Question

The Fitzgerald Company maintains a checking account at the Bank of the North. The bank provides a bank statement along with canceled checks on the last day of each month.

The company's general ledger cash (checking) account had a balance of $42,544 at the end of January 2017. Deposits outstanding totaled $4,224, and all checks written by the company were processed by the bank except for those totaling $5,620. In addition, a check for $500 for the purchase of office furniture was incorrectly recorded by the company as a $50 disbursement. The bank correctly processed the check during January. The monthly loan payment is deducted directly by the bank from the account and includes $400 in interest.

The January 31, 2017, bank statement included the following information:

Balance as of January 1, 2017	$ 32,690
Deposits	86,000
Checks Processed	-75,200
Service Charges	-350
NSF checks	-1,600
Monthly loan payment	-3,400
Balance as of January 31, 2017	$ 38,140

Determine how each of the items described above would be used in a bank reconciliation.

General ledger balance of $42,544

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Deposits outstanding of $4,224

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Unprocessed checks of $5,620

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Check recorded in error for $50

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Monthly loan payment of $3,400

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Bank balance of $32,690

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Total deposits of $86,000

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Checks processed of $75,200

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Service charges of $350

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Returned (NSF) check of $1,600

      [ Choose ]            Subtract to determine adjusted book balance            Add to determine adjusted bank balance            Subtract to determine adjusted bank balance            Add to determine adjusted book balance            Not used in reconciliation      

Bank balance of $38,140

Answer 1

Solution:

S. No.	Item description	Use in Bank Reconciliation
1	General ledger balance of $42,544	Add to determine adjusted book balance
2	Deposits outstanding of $4,224	Add to determine adjusted bank balance
3	Unprocessed checks of $5,620	Subtract to determine adjusted bank balance
4	Check recorded in error for $50	Subtract to determine adjusted book balance
5	Monthly loan payment of $3,400	Subtract to determine adjusted book balance
6	Bank balance of $32,690	Not used in reconciliation
7	Total deposits of $86,000	Not used in reconciliation
8	Checks processed of $75,200	Not used in reconciliation
9	Service charges of $350	Subtract to determine adjusted book balance
10	Returned (NSF) check of $1,600	Subtract to determine adjusted book balance
11	Bank balance of $38,140	Add to determine adjusted bank balance