Question

On March 31, 2019, Home Decorating Pavillon received a bank statement showing a balance of $9.790. The balance in the checkbook and Cash account on the same date was $9,964. The difference between the two balances is caused by below. a. A $2,915 deposit made on March 30 does not appear on the bank statement. b. Check 358 for $505 issued on March 29 and Check 359 for $1,690 issued on March 30 have not yet been paid by the bank C. A credit memorandum shows that the bank has collected a $1,500 note receivable and interest of $150 for the firm d. A service charge of $29 appears on the bank statement e. A debit memorandum shows an NSF check for $545. (The check was issued by Dane Jarls, a credit customer) f. The firm's records indicate that Check 341 of March 1 was issued for $800 to pay the month's rent. However, the canceled check and the listing on the bank statement show that the actual amount of the check was $750. g. The bank made an error by deducting a check for $580 issued by another business from the balance of Home Decorating Pavilion's account. Required: 1. Prepare a bank reconciliation statement for the firm as of March 31, 2019 2. Record entries for any items on the bank reconciliation statement that must be journalized.

Answer 1

Solution 1:

Home decorating pavilion
Bank Reconciliation - March 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$9,790.00	Ending Balance as per cash books	$9,964.00
Additions:		Additions:
Outstanding Deposits	$2,915.00	Note Collection (including interest)	$1,650.00
Bank Error	$580.00	Incorrect recording of check 341	$50.00
Deductions:		Deductions:
Outstanding Checks	$2,195.00	NSF Cheque	$545.00
		Service charge	$29.00
Up to date cash balance as per bank	$11,090.00	Up to date cash balance as per books	$11,090.00

Solution 2:

Journal Entries - Home decorating pavilion
Date	Particulars	Debit	Credit
31-Mar	Cash Dr	$1,650.00
	To Note receivables		$1,500.00
	To Interest Revenue		$150.00
	(Being interest and note collection by bank)
31-Mar	Cash Dr	$50.00
	To Rent expense		$50.00
	(To record correction entry for check)
31-Mar	Accounts Receivables Dr	$545.00
	To Cash		$545.00
	(Being cheque dishonored by bank)
31-Mar	Service charges Dr	$29.00
	To Cash		$29.00
	(Being service charge debited by bank)