Question

Hi,

Can you help me doing the bank reconciliation from bank balance statement and book balance statement?

Please explain why 11,352 is not included in the bank reconciliation? I checked the answer key but they didn't include that number.

Thanks

AP6-2 (Preparation of bank reconciliation) Infinity Emporium Company received the monthly statement for its bank account, showing a balance of $66,744 on August 31. The balance in the Cash account in the company's accounting system at that date was $71,952. The company's accountant reviewed the statement and the company's accounting records and noted the following. 1. After comparing the cheques written by the company and those deducted from the bank account in August, the accountant determined that all six cheques (totalling $6,180) that had been outstanding at the end of July were processed by the bank in August. However, five cheques written in August, totalling $4,560, were outstanding on August 31. 2. A review of the deposits showed that a deposit made by the company on July 31 for $11,532 was recorded by the bank on August 1, and an August 31 deposit of $12,240 was recorded in the company's accounting system but had not yet been recorded by the bank. 3. The August bank statement also showed: a service fee of $24, a customer's cheque in the amount of $204 that had been returned NSF

Answer 1

Solution a:

Infinity Emporium Company
Bank Reconciliation - August 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$66,744.00	Ending Balance as per cash books	$71,952.00
Additions:		Additions:
Outstanding Deposits	$12,240.00	Note collection (Including interest)	$3,600.00
Deductions:		Deductions:
Outstanding Checks	$4,560.00	NSF Cheque	$204.00
		Service Charge	$24.00
		Loan payment	$900.00
Up to date cash balance as per bank	$74,424.00	Up to date cash balance as per books	$74,424.00

Solution 2:

Cash actually available with infinity on August 31 = $74,424

Solution 3:

Adjusted cash balance could be higher than both shown on the bank statement and balance shown in company cash account because transactions that increases cash balance were not recorded by bank as well as by company which is higher in value from transaction that decreases cash.

Solution 4:

Journal Entries - Infinity emporium Company
Date	Particulars	Debit	Credit
31-Aug	Cash Dr	$3,600.00
	To Note receivables		$3,500.00
	To Interest revenue		$100.00
	(To record note collection by bank)
31-Aug	Accounts receivables Dr	$204.00
	To Cash		$204.00
	(To record NSF check from customer)
31-Aug	Miscellenaeous expense Dr	$24.00
	To Cash		$24.00
	(Being service charge debited by bank)
31-Aug	Notes payable Dr	$770.00
	Interest expense Dr	$130.00
	To Cash		$900.00
	(To record loan repayment)