Question

On 30 June 2019, Parson Limited had a cash balance in its general ledger of $13,034.30 debit. The bank statement from ASB on that date showed a credit balance of $19,495.00. A comparison of the statement with the cash ledger account and the bank reconciliation for May 2019 revealed the following facts: (i) Two cheques, totalling $1,770.10, from the May 2019 bank reconciliation had still not been presented to the bank. (ii) Cash sales of $2,945 on 20 June were deposited in the bank. The general jounal entry was incorrectly recorded as $2,954. The bank credited Parson Limited for the correct amount. (ii) From the review of the June cash journals, it was established that unpresented cheques totalled $3,567.10, and outstanding deposits were $1,190.40. (iv) On 24 June Parson Limited issued cheque no. 3485 for $540.80 to K. Smith on account. The cheque, which cleared the bank on 30 June, was incorrectly recorded in the cash ledger account as $450.80. (v) A $3,000 note receivable was collected by the bank for Parson Limited on 15 June, plus $80 interest. The bank charged a collection fee of $20. These items were not accounted for in the cash ledger account. (vi) The bank statement showed a debit entry for $647.10 for an NSF cheque written by T. Lawrence, a customer, to Parson Limited Required: (a) Prepare the necessary adjusting journal entries as at 30 June 2019 in general journal fomat. (b) Prepare the bank reconciliation for Parson Limited as at 30 June 2019.

Answer 1

Solution (a):

Journal Entries
S.No	Particulars	Debit	Credit
(i)	No Journal entry required
(ii)	Sales Dr	$9.00
	To Cash		$9.00
	(To correct cash sales deposited in bank)
(iii)	No Journal entry required
(iv)	Acounts Payable Dr	$90.00
	To Cash		$90.00
	(to correct issued check no. 3485)
(v)	Cash Dr	$3,060.00
	Bank Service charges (Collection Fee) Dr	$20.00
	To Note Receivable		$3,000.00
	To Interest Revenue		$80.00
	(To record note collected by bank along with interest and charged collection fee)
(vi)	Accounts Receivable Dr	$647.10
	To Cash		$647.10
	(To record NSF Check from customer)

Solution b:

Bank Reconciliation
June 30,2019
Bank Statement Balance		$19,495.00	Cash Balance per Company's Records		$13,034.30
Add:			Add:
Deposit in transit	$1,190.40		Note receivable collected	$3,000.00
		$1,190.40	Interest	$80.00	$3,080.00
Subtotal		$20,685.40	Subtotal		$16,114.30
Deduct:			Deduct:
Outstanding check from may 2019 reconciliation	$1,770.10		Error in recording Cash sales ($2954-$2945)	$9.00
Unrepresented checks in June	$3,567.10	$5,337.20	Error in recording issued Check no. 3485 ($540.80-450.80)	$90.00
			Collection fee	$20.00
			NSF Check	$647.10	$766.10
Adjusted Bank Balance		$15,348.20	Adjusted Cash Balance		$15,348.20