Question

On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,370. The balance shown on the bank statement on the same date was $13,247.

Notes

1. The firm’s records indicate that a $1,550 deposit dated August 30 and a $711 deposit dated August 31 do not appear on the bank statement.
2. A service charge of $7 and a debit memorandum of $370 covering an NSF check have not yet been entered in the firm’s records. (The check was issued by Art Corts, a credit customer.)
3. The following checks were issued but have not yet been paid by the bank:
   

Check 712,	$	120
Check 713,	$	135
Check 716,	$	248
Check 736,	$	587
Check 739,	$	88
Check 741,	$	130

  

4. A credit memorandum shows that the bank collected a $2,134 note receivable and interest of $73 for the firm. These amounts have not yet been entered in the firm’s records.
   

Required:

1. Prepare a bank reconciliation statement for the firm as of August 31.
2. Record general journal entries for items on the bank reconciliation statement that must be journalized.

Analyze:
What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Answer 1

Bank reconciliation from bank balance needs to be added with cash deposit and reduced with outstanding checks to arrive at the adjusted bank balance or cash balance.

Reconciliation of cash books to the bank statement requires adjustment for entries which are appearing in the bank statement but not in cash book.