2020 NAS 3E POA EOY P2 Q3
3 Planet Cooperation’s cash at bank account for the month of November 2019 showed the following:
Cash at bank account
2019 | Particulars | Cheque No. | Debit ($) | Credit ($) | Balance ($) |
Nov 1 | Balance b/d | 1 025 Dr | |||
Jupiter Trading | 217832 | 2 300 | 1 275 Cr | ||
5 | 1 600 | 325 Dr | |||
9 | 217833 | 1 850 | 1 525 Cr | ||
12 | Saturn Supplies | 3 900 | 2 375 Dr | ||
17 | 820 | 3 195 Dr | |||
23 | Advertising | 217834 | 1 200 | 1 995 Dr | |
24 | 217835 | 3 100 | 1 105 Cr | ||
27 | Salaries | 217836 | 2 540 | 3 645 Cr | |
29 | Mars Traders | 2 300 | 1 345 Cr | ||
30 | 4 700 | 3 355 Dr | |||
Dec 1 | Balance b/d | 3 355 Dr |
On 3 December 2019, Planet Cooperation received the following bank statement.
2019 | Details | Withdrawals $ | Deposits $ | Balance $ | |
Nov 1 | Balance brought forward | 1 775 | Cr | ||
2 | Cheque: 217832 | 2 300 | 525 | Dr | |
Cheque: 217829 | 750 | 1 275 | Dr | ||
5 | Cash deposit | 1 600 | 325 | Cr | |
8 | Credit transfer: Venus Ltd | 2 170 | 2 495 | Cr | |
14 | Cheque deposit | 3 900 | 6 395 | Cr | |
15 | Standing order: Insurance | 240 | 6 155 | Cr | |
16 | Returned cheque | 3 900 | 2 255 | Cr | |
20 | Cheque deposit | 820 | 3 075 | Cr | |
25 | Cheque: 217835 | 3 100 | 25 | Dr | |
28 | Cheque: 217836 | 2 450 | 2 475 | Dr | |
30 | Interest | 15 | 2 460 | Dr |
Additional information
Upon checking against the bank statement, Planet Cooperation’s accountant found that cheque number 217836 was recorded incorrectly in the business’ records.
REQUIRED
a. Update the cash at bank account and bring down the balance.
[3]
b. Prepare a statement to reconcile the adjusted cash at bank account balance with the balance in the bank statement on 30 November 2019.
[4]
c. State the effect of bank reconciliation adjustments on Planet Cooperation’s profit for the year ended 30 November 2019.
[1]
d. Give two reasons why bank reconciliation is performed.
[2]
e. Explain the need for having good internal controls over cash.
[2]
f. State the role of accountants in a business.
[2]
g. State and explain one principle of professional ethics an accountant should possess.
[1]
[TOTAL 15]
Profit will decrease ✔ by $135 ✔ (15 + 90 – 240)
Bank reconciliation is performed to:
Check the cash at bank balance of the business against the bank’s record as shown on the bank statement ✔✔
Identify items that caused the difference between the ending balances in the business cash at bank account and the bank statement. ✔✔
Cash is highly portable ✔ and has a high chance of getting stolen ✔
And, any one of the following:
- To reduce the possibility for theft ✔ or the likelihood of error ✔
- To ensure that cash is well-protected ✔ and accurately reported ✔
Accountants are stewards ✔ of businesses who set up the accounting information system to provide timely, relevant and credible information ✔✔ to stakeholders for decision-making. ✔
Any one of the following:
- Integrity ✔ which is to be straightforward and honest in all professional relationships ✔
- Objective ✔ which is not let bias, conflict of interest or the undue influence of others override one’s professional judgement ✔