Question

Churros Ltd received its bank statement for the month of January 2020 showing a credit balance of $4,188.30 as at 31 January 2020. The cash balance on the company’s books at 1 January 2020 was $176.00 (debit). The progressive totals of the Cash Receipts Journal and the Cash Payments Journal before considering items 1 to 5 below were $21,475.40 and $17,622.10 respectively. The following reconciling items were identified: (1) Un-presented cheques amounted to $501.25. (2) Debits included in the bank statements were: (a) A $225.00 cheque received from a customer and deposited by Churros Ltd was returned and marked “Insufficient Funds”. (b) Service fee for the month was $11.75. (c) Cheque book charge $12.00. (3) A credit in the bank statement indicated that a note receivable for the amount of $630 plus interest of $71 had been collected by the bank. The bank charged a collection fee of $20.00 and credited the remaining $681.00 to Churros Ltd.’s account. (4) A deposit of $801.50 was in transit on 31 January. (1) The accountant discovered that cheque no. 103 for $225 in payment of insurance premium had been incorrectly recorded in the cash payments journal as $252. Required: (a) Prepare bank reconciliation for Churros Ltd as of 31 January 2020 (adjust both Bank and Book side). (b) Prepare the general journal entries necessary to bring the cash at bank account into agreement with the adjusted balance on the bank reconciliation (ignore GST and narration). All services provided by the bank are recorded into service fees account.

Answer 1