Question

Blue Company is unable to reconcile the bank balance at January 31. Blue’s reconciliation is as follows.

Cash balance per bank    $5,300

Add: NSF check    1,490

Less: Bank service charge    25

Adjusted balance per bank    $6,815

Cash balance per books    $5,905

Less: Deposits in transit    950

Add: Outstanding checks    1,860

Adjusted balance per books    $6,815

Prepare a correct bank reconciliation. (List items that increase cash balance first.)

Answer 1

In Bank reconciliation statement, errors in the books are adjusted in the books and errors in bank statement are corrected in the bank statement

Hence, bank reconciliation statement is as follows:

Cash balance per bank	5,300
Add: Deposits in transit	950
Less: Outstanding checks	1,860
Adjusted Balance as per Bank	$4,390
Cash Balance per books	5,905
Less: NSF check	1,490
Less: Bank service charge	25
Adjusted balance per books	$4,390

NSF check means that there were insufficient funds in the account of the party we received a check from and hence reduced from balance in the books as it must have been credited when the check was received.