Reference no: EM132914016
Ahmed operates a business as a sole trader. Ahmed prepared his financial statements for the year ended 31st December 2020. He then remembered that he had not yet prepared a bank reconciliation statement as at 31 December 2020.
Comparing the cash book with the bank statement he found the following discrepancies.
1. Bank charges $200 appeared on the bank statement as having been deducted on 31st December.
2. A cheque for $5,000 from credit customer Mr. Ali had been entered in the cash book but not yet cleared by the bank.
3. Ahmed had mistakenly paid for the private dinner costing $200 with the business debit card. There was no entry in the cash book.
4. A cheque for $6,000 from credit customer paid on December 27 was dishonored on 31st December and Ahmed decided to write off the amount as an irrecoverable receivable.
5. On 30th December interest received on the business deposit account of $2,500 had been credited to the business current account accordance with Ahmed's instructions but this amount had not yet been entered in the cash book.
6. Cheques for the total of $24,200 to suppliers Sara entered into the cash book on 31st December had not yet appeared on the bank statement.
The cash book showed a debit balance of $15,400 before any correcting entries and the balance as per the bank statement was $30,700.
Required:
Problem 1. Calculate the adjusted closing balance in the cash book.
Problem 2. Prepare a bank reconciliation statement as at 31st December 2020, starting with the unadjusted closing balance as per the cash book.