Question

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Q1-

A. What is a bank reconciliation and why is it important for companies to do it periodically?

B. Prepare a Bank Reconciliation Statement for XYZ company that has:

• Bank statement of $9,000.

• Cash account of $7,500.

Additional information for the reconciliation:

• Deposit in transit.
• NSF Check.
• Outstanding check.
• Collections made by the bank.

Required: provide an amount of each information to bring the adjusted balances to be equal (2 Marks).

Q2-

Assume that you have a company. And the management estimates that 2.5% of sales will be uncollectible.

Provide an amount of sales and prepare the journal entry using the percent of sales method (1 Mark).

Q3-

Q3 A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory (2 Marks).

January 1:	Purchased 100 units at SAR10 per unit
February 5:	Purchased 60 units at SAR 12 per unit
March 16:	Sold 40 Units for SAR 16 per unit

Prepare general journal entries to record the March 16 sale using the

• FIFO inventory valuation method.
• LIFO inventory valuation method.

Answer 1

A. What is a bank reconciliation and why is it important for companies to do it periodically?

BANK RECONCILIATION	It is the the process by which the company verifies the authenticity of its cash balance and cash movements. Basically, the company verifies the cash it has.
	It is done so by preparing a report called the BRS or Bank Reconciliation Statement
	It is a report, comparing the bank balance with the company's accounting records.
Importance	It is normal to have a difference between the balance as per bank and as per the accounting records. The differences may be due to timing differences, human error, etc.
	Bank reconciliation helps in detecting any discrepancies due to such errors.
	It helps with the regular monitoring of cash and company transactions involving cash flow.
	This also prevents any frauds and cash manipulations

B. Prepare a Bank Reconciliation Statement for XYZ company that has:

Balance as per bank		9000
adjustments:
deposits in transit		1000
outstanding checks		-500
adjusted balance		9500

balance as per book		7500
adjustments
NSF checks		-500
collections made by the bank		2500
adjusted balance		9500

Assume that you have a company. And the management estimates that 2.5% of sales will be uncollectible.

Provide an amount of sales and prepare the journal entry using the percent of sales method

sales method estimates the uncollectible accounts from the credit sales.
bad dect expense	=	net sales *%estimation of uncollectible accounts
assume sales	10000$
Uncollectible accounts	250	10000*2.5%
journal entry
bad dect expense	250
to allowance for doubtful debts		250
(estimated uncollectible accounts recorded)

Prepare general journal entries to record the March 16 sale using the

• FIFO inventory valuation method.
• LIFO inventory valuation method.

		fifo		lifo
sale	40*16	640	40*16	640
COGS	40*10	400	40*12	480
fifo
Mar-16	cash	640
	to sales		640
	(cash sales recorded).
	COGS	400
	to inventory		400
lifo	(cost of goods sold recorded)
Mar-16	cash	640
	to sales		640
	(cash sales recorded).
	COGS	480
	to inventory		480
	(cost of goods sold recorded)

HOPE THIS WAS HELPFUL. A LOT OF EFFORT HAS BEEN PUT INTO THIS TO MAKE IT EASILY UNDERSTANDABLE. INCASE OF DOUBTS, GET BACK TO ME. DO CONSIDER GIVING THIS A THUMBS UP.