Question

The Scenario

BRS and Control Accounts – Why Variations?

Given below are the sets of transactions supplied to you as a practicing accountant to prepare bank reconciliation statements and to reconcile control accounts. The report must be submitted to the Chief Financing Officer to take necessary actions upon the deviations found in the passbook and the cash book and the control accounts. The report that you submit with detailed calculation and working notes wherever necessary will have bearing on the operating efficiency of the firm and failing on might result misrepresentation in preparing and disclosing financial information to the interested parties. Hence you have a major role to oversee the entire set of calculations.  

Extract 1: For preparing Bank Reconciliation Statement for RR Telecommunications for year ending 31^st December 2017

1. Bank overdraft as per pass book OMR 30,000

2. Interest on overdraft OMR 3,000

3. Insurance premium paid by the bank OMR 300

4. Cheque issued to the suppliers but not presented for payment to bank OMR 9,750

5. Cheque deposited by the business but not yet collected by the bank OMR 9,000

6. A wrong debit given by the bank OMR 750

Extract 2: For preparing Bank Reconciliation Statement for RR Telecommunications for the year ending 31 December 2017

1. Overdraft as per cash book on 31st December OMR 10,540

2. Interest on overdraft for six months ending Dec. OMR 240

3. Interest on investments collected by bank OMR 300

4. Bank charges for the above period OMR 60

5. Cheques drawn but not cashed by the customers, prior to December OMR 2,500

6. Cheques paid into the bank, but not cleared before 31st December OMR 4,200

7. A Bill Receivable for OMR 1,000 discounted with the bank was dishonoured on December 31st.

8. Cheques issued for OMR 50, returned with remark Not Sufficient Fund (NSF).

Extract 3: Transactions for clearing suspense accounts for RR Telecommunications

1. One cash payment of OMR 1,000 remain un noticed. Later the amount found to be related to the payment of stationery charges.

2. A creditor (supplier) sends an invoice for OMR 9,000 for services, which is payable in 90 days. The accounting personnel is not aware to which department will be debited or charged with this invoice. The accounting department subsequently understands invoice is relating to the R&D department and it must be charged with the invoice.

Extract 4: Data on purchase book, purchase returns book and cash payments book for reconciliation accounts for RR Telecommunications

Purchase Returns Day Book
Invoice No.	Suppliers	Supplier code.	Gross	VAT	Net
AA1	DEF Ltd	10	4,224	704	3,520
BB2	LMN Ltd	11	21,120	3,520	17,600
Total			25,344	4,224	21,120

Purchase Day Book
Invoice No.	Suppliers	Supplier code.	Gross	VAT	Net
10	DEF Ltd	10	132,000	22,000	110,000
11	LMN Ltd	11	168,960	28,160	140,800
Total			300,960	50,160	250,800

Cash Payments and Credit Purchase Book
Ref	Details	Bank	Discount received	Cash Purchase	VAT	Trade Payables (Credit purchases)
10	DEF Ltd	125,114				125,114
11	LMN Ltd	137,522	6,160			137,522
	Cash purchase	31,680		26,400	5,280
Total		294,316	6,160	26,400	5,280	262,636

You need to:

1. Prepare accurate bank reconciliation that apply appropriate tools and techniques to generate accounts and balance sheet using extracts 1 and 2

AND

Produce accurate accounts that have been reconciled applying appropriate methods using extracts 3 and 4

Answer 1

Answer Extract 1

Balance as per passbook (30000)

Add:

Cheque deposited by business but not yet collected by bank 9000

Wrong debited by bank 750

Less:

Interest on overdraft (3000)

Insurance premium paid by bank (300)

Cheque issued to suplierss but not presented to bank (9750)

Balance as per cash book (33300)

Answer Extract 2

Bank Reconciliation Statement

Balance as per cash book (10540)

Add:

Interest on investments collected by bank 300

Cheques drawn but not cashed by the customers 2500

Less:

Interest on overdraft for six months ending (240)

Bank charges for the above period (60)

Cheque issued but not cleared (4200)

Bills receivable dishounred (1000)

Cheque returned (50)

Balance as per passbook (13290)