Question

A. What is a bank reconciliation and why is it important for companies to do it periodically?

B. Prepare a Bank Reconciliation Statement for XYZ company that has:

·        Bank statement of $10,000.

• Cash account of $8,500.

Additional information for the reconciliation:

ü  Deposit in transit.

ü  NSF Check.

ü  Outstanding check.

ü  Collections made by the bank.

ü  Bank error

ü  Books error

Required: provide an amount of each information to bring the adjusted balances to be equal.

Q2-

Assume that you have a company. And the management estimates that 5% of sales will be uncollectible.

Give any amount of sales and prepare the journal entry using the percent of sales method.

Q3 A company that uses a perpetual inventory system made the following cash purchases and sales.  There was no beginning inventory.

January 1:	Purchased 40 units at SAR10 per unit
February 5:	Purchased 40 units at SAR 12 per unit
March 16:	Sold 50 Units for SAR 15 per unit

A.Prepare general journal entries to record the March 16 sale using the

1.       FIFO inventory valuation method.

2.      LIFO inventory valuation method.

what is the gross margin for each method?

Answer 1

1) A bank reconciliation can be defined as a process of matching the balances in a business accounting records for a cash balances on the balance sheet to the corresponding details on a bank statement. The main motive is to determine the differences among the two, resolve any discrepancies, identification of any fraudulent activity and to book changes to the accounting records as required

Periodic bank reconciliations also important for companies to to inspect fraudulent activity and cash manipulations quickly for prevention of the financial statement errors and minimize damage to the company. Moreover the practice assists to spot inefficiencies in the system.

2)

Ending balance per bank statement	10,000
Add: Deposits in transit	7000
Less: Outstanding checks	-2000
Add: Bank error	800
	15,800
Ending balance per cash books	8,500
Less: NSF Checks	3000
Add: Collection made by bank	4,500
Less: Book error	-200
	15,800

As per policy we have to answer first question; I have answered more than one