Question

Rick Hall owns a card shop, Hall’s Cards. The following cash information is available for the month of August 2018:

As of August 31, the bank statement shows a balance of $10,565. The August 31 unadjusted balance in the Cash account of Hall’s Cards is $7,309. A review of the bank statement revealed the following information:

1. A deposit of $1,910 on August 31, 2018, does not appear on the August bank statement.

2. It was discovered that a check to pay for baseball cards was correctly written and paid by the bank for $3,740 but was recorded on the books as $4,640.

3. When checks written during the month were compared with those paid by the bank, three checks amounting to $4,345 were found to be outstanding.

4. A debit memo for $79 was included in the bank statement for the purchase of a new supply of checks.

Required

Prepare a bank reconciliation at the end of August showing the true cash balance.

HALL'S CARDS
Bank Reconciliation
August 31, 2018
Unadjusted Bank Balance, August 31, 2018
True Cash Balance, August 31, 2018	$0
Unadjusted Book Balance, August 31, 2018
True Cash Balance, August 31, 2018	$

Answer 1

Answer:

HALL'S CARDS
Bank Reconciliation
Unadjusted bank balance,August 31, 2018	10,565
Add: Deposit in transit	1,910
	12,475
less: Outstanding Checks	4,345
True Cash Balance, August 31, 2018	8,130
Unadjusted Book Balance, August 31, 2018	7,309
Add: Check overstated	900
	8,209
less: Charges for new checks	79
True Cash Balance, August 31, 2018	8,130

Calculation:

Here, we need to do the bank reconciliation. So for that first we need to take the Unadjusted bank balance,August 31, 2018, and then add Deposit in transit which doesnt appear in the August bank statement.Then we need to deduct the  three Outstanding Checks to get the True Cash Balance as of August 31, 2018.

Then we need to take the book balance of beginning and then add the overstated check amount.

overstated check amount = 4,640 - 3,740 = 900

Then we need to deduct the charges for purchase of a new supply. Then we get the True Cash Balance as of August 31, 2018. Both the book balance and bank balances will be equal then.