Question

On November 30^th, FRI Company’s general ledger shows a checking account balance of $12,000.  The company’s cash receipts for the month which haven’t cleared the bank yet are $5,500 and checks written by the company this month which have not cleared the bank total $9,000.  

While comparing the bank statement with the general ledger FRI determined the bank overstated a deposit the company made on November 28^th for $100.  The bank statement also reported service fees of $50, interest FRI earned on their account of $10, and an automatic withdrawal of $450 for the phone bill.  The bank statement also showed the bank had collected a $2,000 note receivable for FRI from a company executive.  The company noted that one of the checks they wrote was incorrectly recorded in the general ledger, it was written for $600 but they had subtracted $660 from their cash account.

The bank statement reported the company checking account balance was $17,170 on November 30.

Answer the following based on performing a bank reconciliation for FRI Company.

1. How should the company treat the bank error? (add/sub from bank/general ledger)
2. How should the company treat the company error? (add/sub from bank/ general ledger)
3. What is the general ledger cash balance before reconciliation? $____
4. What is the bank statement balance before reconciliation? $_____
5. What is the general ledger balance after reconciliation? $_______

Answer 1

Solution

FRI Company

Bank Reconciliation

FRI Company
Bank Reconciliation Statement
For the Month Ended November 30
Balance as per bank statement		$17,170
Add: Deposits in transit	$5,500
Less: Outstanding checks	$(9,000)
Less: bank error	$(100)	$(3,600)
Corrected Balance as per Bank Statement		$13,570
Balance as per books		$12,000
Add: notes receivable collected by bank	$2,000
Add: error in recording checks	$60
Add: interest earned	$10
Less: Bank charges	$(50)
Less: automatic withdrawal	$(450)	$1,570
Corrected book balance		$13,570

How should the company treat the bank error:

Subtract from the bank balance.

How should the company treat the company error:

Add to general ledger ($660 - $600 = $60)

General ledger cash balance before reconciliation = $12,000

Bank statement balance before reconciliation = $17,170

General ledger balance after reconciliation = $13,570