P5-62A (Learning Objective 3: Using the bank reconciliation as a control device)
ID: 2580735 • Letter: P
Question
P5-62A (Learning Objective 3: Using the bank reconciliation as a control device) The cash data of Dunlap Automotive for July 20X6 follow: Cash Account No. 101 Jral. Ref. Debit Jul 1 31 31 7,900 17,024 7,937 9,124 CR6 CP11 9,087 Cash Receipts (CR) Cash Payments (CP) Cheque No. 3113 3114 3115 116 3117 3118 3119 3120 3121 3122 Total Cash Debit Cash Credit $1,503 1,149 1,630 19 825 Jul 2 $2,771 516 1,682 871 352 924 008 10 16 Total 965 $9,087 Dunlap received the following bank statement on July 31, 20X6 Bank Statement for July 20X6 Beginning balance Deposits and other additions: $ 7,900 $ 750 EFT 2,771 516 1,682 871 352 12 17 3 1,250 BC 8,192 Cheques and other deductions: $1,503 1,360 13 407 US 5s 1,149 19 21 26 30 334 EFT 825 91 25 SC15,713 $10,379 Ending balanc Additional data for the bank reconciliation include the following a. The EFT depasit was a receipt of monthly rent. The EFT debit was a monthly insurance b. The unauthorized signature chequ c. The cormect amount of cheque number 3115, a payment on account, is $1,360. e was received from a customer Dunlap's accountant mistakenly recorded the cheque for $1,630.) l Requirements 1. Prepare the Dunlap Automotive bank reconciliation at July 31, 20X6 2. Describe how a bank account and the bank reconciliation help the general manager control Dunlap's cashExplanation / Answer
2. The bank account statement along with the bank reconciliation statement helps in the control of cash. The two together help ensure the completeness and accuracy of the cash balance in the financial statements and internal controls over cash transactions. It highlights transactions which have not been recorded in the books such as bank charges, collections by bank, returned cheques, etc. It also helps in identifying and correcting errors if any that occured while recording the transactions. Whether all cash/cheques received are deposited in time with the bank can also be known. Any frauds, embezzlement of cash can also be detected through a properly prepared bank reconciliation.
DUNLAP AUTOMOTIVE Bank Reconciliation July 31, 20X6 Cash balance per bank 10379 Add: Deposits in transit ($924 + $2008) 2932 13311 Less: Outstanding cheques Cheque # 3119 440 Cheque # 3120 965 Cheque # 3121 205 Cheque # 3122 2260 3870 Adjusted balance per bank $ 9441 Cash balance per books 7937 Add: EFT deposit of monthly rent 750 Collections by bank 1250 Error in recording cheque # 3115 ($1630 - $1360) 270 2270 10207 Less: US cheque 407 EFT payment of insurance 334 Bank service charge 25 766 Adjusted balance per books $ 9441Related Questions
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