 | Turner Ltd | 110.29 | 75.89 | ||
| 1 | Collins & Co | 144682 | 41.28 | 34.61 | |
| 1 | Long Ltd | 144683 | 25.67 | 8.94 | |
| 1 | Jimmy Dino | 144684 | 171.93 | 162.99 Cr | |
| 2 | Danton & Co | 144685 | 231.71 | 394.70 Cr | |
| 3 | Water rates | SO | 98.20 | 492.90 Cr | |
| 4 | Simone Ltd | 338.97 | 153.93 Cr | ||
| 5 | M Smith | 10.15 | 143.78 Cr | ||
| 10 | Grossman | 144686 | 319.06 | 462.84 Cr | |
| 19 | Butch Ltd | 144687 | 86.21 | 549.05 Cr | |
| 21 | Grape & Co | 430.06 | 118.99 Cr | ||
| 22 | Mothball Ltd | 341.36 | 222.37 | ||
| 25 | Betty Ltd | 144688 | 89.24 | 133.13 | |
| 28 | South Ltd | 144689 | 303.13 | 170.00 Cr | |
| 29 | Oak & Sons | 144690 | 475.00 | 645.00 Cr | |
| 30 | ABC & Co | 549.19 | 95.81 Cr | ||
| 30 | PD Plant | 144691 | 61.35 | 157.16 Cr | |
| Date | Details | Payments | Receipts | Balance |
|---|---|---|---|---|
| 1 April | Balance b/f | 65.60 | ||
| 2 April | BGC: 47619 | 110.29 | 175.89 | |
| 3 April | SO: Tartan Water | 98.20 | 77.69 | |
| 4 April | 144684 | 171.93 | ||
| 144682 | 41.28 | |||
| 144680 | 100.00 | 235.52 O/D | ||
| 7 April | 144683 | 25.67 | ||
| BGC: 47620 | 338.97 | 77.78 | ||
| 8 April | BGC: 47621 | 10.15 | ||
| 144685 | 231.71 | 143.78 O/D | ||
| 13 April | 144686 | 319.06 | 462.84 O/D | |
| 24 April | BGC: 47622 | 430.06 | ||
| 144687 | 86.21 | 118.99 O/D | ||
| 25 April | BGC: 47623 | 150.00 | ||
| BGC: 47624 | 341.36 | 372.37 | ||
| 30 April | Bank interest | 3.40 | ||
| Bank charges | 27.50 | |||
| Balance c/f | 348.27 |
SO = standing order, DD = direct debit, BGC = bank giro credit, O/D = Overdrawn
Hermes Co receives a supplier statement from Albus. Hermes Co extracts details from the payables ledger for Albus so that a supplier statement reconciliation can be prepared.
All items on the statement could be agreed with the payable ledger account for Albus, except for the following:
(a) The supplier statement shows an outstanding balance of $1,715 for an invoice which was settled. The remaining balance relates to an early settlement discount that Hermes Co was eligible for and therefore settled the invoice net of this.
(b) In the payables ledger an invoice for $205 has been incorrectly recorded as a credit note.
(c) Hermes Co paid $63 by cheque prior to year-end. This amount has not yet been recognised on the supplier statement.
Briefly explain what action, if any, Hermes Co should take relating to the three issues noted above.