Question

1. What is the purpose of a Bank Reconciliation Statement?

2.Preparing a bank Reconciliation Statement:

•The July 31 bank statement for Parkview Company indicated a cash balance of $5,000.17.

•The cash ledger account on that date shows a balance of $4,262.83. •Four outstanding checks totaled $717.75.

•A $410.90 deposit made after banking hours on July 31 does not appear in the bank statement.

•On July 30, the bank returned J.B. Ball’s NSF check for $50.25, received as payment of an account receivable.

•The bank statement showed $24.74 interest earned on the bank balance for the month of July.

The bank collected a non-interest bearing note on July 22 for $500 and charged a $5 collection fee.

•Check 893 for telephone expenses cleared the bank for $85 but was erroneously recorded in our books as $58.

•The bank charged a July service charge of $12.00.

Here's an example of a Bank Reconciliation Statement.

You must used the same format to complete the assignment above LAIRD COMPANY Bank Reconciliation April 30,2019

Cash balance per bank statement 15,907.45

Add: Deposits in transit 2,201.40 $18,108.85 Less:

Outstanding checks No. 453 $3,000.00

No. 457 1,401.30

No. 460 1,502.70 5,904.00

Adjusted cash balance per bank $12,204.85

Cash balance per books $11,589.45

Add: Collection of note receivable $1,000 plus Interest earned $50,

less collection fee $15 $1,035.00 Error in recording check

no. 443 36.00 1,071.00 $12,660.45 Less: NSF check 425.60 Bank service charge 30.00 455.60

Adjusted cash balance per books $12,204.85

Answer 1

1, The purpose of bank reconciliation is to compare the Cash account balance with bank statement balance on periodical basis mostly daily. This will help to ensure that all the transactions recorded in the cash book are legitimate. Usually bank reconciliation is completed by a person who is not responsible for recording the cash transactions. This enables a check to ensure that there is no error and fraud committed. It is extremely common to have differences between the two balances, the reasons could be deposit in transit, Unpaid checks, Bank interest and charges, NSF checks and direct collection and payment made by the bank. These differences are caused only because of the time difference within which each of these transactions are recorded by the bank and the when it is recorded by business in its cash book. Once these common timing differences are adjusted, usually your cash ledger balance should match with the bank statement. It is considered to be the first line defense against errors, omissions and fraud.

2 Bank reconciliation statement

Particulars	Amount $	Amount $
Balance as per Cash ledger		4,262.83
Add Outstanding Checks	717.75
Add Interest Earned	24.74
Add Note collected	500.00	1242.49
		5505.32
Less Deposit in transit	410.90
Less NSF Check	50.25
Less Note collection charges	5.00
Less Error correction Check 893 (85-58)	27,00
Less Bank charges	12,00	(505.15)
Balance as per bank statement		5,000.17