Explanation a. Deposit in transit is reported in the bank side of bank reconciliation statement . This difference is an addition. Justification: Receipts are recorded by the bank only when there is receipt of cash. Business records the deposit of cash is made. This shows increase in amount on the book side. But, when bank side is considered, it shows a lesser amount and thus, deposit in transit should be added to the bank side. b. The difference in the bank collection is reported on the book side of the bank reconciliation statement. This difference is an addition. Justification: Banks make a collection of amount for a business that has no records. This creates difference in the book balance. The book side of the business shows low amount and thus, amount collected by the bank is added to the book side. c. Debit memorandum is reported on the book side of the bank reconciliation statement. This difference is a subtraction. Justification: Debit memorandum is the amount debited to the bank account. It includes deductions like bank charges. The business is unaware about the deductions made by the bank. The book side shows more amount and thus, debit memorandum is subtracted from the book side. d. The difference in the EFT cash receipt is reported on the book side of the bank reconciliation. This difference is an addition. Justification: The amount received by the bank through EFT (Electronic Fund Transfer) cannot be recorded by the business. It shows a low amount and thus, EFT cash receipts will be added to the book side. e. The difference in the outstanding checks is reported on the bank side of bank reconciliation. This difference is a subtraction. Justification: The payments are recorded by the company immediately after the checks are issued. Banks deduct the amount when the bank receives the checks sent for the collection by the third party. The bank side shows more amount and thus, outstanding checks are being subtracted from the bank side. f. The difference occurred will be reported on the bank side of the bank reconciliation...

Horngren's Financial & Managerial Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)

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ISBN: 9780134642864

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Concept explainers

Bank Reconciliation Statement

As a commerce student, we all know that every business has to maintain a cash book to maintain all his cash and bank transactions. A cash book is a book which has two columns, one cash column and one bank column.

Question

Chapter 7, Problem 7.8SE

To determine

Timing differences: When accounting records are maintained by both bank and business, time interval occurs and thus cash differences occur between cash amount in the bank statement and the cash account in the company books. These time intervals are referred as timing differences.

To identify: The timing differences related to book side or the bank side of bank reconciliation.

Expert Solution & Answer

Chapter 7 Solutions

Horngren's Financial & Managerial Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)

Ch. 7 - Prob. 1QC Ch. 7 - Prob. 2QC Ch. 7 - Prob. 3QC Ch. 7 - Prob. 4QC Ch. 7 - Prob. 5QC Ch. 7 - Prob. 6QC Ch. 7 - Prob. 7QC Ch. 7 - Prob. 9QC Ch. 7 - Prob. 10QC Ch. 7 - Prob. 11QC

Ch. 7 - Prob. 1RQ Ch. 7 - Prob. 2RQ Ch. 7 - What are the five components of internal control?...Ch. 7 - Prob. 4RQ Ch. 7 - What is separation of duties?Ch. 7 - Prob. 6RQ Ch. 7 - Prob. 7RQ Ch. 7 - Prob. 8RQ Ch. 7 - How do businesses control cash receipts by mail?Ch. 7 - Prob. 10RQ Ch. 7 - Prob. 11RQ Ch. 7 - Prob. 12RQ Ch. 7 - Prob. 14RQ Ch. 7 - Prob. 15RQ Ch. 7 - Prob. 16RQ Ch. 7 - Prob. 17RQ Ch. 7 - Prob. 18RQ Ch. 7 - Defining internal control Internal controls are...Ch. 7 - Prob. 7.2SE Ch. 7 - Prob. 7.3SE Ch. 7 - Prob. 7.4SE Ch. 7 - Prob. 7.5SE Ch. 7 - Prob. 7.7SE Ch. 7 - Prob. 7.8SE Ch. 7 - Prob. 7.9SE Ch. 7 - Prob. 7.10SE Ch. 7 - Prob. 7.11SE Ch. 7 - Prob. 7.12E Ch. 7 - Prob. 7.13E Ch. 7 - Prob. 7.14E Ch. 7 - Evaluating internal control over cash payments...Ch. 7 - Understanding internal control, components,...Ch. 7 - Prob. 7.17E Ch. 7 - Prob. 7.18E Ch. 7 - Prob. 7.20E Ch. 7 - Prob. 7.21E Ch. 7 - Prob. 7.23AP Ch. 7 - Prob. 7.24AP Ch. 7 - Prob. 7.25AP Ch. 7 - Prob. 7.26AP Ch. 7 - Prob. 7.27AP Ch. 7 - Prob. 7.28AP Ch. 7 - Prob. 7.29BP Ch. 7 - Prob. 7.30BP Ch. 7 - Prob. 7.31BP Ch. 7 - Prob. 7.32BP Ch. 7 - Prob. 7.33BP Ch. 7 - Prob. 7.34BP Ch. 7 - Prob. 7.2DC Ch. 7 - Levon Helm was a kind of one-man mortgage broker....Ch. 7 - Prob. 7.1CA

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Which of the following items are found on a book side of the bank reconciliation? A. beginning bank balance B. outstanding checks C. interest income D. error made by bank
Which of the following are found on the bank side of the bank reconciliation? A. NSF check B. interest income C. wire transfer into clients account D. deposit in transit

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