Question

1. Xavier’s end of October bank statement has a balance of $6,540. His check book record shows a balance of $5,150. The bank statement contains $90 for interest earned and $420 deposit made by his friend, who owed him. The bank statement does not include checks Xavier wrote in the final days of October to pay bills. These checks total $880. Prepare bank reconciliation statement for Xavier showing the correct cash balance at the end of October.

Answer 1

As per the scenario,

The bank account balance is $6,540

The cheque book balance is $5,150

To understand the difference between Bank balance and cheque book balance, first we need to understand the transaction due to which amount calculation is happening in both books and identify the error.

Below mention are the three transactions which we will understand and rectify the difference between bank and cheque book.

1. Interest earned and credited by the bank but not mentioned in cheque book = $90

2. Amount deposited by Xavier's friend in the bank but not mentioned in cheque book = $420

3. Cheque issued by Xavier for bill payment but the cheque is not presented to the bank for payment = $880

Let's calculate the final cash balance at the end of October end

S.No	Particulars	Amount
1	Balance as per Cheque Book	5150
2	(Add): - Interest earned and credited by the bank	90
3	(Add): - Amount deposited by Xavier's friend in the bank but not mentioned in the cheque book	420
4	(Add): - Cheque issued by Xavier for bill payment but the cheque is not presented to the bank for payment	880
	Cash Balance at the end of Oct	6540