Question

Option #1: Conducting a Bank Reconciliation

Note: Part 1 is the bank reconciliation itself and Part 2 is for the adjusting entries.

Instructions: Using the information below, complete the bank reconciliation for both the "book" and

the "bank" sides and create all necessary adjusting journal entries.

Details:

• Cash balance per company's records as of July 31st, 2011 was $66,955.
• Bank statement balance as of July 31st, 2011 was $15,875.
• A deposit in the amount of $52,000 was deposited into the night depository of the bank on July 31st but did not get recorded in the July 31st bank statement balance.
• Check #354 in the amount of $575 and check # 365 in the amount of $1,500 were outstanding as of this bank statement.
• An NSF check in the amount of $500 (written by J. Smith, a customer) was returned by the bank to the company in the July 31st bank statement.
• A bank service charge in the amount of $50 was included in the July 31st bank statement.
• Interest in the amount of $125 was deposited into our account by the bank.
• The bank collected $1,000 from a customer (H. Doe) on our behalf as part of the lockbox service that we established with the bank.
• The bank erroneously posted another company's check (i.e. withdrawal) in the amount of $5,000 to our account.
• The bank erroneously posted another company's deposit into our account in the amount of $3,000.
• After reconciling the bank statement, we noticed that a check that was written to pay for the current month's utilities in the amount of $250 was improperly recorded in our books as $520. (It was properly recorded in the bank statement as $250.)

Answer 1

Requirement-2: NOTE EventGeneral Journal Debit Adjusting entries in company's books are required to be passed only for those transactions which would affect company records. Credit a) Cash $1,000 $1,000 Accounts receivable (H. Doe) (To record receivable collected by by bank b) Cash $270 In other words, transactions which would affect bank records shall not be recorded in books. So outstanding checks and deposits in transit are not recorded in adjusting entries. $270 Utilities Expense (To rectify error in recording expense payment) c) Cash $125 $125 Interest revenue (To record interest revenue earned) Acounts receivable (J. Smith) d) $500 $500 Cash (To record NSF check) e Bank Service Charges (or Miscellaneous Expense) $50 Cash To record bank charges debited by bank $50