Question

Required information [The following information applies to the questions displayed below.) On October 31, 2021, the bank statement for the checking account of Blockwood Video shows a balance of $12,856, while the company's records show a balance of $12,301. Information that might be useful in preparing a bank reconciliation is as follows: 2 a. Outstanding checks are $1,200. b. The October 31 cash receipts of $755 are not deposited in the bank until November 2. c. One check written in payment of utilities for $131 is correctly recorded by the bank but is recorded by Blockwood as a disbursement of $311. d. In accordance with prior authorization, the bank withdraws $544 directly from the checking account as payment on a note payable. The interest portion of that payment is $44 and the principal portion is $500. Blockwood has not recorded the direct withdrawal. e. Bank service fees of $18 are listed on the bank statement. f. A deposit of $561 is recorded by the bank on October 13, but it did not belong to Blockwood. The deposit should have been made to the checking account of Hollybuster Video, a separate company. g. The bank statement includes a charge of $69 for an NSF check. The check is returned with the bank statement, and the company will seek payment from the customer. Required: 1. Prepare a bank reconciliation for the Blockwood checking account on October 31, 2021. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

A bank reconciliation statement involves making adjustment to the entries which are creating differences between bank book as per company's ledger against the bank statement.

Items missing in the bank books as compared to bank statement would need to be adjusted for. Similarly, items which are present in the bank book but not in bank statement due to timing differences, errors etc needs to be adjusted accordingly.

Below is the bank reconciliation for the above question.

Blockwood Video:
Bank statement reconciliation
Balance as per company's bank book	$      12,301
a) Outstanding checks
(These are checks issued which have not been cleared in bank yet, so should be added to bank book)	$        1,200
b) Cash receipts
(These have not been deposited in bank yet, so should be deducted from bank book)	$         (755)
c) Utilities check incorrectly recorded	$            180
(Excess expense of 180 (311-131) incorrectly recorded should be added back to bank book
d) Prior authorization of note payable not recorded in books	$         (544)
(Note payable of 544 not recorded, would deduct the bank book balance, Interest of 44 and principal portion of 500 would be relevant for adjustment entries but wont impact the bank reconciliation statement)
e) Bank Service fee not recorded	$            (18)
(Service fee is a charge and would deduct the bank book balance)
f) Deposit incorrectly included in Blockwood	$            561
(Incorrect deposit not accounted in bank book, should be added back to bank book balance)
g) NSF charge	$            (69)
(NSF is a charge and would deduct the bank book balance, collection of the same from customer would be relevant for adjustment entries but wont impact the bank reconciliation statement)
Sum of all above (bank book balances including adjustments a to g) (A)	$      12,856
Balance as per Bank statement (B) - given in the question	$      12,856
Difference (A-B)	$               -