Question

On August 1, 2019, the accountant for Western Imports downloaded the company's July 31, 2019, bank statement from the bank's Website. The balance shown on the bank statement was $28,710. The July 31, 2019, balance in the Cash account in the general ledger was $14,537.

Jenny Irvine, the accountant for Western Imports, noted the following differences between the bank's records and the company's Cash account in the general ledger.

1. An electronic funds transfer for $13,900 from Foncier Ricard, a customer located in France, was received by the bank on July 31.
2. Check 1422 was correctly written and recorded for $1,200. The bank mistakenly paid the check for $1,270.
3. The accounting records indicate that Check 1425 was issued for $60 to make a purchase of supplies. However, examination of the check online showed that the actual amount of the check was for $90.
4. A deposit of $750 made after banking hours on July 31 did not appear on the July 31 bank statement.
5. The following checks were outstanding: Check 1429 for $1,244 and Check 1430 for $136.
6. An automatic debit of $257 on July 31 from CentralComm for telephone service appeared on the bank statement but had not been recorded in the company's accounting records.
   

Required:

1. Prepare a bank reconciliation for the firm as of July 31.
2. Record general journal entries for the items on the bank reconiliation that must be journalized.
   

Analyze:
What effect on total expenses occurred as a result of the general journal entries recorded?

Answer 1

Solution 1:

Western imports
Bank Reconciliation - July 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$28,710.00	Ending Balance as per cash books	$14,537.00
Additions:		Additions:
Outstanding Deposits	$750.00	EFT collection	$13,900.00
Bank Error	$70.00
Deductions:		Deductions:
Outstanding Checks	$1,380.00	Incorrect recording of check 1425	$30.00
		Telephone payment	$257.00
Up to date cash balance as per bank	$28,150.00	Up to date cash balance as per books	$28,150.00

Solution 2:

Journal Entries - Western Imports
Date	Particulars	Debit	Credit
31-Jul	Cash Dr	$13,900.00
	To Accounts receivables		$13,900.00
	(To record collection from customer)
31-Jul	Supplies Dr	$30.00
	To Cash		$30.00
	(To record correction entry for check)
31-Jul	Telephone expense Dr	$257.00
	To Cash		$257.00
	(To record telephone expense)

As a result of journal entries, total expense will increased.