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 $28,770. The July 31, 2019, balance in the Cash account in the general ledger was $14,131.

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 $14,500 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 $1,270.

The accounting records indicate that Check 1425 was issued for $66 to make a purchase of supplies. However, examination of the check online showed that the actual amount of the check was for $96.

A deposit of $890 made after banking hours on July 31 did not appear on the July 31 bank statement.

The following checks were outstanding: Check 1429 for $1,250, and Check 1430 for $142.

An automatic debit of $263 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

Balance as per Bank Statement				28770
Adjustment
Add: Error on check payment				70
Add: Deposits in transit				890
Less: Outstanding checks				-1392
Adjusted balance as per bank statement				28338
Balance as per Books				14131
Adjustment
Add: EFT from customer				14500
Less: Error in recording the payment of supplies				-30
Less: Telephone charges paid				-263
Adjusted Balance as per Books				28338
Journal entries
Cash Account Dr.				14500
Accounts receivable					14500
(for EFT transfer)
Supplies Account Dr.				30
Cash Account					30
Telephone Charges Dr.				263
Cash Account					263
Req3:
Effect of Errors on Expenses:
Total expense Shall be increased by (30+263) = $ 293
Note: It has been assumed that the supplies will be consumed and normally supplies inhand is considered and balance is taken as Expense.