Question

The bank statement shows a cash balance of $5,000 on December 31. The has outstanding checks totaling $2,000 on that date and deposits in transit of $500 on that date. The bank paid the company interest of $50 for the month of December and charged a bank fee of $10. Calculate the adjusted bank balance for the company given this information company $3,540 $3,500 $2,500 $2,540 ate) a

Answer 1

Adjusted Bank Balances Statement

Particulars Amount($) Amount($)

Bank Balances as per Bank Statement 5000

Add: Deposit in transit 500

Less: Cheque Outstanding For Payment    (2000) 1500

Adjusted Bank Balances 3500  

Note: As in the above question it has been asked to find the adjusted bank balances and not the bank balances as per Cash Book If the Bank Balance As Cashbook then the answer will be different

1) So as given in the answer cheque outstanding has to be deducted from the bank because it has been already deducted from cash book and cheque outstanding is the sort of payment ultimately it is going to pay from the bank.

2) Deposit in transit has to add in the bank balance of bank statement because its a sort receipt for the organization and it will lead to an increase in the balance of bank.

3) In the case of Interest received and Bank Charges, there will be no effect in the Adjusted Statement because it is the transaction of the month of December and the bank balance given in the question for the end of December so this transaction has already be taken in the adjustment. It has been implied that interest and bank charges are already been taken in the bank balances.

However, if the question asked to find the Bank Balances as per Cash Book then the effect of Interest Received and Bank Charges will come in the Bank Reconciliation Statement and we have to prepare Bank Reconciliation Statement instead of Adjusted Bank Statement.

  Bank Reconciliation for the month of December

Particulars Amount($) Amount($)

Cash Balances as per Bank Statement 5000

Add: Deposit in Transit ( Because it has already been added in 500  

in the cash book)

Add: Bank Charges ( Because it has been debited in the bank 10

but till now cash balances of cash book has not been

deducted)

Less: Cheques Outstanding (Because it has already been (2000)

deducted from the cash book but there is no effect of it in the

bank statement so we have to adjust it.)

Less: Interest Received (Because it already been credited in (50)

bank statement and by interest amount cash book bank

balances is less ) (1540 )

Bank Balance as per Cash Book    3460