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Bank reconciliation The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6: 1. Cash balance according to the company’s records at August 31, $42,920. 2. Cash balance according to the bank statement at August 31, $56,300. 3. Checks outstanding, $25,390. 4. Deposit in transit not recorded by bank, $13,325. 5. A check for $150 in payment of an account was erroneously recorded in the check register as $1,500. 6. Bank debit memo for service charges, $35. a. Prepare a bank reconciliation, using the format shown in Exhibit 13. b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash? c. Must a bank reconciliation always balance (reconcile)?
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Bank reconciliation
The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:
- 1. Cash balance according to the company’s records at August 31, $42,920.
- 2. Cash balance according to the bank statement at August 31, $56,300.
- 3. Checks outstanding, $25,390.
- 4. Deposit in transit not recorded by bank, $13,325.
- 5. A check for $150 in payment of an account was erroneously recorded in the check register as $1,500.
- 6. Bank debit memo for service charges, $35.
- a. Prepare a bank reconciliation, using the format shown in Exhibit 13.
- b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash?
- c. Must a bank reconciliation always balance (reconcile)?
a.
Compute the adjusted balance on the bank reconciliation.
Explanation of Solution
Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.
Prepare bank reconciliation statement of Company CD.
| Company CD | ||
| Bank Reconciliation Statement | ||
| August 31, 20Y6 | ||
| Particulars | Amount ($) | Amount ($) |
| Cash balance according to bank statement | $56,300 | |
| Adjustments: | ||
b.
Compute the amount of cash to be shown by Company CD on the balance sheet.
c.
Comment on the balances always being reconciled in the bank reconciliation.
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