Question

On August 1, 2019, the accountant for Western Imports downloaded the company’s July 31, 2019, bank statement from the bank’s website. The balance shown on the bank statement was $28,760. The July 31, 2019, balance in the Cash account in the general ledger was $14,042.

Jenny Irvine, the accountant for Western Imports, noted the following differences between the bank’s records and the company’s Cash account in the general ledger:

An electronic funds transfer for $14,600 from Foncier Ricard, a customer located in France, was received by the bank on July 31.

Check 1422 was correctly written and recorded for $1,200. The bank mistakenly paid the check for $1,280.

The accounting records indicate that Check 1425 was issued for $60 to make a purchase of supplies. However, examination of the check online showed that the actual amount of the check was for $90.

A deposit of $900 made after banking hours on July 31 did not appear on the July 31 bank statement.

The following checks were outstanding: Check 1429 for $1,249, and Check 1430 for $141.

An automatic debit of $262 on July 31 from CentralComm for telephone service appeared on the bank statement but had not been recorded in the company's accounting records.

Required:

Prepare a bank reconciliation for the firm as of July 31.

Record general journal entries for the items on the bank reconiliation that must be journalized.

Analyze:
What effect on total expenses occurred as a result of the general journal entries recorded?

Answer 1

Solution:

Western Imports
Bank Reconciliation - July 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$28,760.00	Ending Balance as per cash books	$14,042.00
Additions:		Additions:
Outstanding Deposits	$900.00	EFT Collection	$14,600.00
Bank Error	$80.00
Deductions:		Deductions:
Outstanding Checks (Check no 1429 and 1430) ($1,249 + $141)	$1,390.00	Telephone charges	$262.00
		Incorrect recording of cheque no 1425 ($90 - $60)	$30.00
Up to date cash balance as per bank	$28,350.00	Up to date cash balance as per books	$28,350.00

Journal Entries - Western Imports
Date	Particulars	Debit	Credit
31-Jul	Cash A/c Dr	$14,600.00
	To Accounts Receivables		$14,600.00
	(To record EFT collection from customer)
31-Jul	Supplies Dr	$30.00
	To Cash		$30.00
	(To record correction entry for check 1425)
31-Jul	Telephone expense Dr	$262.00
	To Cash		$262.00
	(To record telephone expense paid)

Effect on total expense occurred as a result of the general journal entries = Expenses will be increased by $262.