Neco 2017 Financial Accounting Question 7

A sole trader, Ade Enterprises, maintains a cash book for its bank transactions. The following information is extracted from the cash book and the bank statement for the month ended 31 March 2024. Cash book (bank column) balance as at 31 March 2024: ₦ 1,250,000 (debit). Bank statement balance as at 31 March 2024: ₦ 1,180,000 (debit). Outstanding checks (issued but not yet presented to the bank): - Cheque No. 102 for ₦ 45,000 - Cheque No. 103 for ₦ 30,000 Deposits in transit (deposited but not yet reflected on the statement): - Cash received from a customer on 30 March for ₦ 25,000 Bank charges shown on the statement but not recorded in the cash book: ₦ 5,500. Interest earned on the bank balance (credited by the bank) not recorded in the cash book: ₦ 2,200. A clerical error: a payment of ₦ 12,000 was recorded as ₦ 21,000 in the cash book. Using the above information, answer the following: a) Determine the corrected cash book balance after adjusting for the clerical error, bank charges and interest. b) Prepare a Bank Reconciliation Statement showing the adjustments required to reconcile the corrected cash book balance with the bank statement balance. c) Briefly explain two reasons why regular bank reconciliation is an essential internal control procedure for a business.