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Ch. (8) : Bank Reconciliation Example:: Debit Memorandum: Credit Memorandum

The bank reconciliation for Poorten Company shows a correct cash balance of $13,622. This reconciles the adjusted cash balance per bank of $13,622 with the adjusted cash balance per books of $13,622. The adjustments include adding deposits in transit of $1,752 to the bank balance, subtracting outstanding checks of $2,410, and adjusting for errors such as an NSF check and a difference in recording a check amount. Journal entries are made on May 31 to record the collection of a note receivable by the bank and the required reconciling items.

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459 views2 pages

Ch. (8) : Bank Reconciliation Example:: Debit Memorandum: Credit Memorandum

The bank reconciliation for Poorten Company shows a correct cash balance of $13,622. This reconciles the adjusted cash balance per bank of $13,622 with the adjusted cash balance per books of $13,622. The adjustments include adding deposits in transit of $1,752 to the bank balance, subtracting outstanding checks of $2,410, and adjusting for errors such as an NSF check and a difference in recording a check amount. Journal entries are made on May 31 to record the collection of a note receivable by the bank and the required reconciling items.

Uploaded by

youssef walid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Ch.

(8): Bank Reconciliation


Example: Poorten Company's bank statement for May 2012 shows the following data:
Balance May 1 12,650 Balance May 31 14,280
Debit memorandum: Credit memorandum:
NSF check 175 collection of note receivable 505
The cash balance per books at May 31 is 13,319. Your review of the data reveals the
following:
1. The NSF check was from Copple Co., a customer.
2. The note collected by the bank was a 500, 3-month, 12٪ note. The bank charged a 10
collection fee. No interest has been accrued.
3. Outstanding checks at May 31 total 2,410.
4. Deposits in transit at May 31 total 1,752.
5. A Poorten Company check for 352, dated May 10, cleared the bank on May 25. The
company recorded this check, which was a payment on account, for 325.
Instructions:
1. Prepare bank reconciliation at May 31.
2. Journalize the entries required by the reconciliation.
Answer:
Cash balance per bank statement (end of period) $14,280
Add: Deposit in transit (4) $1,752
$16,032
Less: Outstanding checks (3) 2,410
Adjusted cash balance per bank $13,622

Cash balance per books $13,319


Add: Collection of note receivable 500, (2) 505
Plus 15 interest, less collection fee10 13,824
Less: NSF check (1) $175
Error in recording check (5) 27 202
Adjusted cash balance per books $13,622

(b) :
Date Explanation Debit Credit
May 31 Cash 505
Miscellaneous Expense 10
Notes Receivable 500
Interest Revenue 15
(to record collection of note by bank)
31 Accounts Receivable-Copple Co. 175
Cash 175
31 Accounts Payable 27
Cash 27
Summary:

Cash balance per bank statement (end of period) $$$


Add: Deposits in transit $$
Bank errors that understate the bank statement balance $$ $$
$$$
Less: Outstanding checks $$
Bank errors that overstate the bank statement balance $$ $$
Correct cash balance $$$

Cash balance per books (end of period) $$$


Add: Bank credits and collections not yet recorded in the books $$
Book errors that understate the book balance $$ $$
$$$
Less: Non sufficient funds checks (NSF) $$
Bank charges not yet recorded in the books $$
Book errors that overstate the book balance $$ $$
Correct cash balance $$$

Your assignment: EX. 8-11 (P. 348)

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