Question

Sawyer Company reported the following information related to its August 31, 2018 Chase bank statement and their own records:

a. The bank statement’s balance is $3,405.

b. The cash account balance in Sawyer’s records is $3,193.

c. The outstanding checks total $612.

d. The deposits in transit amount to $1,415.

e. The bank service charge is $27.

f. Sawyer’s accountant wrote a check for $153 (in payment on an account payable) that was recorded incorrectly in the record as $135 but was paid correctly by the bank.

g. The bank collected a note receivable on behalf of Sawyer in the amount of $ 1,060.

Required: Prepare Sawyer’s bank reconciliation on August 31, 2018 and prove the true cash that should be reported in the Balance Sheet.

Explain the solution also.

Answer 1

Deposits in transit and outstanding checks needs to be adjusted against the bank balance as these are already accounted in the cash book.

Entries which are appearing in the bank statements i.e. entered by the banks directly, but not accounted in the cash book needs to be adjusted in the cash book to arrive at the correct cash balance.