Question

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017. On July 31, the company’s Cash account has a $25,758 debit balance, but its July bank statement shows a $28,299 cash balance. Check No. 3031 for $1,600 and Check No. 3040 for $792 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $576 and Check No. 3069 for $2,368, both written in July, are not among the canceled checks on the July 31 statement. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,240 but was erroneously entered in the accounting records as $1,230. The July bank statement shows the bank collected $5,500 cash on a noninterest-bearing note for Branch, deducted a $28 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement. The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF. The July statement shows a $8 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received. Branch’s July 31 daily cash receipts of $6,652 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

Answer 1

Solution:

Branch Company
Bank Reconciliation - July 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$28,299.00	Ending Balance as per cash books	$25,758.00
Additions:		Additions:
Outstanding cash receipt	$6,652.00	Note collection by bank	$5,472.00
Deductions:		Deductions:
Outstanding Checks (Check no 3031, 3065, 3069) ($1,600 + $576 + $2,368)	$4,544.00	Incorrect recording of check no 3056	$10.00
		NSF Check	$805.00
		Service Charge	$8.00
Up to date cash balance as per bank	$30,407.00	Up to date cash balance as per books	$30,407.00

Journal Entries
Date	Particulars	Debit	Credit
31-Jul	Cash Dr	$5,472.00
	Expenses for collection Dr	$28.00
	To Accounts receivables		$5,500.00
	(To record note collectioon by bank
31-Jul	Rent expense Dr	$10.00
	To Cash		$10.00
	(Correction entry for check no 3056)
31-Jul	Accounts receivables Dr	$805.00
	To Cash		$805.00
	(To record NSF check from customer)
31-Jul	Miscellenous Expenses Dr	$8.00
	To Cash		$8.00
	(Being service charges debited by bank)