2020 NAS 3E POA EOY P2 Q3

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

Sales revenue

 

1 600

 

325 Dr

        9

Inventory

217833

 

1 850

1 525 Cr

       12

Saturn Supplies

 

3 900

 

2 375 Dr

       17

Sales revenue

 

820

 

3 195 Dr

       23

Advertising

217834

 

1 200

1 995 Dr

       24

Inventory

217835

 

3 100

1 105 Cr

       27

Salaries

217836

 

2 540 

3 645 Cr

       29

Mars Traders

 

2 300

 

1 345 Cr

       30

Sales revenue

 

4 700

 

3 355 Dr

Dec 1

Balance b/d

   

3 355 Dr

On 3 December 2019, Planet Cooperation received the following bank statement.

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]

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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

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