Question

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

Balance, July 1, 2018	$	58,178
Deposits		181,500
Checks processed		(194,610	)
Service charges		(75	)
NSF checks		(2,200	)
Monthly loan payment deducted directly by bank from account (includes $320 in interest)		(4,320	)
Balance, July 31, 2018	$	38,473

The company’s general ledger account had a balance of $41,823 at the end of July. Deposits outstanding totaled $8,300 and all checks written by the company were processed by the bank except for those totaling $8,620. In addition, a $4,000 July deposit from a credit customer was recorded as a $400 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $75 disbursement was incorrectly processed by the bank as a $750 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

	Balance as per bank as on July 1, 2018				$ 38,473.00
Add:	Deposits in transit				$   8,300.00
Add:	Receivable from bank				$      675.00
Less:	Checks not cleared				$ (8,620.00)
	Adjusted balance as on July 31, 2018				$ 38,828.00

	Balance as per general ledger as on July 1 , 2018					$ 41,823.00
Less:	Monthly loan payment plus interest					$ (4,320.00)
Less:	NSF checks					$ (2,200.00)
Less:	Service charges					$       (75.00)
Add:	Deposit recording error					$   3,600.00
	Adjusted balance as on July 31, 2018					$ 38,828.00

Adjusting Entry
Particulars	Debit	Credit
Loan Payable	$ 4,000.00
Cash in Bank (error in recording deposit)	$ 3,600.00
Accounts Receivable (NSF check)	$ 2,200.00
Interest Expense	$    320.00
Service Charge	$      75.00
To Cash in Bank (Bal. figure)		$ 7,995.00
To Accounts Receivable		$ 2,200.00