Question

While preparing the bank reconciliation, an accountant with Elliter noticed that an error had been made in recording a deposit received by the company. The receipt had been recorded by the company as $729 yet the correct amount of the deposit on the bank statement was $279. Which of the following reconciling adjustments is necessary?

	1.	Deduct $450 from the bank statement balance
	2.	Add $450 to the bank statement balance
	3.	Add $450 to the company's records
	4.	Deduct $450 from the company's records The company recorded a deposit as $540, but it correctly cleared the bank for $450. In the Bank Reconciliation you will need to: 1. Subtract from bank balance $90 2. Add to book balance $90 3. Subtract from book balance $90 4. Add to bank balance $90 The bank statement shows a NSF cheque of $50. When preparing the bank reconciliation you should: 1. Subtract from the book balance 2. Add to the bank balance 3. Add to the book balance 4. Subtract from the bank balance thank you !

Answer 1

While preparing the bank reconciliation, an accountant with Elliter noticed that an error had been made in recording a deposit received by the company. The receipt had been recorded by the company as $729 yet the correct amount of the deposit on the bank statement was $279. Which of the following reconciling adjustments is necessary?

The correct answer is:

4.	Deduct $450 from the company's records

Explanation: The company has recorded the deposit of $729 while the actual amount is $279. It means that the company has credited/added $(729-279) = $450 more in the books.

Hence, the correct reconciliation adjustment would be to deduct $450 from the company’s records.

The company recorded a deposit as $540, but it correctly cleared the bank for $450. In the Bank Reconciliation you will need to:

2.	Add to book balance $90

Explanation: The company has debited/subtracted form the books $540 while the actual amount cleared is $450. Since the company ahs deducted $90 incorrectly, adding it to the book balance would be the correct reconciliation adjustment.

The bank statement shows a NSF cheque of $50.

When preparing the bank reconciliation you should:

3.	Add to the book balance

An NSF cheque stands for not sufficient funds. This cheque was issued by the company but was not cleared because of insufficient funds in the bank account. The company must have reduced the balance in the books but since the cheque was not honoured, the bank has not done the same. Hence the correct adjustment is to add it back to the book balance.