Question

On March 31, 2019, Home Decorating Pavilion received a bank statement showing a balance of $9,800. The balance in the firm's checkbook and Cash account on the same date was $10,370. The difference between the two balances is caused by the items listed below. A $2,925 deposit made on March 30 does not appear on the bank statement. Check 358 for $510 issued on March 29 and Check 359 for $1,700 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 $30 appears on the bank statement. A debit memorandum shows an NSF check for $550. (The check was issued by Dane Jaris, a credit customer.) The firm's records indicate that Check 341 of March 1 was issued for $700 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 $600. The bank made an error by deducting a check for $585 issued by another business from the balance of Home Decorating Pavilion’s account. Required: Prepare a bank reconciliation statement for the firm as of March 31, 2019. Record entries for any items on the bank reconciliation statement that must be journalized.

Answer 1

Solution:

Home decorating Pavilion
Bank Reconciliation
Mar-31
Cash balance per Bank	$9,800
Add: Deposit in transit	$2,925
Add: Bank error in recording another company's check	$585
Subtotal	$13,310
Less: Outstanding checks (510+1700)	$2,210
Adjusted Balance per bank	$11,100
Cash balance per General ledger	$10,370
Add: Note collected by bank with interest	$1,210
Add: Error in recording check as $700 instead of $600	$100
Subtotal	$11,680
Less: NSF check	$550
Less: Bank Service Charges	$30
Adjusted Balance per book	$11,100

Journal Entries
S.No	Particulars	Debit	Credit
a.	Cash	$1,210
	Note receivable		$1,100
	Interst Revenue		$110
	(To record note coolected by bank)
b.	Cash	$100
	Rent Expense		$100
	(To correct error in recording check for Rent)
c.	Accounts Receivable	$550
	Cash		$550
	(To record NSF Check)
d.	Miscellaneous expense	$30
	Cash		30
	(to record bank service chages)