Question

Bank Reconciliation

Identify each of the following reconciling items as:

a. an addition to the cash balance according to the bank statement

b. a deduction from the cash balance according to the bank statement

c. an addition to the cash balance according to the company's records

d. a deduction from the cash balance according to the company's records

(None of the transactions reported by bank debit and credit memos have been recorded by the company.)

Item

1. Bank service charges, $ 30.

2. Check of a customer returned by bank to company because of insufficient funds, $ 400 :

3. Check for $ 320 incorrectly recorded by the company as $ 230.

4. Check for $ 1,100 incorrectly charged by bank as $ 110.

5. Deposit in transit, $ 3,300.

6. Outstanding checks, $ 7,950.

7. Note collected by bank, $ 10,500.

Answer 1

Ans: In case we take Balance as per Bank statement, then we should do addition or deletion of those transaction which are not shown in bank statement. Similarly if we take balance as per cash account in general ledger, then we should add or deduct those transactions which are recorded in cash books but not showing in bank statement. Let's examine given transactions:

1. Bank Service Charges, $30:

In case of cash balance according to bank statement: Addition of this with balance as per bank statement by $30

In case of cash balance according to company records: Deduction of this with balance as per bank statement by $30.

2. Check of a customer returned by bank due to insufficient of fund, $400:

In case of cash balance according to bank statement: Deduction of this with balance as per bank statement by $400

In case of cash balance according to company records: Addition of this with balance as per bank statement by $400

3. Check for $320 incorrectly recorded by the company as $230:

In case of cash balance according to bank statement: Addition of this with balance as per bank statement by $90 ($320-$230)

In case of cash balance according to company records: Deduction of this with balance as per bank statement by $90 ($320-$230)

4. Check for $1100 incorrectly charged by bank as $110:

In case of cash balance according to bank statement: Deduction of this with balance as per bank statement by $990 ($1100-$110)

In case of cash balance according to company records: Addition of this with balance as per bank statement by $990 ($1100-$110)

5. Deposit in Transit, $3300:

In case of cash balance according to bank statement: Addition of this with balance as per bank statement by $3300.

In case of cash balance according to company records: Deduction of this with balance as per bank statement by $3300.

6. Outstanding Check, $7950:

In case of cash balance according to bank statement: Deduction of this with balance as per bank statement by $7950.

In case of cash balance according to company records: Addition of this with balance as per bank statement by $7950.

7. Note Collected by Bank, $10,500:

In case of cash balance according to bank statement: Deduction of this with balance as per bank statement by $10500.

In case of cash balance according to company records: Addition of this with balance as per bank statement by $10500.