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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Bank reconciliation

Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company’s records, or (d) a deduction from the cash balance according to the company’s records. (None of the transactions reported by bank debit and credit memos have been recorded by the company.)

  1. 1. Bank service charges, $30.
  2. 2. Check of a customer returned by bank to company because of insufficient funds, $400.
  3. 3. Check for $320 incorrectly recorded by the company as $230.
  4. 4. Check for $1,100 incorrectly charged by bank as $110.
  5. 5. Deposit in transit, $3,300.
  6. 6. Outstanding checks, $7,950.
  7. 7. Note collected by bank, $10,500.

To determine

Bank Reconciliation Statement: 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.

To identify: The reconciling items.

Explanation

In order to prepare bank reconciliation statement, follow the below format:

Bank section of bank reconciliation statement

Step 1: Enter the cash balance according to bank.

Step 2: Add deposits not recorded by the bank.

Step 3: All the outstanding checks that have not been paid by the bank need to be deducted.

Step 4: Adjusted balance is determined by adding the total adjustments and adding (Subtracting) the total to (from) the cash balance according to bank.

Company section of bank reconciliation statement

Step 5: Enter the cash balance of the company from the ending cash balance in the ledger.

Step 6: Add credit memos that have not been recorded.

Step 7: Subtract debit memos that have not been recorded.

Step 8: Adjusted balance is determined by adding the total adjustments and adding (Subtracting) the total to (from) the cash balance according to company...

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