Question

Problem 8-4A Preparing a bank reconciliation and recording adjustments P3 Images Missing The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017. On July 31, the company’s Cash account has a $27,497 debit balance, but its July bank statement shows a $27,233 cash balance. Check No. 3031 for $1,482 and Check No. 3040 for $558 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $382 and Check No. 3069 for $2,281, both written in July, are not among the canceled checks on the July 31 statement. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,250. The July bank statement shows the bank collected $8,000 cash on a noninterest-bearing note for Branch, deducted a $45 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement. The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF. The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received. Branch’s July 31 daily cash receipts of $11,514 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement. Check (1) Reconciled balance, $34,602; (2) Cr. Notes Receivable, $8,000 Required Prepare the bank reconciliation for this company as of July 31, 2017. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017.

Answer 1

Outstanding checks do not need to be accounted separately, as they are already accounted in the payer's records and would have been adjusted while preparing the previous period's bank reconciliation statement.

A cancelled check is a check for which the payment amount has been removed from the payer's account as per the amount stated on the check. Thus the transaction is complete and the check is no longer outstanding.

Where the amount originally recorded in cash as per books is incorrect, the difference with the related cancelled check will need to be accounted in the books.

Notes receivable, any related bank charges, as well as any bank service charges, where not recorded in books, need to be accounted as per the bank statement.

NSF checks should be reversed from cash and the corresponding customer should be debited to increase the amount receivable from him to that extent. Where NSF charges are recoverable from the customer, they should be charged to the customer.

Deposits in transit, which have been recorded in books but not in the bank statement, need to be adjusted in the bank reconciliation statement.