Question

Case Analysis 1

Smart Supplies Inc.

The Smart Supplies Inc. is operating its business in GTA and dealing with different products. The company maintains its bank account with TD bank. The bank sent statement at the end of each moth. Martin the CEO of the organization normally check the cash book balance regularly in order to see everything going on smoothly. The Cashier who maintains cash book gives Martin monthly cash balance information. In the month of July 2019, Martin noted that there is a big different in between the balance as per TD Bank statement and the balance as per Cash Book. He was confused and could not understand the reason why. He was also worried to note a huge difference between Cash Book Balance and the Bank Statement. The bank statement balance is much less than the Cash Book Balance. He was surprised thinking where the cash might go from the bank. Martin also not sure how much the cash the company might be having by the end of June.

Martin engaged you as an accountant to let him know why there is a huge different in between the cash book balance and the bank statement.

The business record and the month end bank statement show the following:

Balance as per Bank Statement $595.

Balance as per Cash Book record $1,882.

Sometimes customers send money to the bank by electronic transfer. It is noted in the bank statement that there is an EFT customer collection $300.

As the bank provides services to the business normally debit bank charge at a regular interval. The bank statement shows that there was a service charge of an amount $12.

The bank statement includes Three NSF (Not Sufficient Funds) from 3 different customers.

M & Co​​$70

FM Inc.​​ ​ 20

Muller M​​ 30

The cheque book of the company got finished and the company ordered for a new cheque book. The printing charged for the cheque book is shown by the bank statement $9

The company issued few cheques to the following customers which has not yet cleared by the bank (Outstanding Cheques) till the last day of the month. These cheques are shown below against the customers and CQ numbers:

MC Miller​CQ No 546​​​​$200

Peter​​CQ No 647​​​​$300

Khan​​CQ No 764​​​​$103

On June 30th the cashier deposited three cheques received from customers. These cheques were deposited to the bank by the cashier. The bank collected these cheques (Deposit in Transit) in the month of July. The name of customer CQ number is given below:

John M.​​​CQ No 354​​$1,000

Paul S.​​​​CQ No 333​​ 588

Gagandeep​​​CQ No 435​​ 200

A cheque given for salary during the month $290. By mistake the cashier wrote in the cash book as 29.

Required:

1) You need to write a short report to Martin showing how much cash the company exactly had in on 30th June, 2019. The report must include two Bank Reconciliation statement (Starting with Cash Book Balance and Bank Statement Balance).

2) Explain each point why you have deducted or added in your statement.

Answer 1

1]	Difference between "cash balance per books" and "cash balance per bank statement".
	The difference between the balances is one that is usually present in all cases and but
	for any misappropriations to be established in the process of reconciliation, there
	should be nothing alarming about it.
	Presented below the is bank reconciliation statement in two parts.
	Part 1 shows adjustments to be made to the cash book balance and Part 2 shows the
	adjustments to be made to the bank balance.
	It may be noticed that the final adjusted balance per both the statements are the same.
	Further, all the adjustements are in order and there is nothing abnormal about them.
	BANK RECONCILIATION STATEMENT	EXPLANATIONS
Part 1:	Cash book balance		$              1,882
	Add:
	EFT-Customer collection	$                   300	$                  300	The customer has paid the amount due directly in to the bank account. It reflects in the bank statement and needs to be added to the cash book balance.
			$              2,182
	Less:
	Mistake in check [290-29]	$                   261		This is a mistake made by the cashier and needs to be deducted as he has entered a lower amount in the basic entry. As the bank has correctly accounted for it no adjustment is to be done to the bank balance.
	Check printing charges	$                        9		Accounted by bank, but not by the firm
	NSF checks [70+20+30]	$                   120		Checks for collection returned as NSF and accounted by bank. All these need to be deducted from the book balance as these amounts have already been taken credit for when the checks were deposited.
	Service charges	$                      12	$                  402	Service charges debited by bank not responded yet in the cash book.
	Adjusted cash book balance		$              1,780
Part 2:	Bank statement balance		$                  595
	Add:
	Deposits in transit [1000+588+200]	$                1,788	$              1,788	These have been accounted for in the cash book but has not been collected and credited by the bank. Hence, adjustment is to be done only to the bank balance.
			$              2,383
	Less:
	Check outstanding [200+300+103]	$                   603	$                  603	These checks have been accounted for in the cash book but have not yet been presented to the bank. Hence, the bank balance is higher to that extent requiring deduction from the bank balance.
	Adjusted bank statement balance		$              1,780
2]	Explanations are given in the column to right side of the adjustments.