MG has operated as a furniture manufacturer for several years. On 31 August 2022, the bank column in his cash book showed that the business had $25600 in the bank account. The bank statement on that date showed a credit balance of $24815.
The only transactions recorded in the cash book were:
Cheque paid to JW $680
Cheque received from TH $910
In addition, an error had been found. A standing order for rates of $205 had been entered in the cash book as $255.
The only transactions appearing on the bank statement were:
Dishonoured cheque received from RJ $420
Insurance paid by direct debit $110
Bank charges $75
(a)[5]
Prepare MG's cash book. Bring down the revised balance on 1 September 2022.
(b)[4]
Prepare a bank reconciliation statement as at 31 August 2022.
(c)[2]
State two reasons why a business would draw up a bank reconciliation statement.
(d)[2]
State two possible reasons for the dishonour of the cheque from RJ.
(e)[2]
Explain how a direct debit differs from a standing order.
(f)[5]
Advise MG whether to accept or reject these terms. Support your answer.
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