Question

On March 31, 2010, Home Decorating Pavilion received a bank statement containing a balance of $9,750. The balance in the firm's checkbook and Cash account on the same date was $10,290. The difference between the two balances is caused by the items listed below.

* A $2,875 deposit made on March 30 does not appear on the bank statement.
* Check 358 for $485 issued on March 29 and Check 359 for $1,650 issued on March 30 have not yet been paid by the bank.
* A credit memorandum shows that the bank has collected a $1,100 note receivable and interest of $110 for the firm.
* A service charge of $25 appears on the bank statement.
* A debit memorandum shows an NSF check for $525. (The check was issued by Dane Smithey, a credit customer.)
* The firm's records indicate that Check 341 of March 1 was issued for $900 to pay the month's rent. However, the canceled check and the listing on the bank statement show that the actual amount of the check was $800.
* The bank made an error by deducting a check for $560 issued by another business from the balance of Home Decorating Pavilion's account.

Requirements

Prepare the bank reconciliation at March 31, 2010.

Journalize any transactions required from the bank reconciliation.

Answer 1

Solution:

Home Decorating Pavilion
Bank Reconciliation - March 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$9,750.00	Ending Balance as per cash books	$10,290.00
Additions:		Additions:
Outstanding cash receipt	$2,875.00	Collection of note receivables	$1,100.00
Incorrect deduction of cheque	$560.00	Incorrect recording of cheque ($900 - $800)	$100.00
		Interest earned	$110.00
Deductions:		Deductions:
Outstanding Checks ($485 + $1,650))	$2,135.00	NSF Cheque	$525.00
		Service Charge	$25.00
Up to date cash balance as per bank	$11,050.00	Up to date cash balance as per books	$11,050.00

Journal Entries - Home Decorating Pavilion
S. No.	Particulars	Debit	Credit
1	Bank A/c Dr	$1,210.00
	To Notes Receivables		$1,100.00
	To Interest Income		$110.00
	(Being collection of notes receivables & Interest credited by bank)
2	Bank A/c Dr	$100.00
	To Rent		$100.00
	(Being check recorded with incorrect amount now corrected)
3	Accounts receivables Dr	$525.00
	To Bank		$525.00
	(Being check dishonoured by bank)
4	Service Charges Dr	$25.00
	To Bank		$25.00
	(Being bank charges debited by bank)