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Hello Sir,
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In PYQ JUNE 2015 Q6 (b)
Substantive procedures for bank reconciliation
1.Obtain Hawthorn’s bank account reconciliation and cast to check the additions to ensure arithmetical accuracybank account reconciliation is it mean bank account ledger in the nominal account?
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2.Trace all the outstanding lodgements to the pre year-end cash book, post year-end bank statement and also to
paying-in-book pre year endwhy need to check pre year-end cash book?As its cheques receipt so just need to check with paying in book?
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3.Examine any old unpresented cheques to assess if they need to be written back into the purchase ledger as they
are no longer valid to be presented.no longer valid is like cancel the payment?and how to examine old unpresented cheques?is like check the pre year end cheques and not cleared after year end?
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4.Select a sample of goods despatched notes (GDN) before and just after the year end and follow through to the sales
ledger to ensure they are recorded in the correct accounting periodThe question ask the assertion for valuation and existence, but this procedure is for the cut-off test?
Thank you.
The bank/cash account and the cash book are the same thing. The cash book is really part of the nominal ledger but split out because cash has usually so many postings.
If something is in the pay-in book and before year end it should also be in the cash book and be eventually credited by the bank. There is a risk that cheques paid in on eg 31/12 have not been recorded in the cash book.
You examine old unpresented cheques simpky by lookkng at the date jn the CB or cheque stub that they were issued. In the UK they become jnvalid after 6 months.
It is primarily cut-off but the assertions are not mutually exclusive. If you get sales cut-off wrong you will get existence or completeness wrong too.
”If something is in the pay-in book and before year end it should also be in the cash book and be eventually credited by the bank. There is a risk that cheques paid in on eg 31/12 have not been recorded in the cash book“
the pay-in book is it for cheque paid in and record in the book?is it mean the bank and cash book is separated out into 2 books?
and why the cheque paid in need to record in the cash book when there has a bank book(pay-in book)?Thank you.
The pay-in book contains pages you can tear out and send to the bank with the cheque so that the bank knows what account to pay the cash into. You also,record details of the cheque on the counterfoil or copy of the pay-in book page. It is not part of the double entry system. It is provided by the bank and is part of the banking system to facilitate paying money into the account.
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