Question

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December 30th - January 2nd Class Activity (Chapter 7) Bank Reconcili Name: Student ID: 1. What are the reconciling items in a bank reconciliation (b) 2. Reconciling Procedure: Cash Balance per Bank Cash Balance per Books Corrected Balance Corrected Balance 3. If a check correctly written and paid by the bank for $519 is incorrectly recorded on the company's books for $591, the appropriate treatment on the bank reconciliation would be to a. add $72 to the bank's balance. c. deduct $72 from the bank's balance. b. add $72 to the book's balance. d. deduct $519 from the book's balance. 4. Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: a. Accounts Receivable c. Miscellaneous Expense Cash Accounts Receivable b. Cash d. No adjusting entry is necessary Accounts Receivable 5. Heath Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, 7/31 £15,000 Deposits in transit 300 Notes receivable and interest collected by bank 1,700 Bank charge for check printing 40 Outstanding checks 4,000 NSF check 340 The adjusted cash balance per books on July 31 is a. £16,320. b. £16,020. c. £12,620 d. £12,920.

Answer 1

1) Following are the reconciling items in a bank reconciliation

Book side:

Bank service charges

NSF check

Bank Interest income / Expense

Recording errors

Unrecorded deposits

Bank side:

Deposits in transit

Outstanding checks

Recording errors

2) Reconciling Procedure

Cash balance as per bank	Cash balance as per books
+ Deposits in transit	+ Unrecorded deposits
- Outstanding checks	-NSF checks
+/- Recording errors	-Bank service charges
=Corrected balance	+/- Recording errors
	=Corrected balance

3) Check for $ 519 is booked as for $ 591 in books then check is recorded by more amount of $ 72 in books so while reconciling $ 72 is to be added to the balance as per books because payment is recorded by more amount in books. If payment is recorded by more amount balance as per books gets reduced so to correct it differential amount is added back to book balance

Correct option is b) add $ 72 to the book's balance. Rest all other options are incorrect as they do not match with the calculation

4) If check is returned then original entry which was made while depositing the check, is to be reversed now. Accounts Receivable Dr Cash A/c Cr.

Correct option is a) Accounts Receivable

Cash

Rest all other options are incorrect because correct entry is provided at option a) only

5)

Adjusted cash balance as per books on July 31 to be calculated as under:

Cash balance as per books, 7/31	£15,000
Add: Notes receivable and interest collected by bank	1,700
Less: bank charges for check printing	(40)
Less: NSF check	(340)
Adjusted cash balance as per books on July 31	£16,320

Correct option is a) . Rest all other options are incorrect as they do not match with the calculation