Question

Exercise 8-11 Bank reconciliation and adjusting entries LO P3

A table for a monthly bank reconciliation dated September 30 is given below. For each item 1 through 12, indicate whether the item should be added to or subtracted from the book or bank balance, and whether it should or should not appear on the reconciliation. (Select the answers in the appropriate cells. Leave no cells blank. Be certain to select "NA" in fields which are not applicable.)

Exercise 8-11 Bank reconciliation and adjusting entries LO P3 A table for a monthly bank reconciliation dated September 30 is given below. For each item 1 through 12, indicate whether the item should be added to or subtracted from the book or bank balance, and whether it should or should not appear on the reconciliation. (Select the answers in the appropriate cells. Leave no cells blank. Be certain to select "NA" in fields which are not applicable.)

Bank Balance Book Balance Show or Not Show on Reconciliation Check written against the company's account and cleared by the bank, erroneously not recorded by the company's recordkeeper The company received a bank fee for an NSF check from a customer. The company did not know of the fee until they received the bank statement Interest was eamed by the company on the cash balance it had with the bank. The company has not yet recorded this interest A customer sent an NSF check in payment of their account. The company did not know it was NSF until they received the bank statement 5. The company made a month-end accrual for expired insurance coverage. 6. Bank fees for check printing are not yet recorded by the company, 7. Bank service charge 8. Checks written and mailed to payees on October 2. The bank received an electronic funds transfer (EFT) and deposited the amount in the company's account on September 30. The company has not yet recorded this EFT. 10. Outstanding checks to suppliers existed at the end of September 11. The company hired a new treasurer 12 The bank collected a note receivable on September 29. The company has not yet recorded the receipt of the cash

Answer 1

The table will be populated in the following manner:

	Bank Balance	Book Balance	Shown/Not Shown on Reconciliation
1	Not applicable	Deduct	Shown
2	Not applicable	Add	Shown
3	Not applicable	Add	Shown
4	Not applicable	Deduct	Shown
5	Not applicable	Not applicable	Not applicable
6	Not applicable	Deduct	Shown
7	Not applicable	Deduct	Shown
8	Not applicable	Not applicable	Not applicable
9	Not applicable	Add	Shown
10	Deduct	Not applicable	Shown
11	Not applicable	Not applicable	Not applicable
12	Not applicable	Add	Shown

Notes

A simple rule to remember while preparing a bank reconciliation:

Add or Subtract items based on how you would have treated those in the cash account.

A bank reconciliation statement or BRS is prepared to a comparison between balances as per cash book and balance as per bank statement. Differences are then identified between cash book and bank statement balance and accordingly if any entries need to be booked the same would be booked.

BRS can be prepared either by starting with the balance in cash books or balance in bank statement. In both cases, the ending balances would match.

Please comment in case of any issue and I will be happy to rectify it.