Question

Bank Reconciliation

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. Cash balance according to the company's records at August 31, $14,900.
2. Cash balance according to the bank statement at August 31, $15,900.
3. Checks outstanding, $3,020.
4. Deposit in transit, not recorded by bank, $2,430.
5. A check for $270 in payment of an account was erroneously recorded in the check register as $720.
6. Bank debit memo for service charges, $40.

a. Prepare a bank reconciliation, using the format shown in Exhibit 13.

Creative Design Co.
Bank Reconciliation
August 31, 20Y6
Cash balance according to bank statement		$
Add: Deposit in transit on August 31
Deduct: Outstanding checks
Adjusted balance		$
Cash balance according to company's records		$
Add: Error in recording check
Deduct: Bank service charge
Adjusted balance		$

b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash?
$

c. Must a bank reconciliation always balance (reconcile)?

Entries for Bank Reconciliation

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. Cash balance according to the company's records at August 31, $22,100.
2. Cash balance according to the bank statement at August 31, $23,310.
3. Checks outstanding, $4,490.
4. Deposit in transit not recorded by bank, $3,600.
5. A check for $480 in payment of an account was erroneously recorded in the check register as $840.
6. Bank debit memo for service charges, $40.

Journalize the entries that should be made by the company that (a) increase cash and (b) decrease cash.

a. 20Y6 Aug. 31	Cash
	Accounts Payable
b. Aug. 31	Miscellaneous Expense
	Cash

Answer 1

a)	Creative Design Co.
	Bank Reconciliation
	August 31, 20Y6
	Cash balance according to bank statement	15,900
	Add: Deposit in transit on August 31	2,430
		18,330
	Deduct: Outstanding checks	3,020
	Adjusted balance	15,310
	Cash balance according to company's records	14,900
	Add: Error in recording check ( 720 - 270 )	450
		15,350
	Deduct: Bank service charge	40
	Adjusted balance	15,310
b)	$ 15,310 is to be reported in Balance Sheet
c)	Yes
2	Journal
Date	General Journal	Debit	Credit
Aug-31	Cash	360
	Accounts Payable		360
	( 840 - 480 )
Aug-31	Miscellaneous Expenses	40
	Cash		40