Question

In: Accounting

The following information for the month of December 20x6, with respect to cash activities, was gathered...

The following information for the month of December 20x6, with respect to cash activities, was gathered by the company’s bookkeeper.

Cash balance per books, December 1	$3,700
Cash received during December	$77,000
Cash payments made during December	$77,548
Cheques outstanding, December 31	$5,300
Bank service charges for December	$52
Deposits in transit at December 31	$1,700
A $1,200 cheque received from a customer on December 13 in payment of an account receivable was incorrectly recorded as	$1,020

a) What is the adjusted cash balance per books at December 31?

b) What is the cash balance per the bank statement at December 31?

c) The last item in the list above will cause what kind of adjustment to the cash account balance?

Expert Solution

(a)

Cash balance as per book on dec 1		$3700
Add:
Cash recieved during december	$77000
Error in recording of cheques recieved on dec 13	$180	$77180
Less:
Cash payments made during december	$77548
Bank service charges	$52	($77600)
Adjusted cash balance per books at 31 dec		$3280

Cash recieved was added as it is a reciept from customer
Error in recording of cheques is added as an additional $180($1200-$1020) as a result of error is to be made to correct it
Cash payments are deduced as these are payments made from the company
Bank services charges are deducted as these are expenses to be recorded in cash book

(b)

Adjusted cash balance as per books and adjusted balance as per bank stament will be the same

So adjusted balance as per bank statement at 31 dec=$3280

Cash balance as per bank statement + All additions - All deduction = Adjusted balance as per bank statement at 31 dec

So,

Cash balance as per bank statement= Adjusted balance as per bank statement-All additions+all deduction

Additions to the cash balance bank statement as per question are

Deposit in transit $1700

Deposit in transit is added as this will soon be deposited in bank

Deductions to the cash balance of bank statement as per question are

Cheques outstanding $5300

Cheques outstanding is deducted as these will soon be presented at the bank and payment will be made

So,

Cash balance as per bank statement at 31 dec = Adjusted balance as per bank statement-All additions+all deduction = $3280-$1700+$5300= $6880

(c)

As the cheque recieved from customer of $1200 was incorrectly recorded as $1020 the difference of $180($1200-$1020) should be added to the cash book.

So, the entry will be

DEBIT Cash book $180

CREDIT Creditor's account $180

The cash book is debited as the amount of $1200 was wrongly recorded as $1020

The creditor's account will be credited as an additional $180 due to error should be recorded

So the adjustment will result in increasing the cash account of $180

ekkarill92 answered 1 year ago

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