Reference no: EM132493062

KA Furniture Stores is a furniture shop operating in Ivory Park. The following information appeared in the accounting records of the business and relates to the month of May 20.7.

a) The totals of the cash receipts journal and the cash payments journal was R167 000 and R202 000 respectively.

b) The balance in the bank account in the general ledger of KA Furniture Stores was an unfavourable balance of R40 063.

c) The bank statement of KA Furniture Stores for May 20.7 had a debit balance of R44 970. The bookkeeper of KA Furniture Stores compared the cash receipts and cash payments journal for May 20.7 with the bank statement for May 20.7 and she noted the following differences:

d) The following cheques issued in May 20.7 were not yet presented for payment: R Cheque no: 456 20 000 Cheque no: 460 14 700 Cheque no: 467 9 900

e) A deposit made on 31 May 20.7, for R65 000 did not reflect on the May 20.7 bank statement.

f) The following cheques were recorded as outstanding cheques in April's bank reconciliation statement. Cheque no 436 issued on 31 March 20.7 for R11 900. Cheque no 440 issued on 2 April 20.7 for R14 000. Cheque no 441 issued on 17 April 20.7 for R1 500 Only cheque no 441 was presented for payment in May 20.7.

g) The following debit orders were noted on the bank statement: A debit order to JJ Municipality for R6 500 for the monthly water and electricity account. A debit order to Yourway Insurers for R2 900 for the monthly insurance premium. A debit order to Katara Rental Properties for R9 000 for rent of the current business premises.

The following clients made direct deposits to KA Furniture Stores bank account:

h) R Mrs K Singh 5 100 Mr S Sithole 4 700 Miss Y Kruger 3 500

i) On 30 November 20.6, Naidoo's Catering Service provided a catering service to KA Furniture Stores. The bookkeeper issued cheque no 220 for R15 000 to Naidoo's Catering Services on 30 November 20.6. The cheque has not yet been presented for payment.

j) Bank charges for the month of May was R250 and interest on overdraft is R120.

k) Mr KA Locker deposited R10 000 on 31 May 20.7 directly into the business bank account to increase his capital contribution.

l) Mr KA Locker went to the bank to deposit R5 000 into his personal bank account. A trainee bank teller at ABC Bank deposited R5 000 into KA Furniture Stores business account.

m) Cheque no 470 for R281 was correctly recorded in the cash payments journal but according to the bank statement received from ABC Bank the amount paid was R218.

Question 1: How would you rectify the error made by the bank for the incorrect amount reflecting on the bank statement of R218 instead of R281 for cheque no 470? (refer to "m" in the above information provided to you)

(1) An entry will be made in the cash receipts journal with the difference of R63.

(2) An entry will be made in the cash payments journal with the difference of R63.

(3) An entry will be made on the credit side of the bank reconciliation statement with the difference of R63.

(4) An entry will be made in the general journal with the difference of R63.

(5) An entry will be made on the debit side of the bank reconciliation statement with the difference of R63.

Question 2: Where would you record cheque no 220 which was not yet presented for payment? (refer to "i" in the above information provided to you)

(1) An entry will be made in the cash payments journal of R15 000 as a cancelled cheque.

(2) An entry will be made in the cash payments journal of R30 000 as a cancelled cheque.

(3) An entry will be made in the cash receipts journal of R30 000 as a cancelled cheque.

(4) A entry will be made on the credit side of the bank reconciliation statement with R15 000. (5) An entry will be made in the cash receipts journal of R15 000 as a cancelled cheque.

Question 3: In which of the following will you record the direct deposits made by the clients of KA Furniture Stores? (refer to "h" in the above information provided to you)

(1) Cash payments journal.

(2) Bank reconciliation statement.

(3) Cash receipts journal.

(4) General journal.

(5) Sales journal.