Question

On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,236. The balance shown on the bank statement on the same date was $13,172.

Notes

The firm’s records indicate that a $1,400 deposit dated August 30 and a $696 deposit dated August 31 do not appear on the bank statement.

A service charge of $8 and a debit memorandum of $295 covering an NSF check have not yet been entered in the firm’s records. (The check was issued by Art Corts, a credit customer.)

The following checks were issued but have not yet been paid by the bank:

Check 712,	$	105
Check 713,	$	120
Check 716,	$	233
Check 736,	$	572
Check 739,	$	73
Check 741,	$	115

  

A credit memorandum shows that the bank collected a $2,059 note receivable and interest of $58 for the firm. These amounts have not yet been entered in the firm’s records.

Required:

Prepare a bank reconciliation statement for the firm as of August 31.

Record general journal entries for items on the bank reconciliation statement that must be journalized.

Analyze:
What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Answer 1

	Bank reconciliation
	Bank balance	13172
Add	Deposit in transit	2096		Outstanding checks
		15268		Check 712	105
Less	Outstanding checks	1218		check 713	120
	Adjusted bank balance	14050		Check 716	233
				Check 736	572
				Check 739	73
				Check 741	115
					1218
	Cash balance		12236
Add	Notes receivable	2059
	Interest revenue	58	2117
Less
	NSF cheque	295
	service charge	8
			303
	Adjusted cash balance		14050
	Journal entries
	Service charges	8
	Accounts payable	295
	Cash		303
	Cash	2117
	Interest revenue		58
	Notes receivable		2059