Reference no: EM132645761

Scenario:

Shah&Shah is a sole proprietorship and the cash book of Shah&Shah business showed a balance at the bank of 570 in hand on 31 August 2020. At the same date the bank statement balance of Shah&Shah account was 446 overdrawn. The difference was accounted for as follows.

1. Check for, 1555 sent to creditors on 30 August were not paid by the bank until 8 September.

2. Check amounting to 2520 paid into the bank on 31 August was not credited by the bank until 6 February.

3. A standing order for a charitable subscription of 60 had been paid by the bank on 21 August but no entry had been made in the cash book.

4. A check paid by Shah&Shah for rent on 21 August for345 had been entered in his cash book as 354.

Required:

Question 1) Why we need to prepare bank reconciliation statement.

Question 2) Why bank reconciliation statement need to be reconcile.

Question 3) Prepare Bank Reconciliation statement for Shah&Shah

Question 4) Generally explain what factors differentiate Shah&Shah form partnership.

Question 5) Explain different type of parties who are interested in Shah&Shah financial information also briefly summarize what will happen if Shah&Shah do not follow proper Accounting Principles.