Question

While attending university, you work as a part time barista and accountant at Bean Crazy Inc. (BCI). Fuller Beans, BCI’s owner, was confused when he reviewed BCI’s bank statement since debits reduced the account balance and credits increased the balance. Fuller has comments that this is the exact opposite of what you have taught him about recording increases and decreases in the cash account in the books. Therefore, he has asked that you BRIEFLY EXPLAIN why the debits and credits on the bank statement are not really backwards and are, in fact, correct .

(Please insert response here.)

Satisfied with your explanation, Fuller has provided the following details related to the bank reconciliation for February 2020:

• According to the unadjusted trial balance, the cash account had a balance of $33,954 as at February 29.
• According to the bank statement, BCI had a February 29 balance of $42,000.
• Outstanding cheques totaled $22,800 as at February 29.
• When it was written, cheque #136 resulted in a debit to accounts payable and a credit to cash for $2,940. However, the bank reduced the bank balance by $2,454 when it processed cheque #136. You have determined an error was made when accounting for the payment and the bank statement is correct.
• According to the bank statement, BCI was charged a fee of $240 for printing cheques. The fee has not yet been journalized.
• Until the bank statement was received, you were not aware that the bank had returned an NSF cheque for $3,360 received from a customer that contracted BCI to provide coffee and pastries for a week long corporate retreat.
• On February 29, BCI made a deposit of $19,200. This deposit does not appear on the bank statement.
• The bank statement included a deposit for $7,560 received from a neighboring business that hosts regular coffee parties for its employees. The EFT received from this customer has not yet been recorded.

Fuller has asked that you prepare BCI’s bank reconciliation (in good form) for February. He expects you to clearly label your work, provide detailed supporting calculations and round all amounts to the nearest dollar .

(Please insert response here.)

Answer 1

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Bean Crazy Inc.
Bank reconciliation statement	Amount $			Amount $
Balance as per books	33,954.00		Balance as per bank	42,000.00
Add:			Add:
Cheque # 136 recorded erroneously (2940-2454)	486.00		Deposit not recorded	19,200.00
Collection not recorded	7,560.00
Less:			Less:
Bank Service charges on printing cheque	240.00		Cheque outstanding	22,800.00
NSF Cheque	3,360.00
Reconciled balance as per books	38,400.00		Reconciled balance as per bank	38,400.00