Reference no: EM132619744

Questions -

(a) Explain the term "bank reconciliation" and state the reasons for its preparation.

(b) On 31 October 2018, the cashbook of Caritas Enterprises Ltd. Showed a debit balance of Sh.1,710,000. This did not agree with the balance shown in the bank statement.

Upon investigation, the accountant discovered the following errors:

1. A cheque paid to Kindaruma for Sh.306,000 had been entered in the cashbook as Sh.387,000

2. Cash paid into the bank by a customer for Sh.90,000 had been entered in the cashbook as Sh.81,000

3. A transfer of Sh.1,110,000 to Central Savings Bank had not been posted to the cash book.

4. A receipt of Sh.9,000 shown in the bank statement had not been posted in the cashbook.

5. Cheques drawn amounting to Sh.36,000 had not been paid into the bank.

6. The cash book balance had been incorrectly brought down at 1 November 2017 as a debit balance of Sh.1,080,000 instead of a debit balance of Sh.990,000

7. Bank charges of Sh.18,000 do not appear in the cash book.

8. A receipt of Sh.810,000 paid into the bank on 31 October 2018 appeared in the bank statement on 1 November 2018.

9. A standing order of Sh.27,000 had not been recorded in the cash book.

10. A cheque for Sh.45,000 previously received and paid into the bank had been returned by the customer's bank marked "account closed".

11. The bank received a direct debit of Sh.90,000 from an anonymous customer.

12. Cheques banked had been totalled at Sh.135,000 instead of Sh.153,000.

13. A cheque drawn in favour of Nyaga for Sh.120,000 had been entered on the debit side of the cashbook.

Required -

1. Caritas adjusted cashbook balance as at 31st October 2018.

2. A bank reconciliation statement as at 31st October 2018.