Question

On March 31, Blue Spruce Corporation showed a cash balance on their books of $12,600. The bank statement from the company’s bank showed a month end balance of $16,791. On reviewing the bank statement, the following items were discovered:

1.		A deposit made on March 29 for $3,850 did not appear on the bank statement.
2.		Cheques written in the month of March but that did not appear on the bank statement were as follows:

Cheque # 6341		$4,410
Cheque # 6342		255
Cheque # 6346		32
Cheque # 6347		1,005
Cheque # 6348		805

3.		The bank credited Blue Spruce’s account for $410 on March 19. This deposit did not belong to Blue Spruce, but belonged to another company and was posted in error.
4.		The bank statement showed receipt of a wire transfer of $1,500 in payment of a note receivable, as well as $135 interest.
5.		According to the bank statement, $31 was deducted from Blue Spruce’s account for service charges.
6.		The bank cleared cheque # 6281 for $910; however, the cheque was recorded in Blue Spruce’s records at $730. Research showed the bank was correct, and the cheque was recorded incorrectly in Blue Spruce’s books. The cheque was written in payment of rent.
7.		A cheque for $300 from one of Blue Spruce’s customers was rejected by the bank due to insufficient funds (NSF).

Prepare a bank reconciliation to the correct cash balance at March 31.

Blue Spruce Corporation Bank Reconciliation

Answer 1

SOLUTION

1. Bank reconciliation statement-

Particulars	Amount ($)	Amount ($)
Balance as per bank statement		16,791
Add: Deposits in transit		3,850
		20,641
Less: Outstanding checks-
Check no. 6341	4,410
Check no. 6342	255
Check no. 6346	32
Check no. 6347	1,005
Check no. 6348	805	(6,507)
Adjusted balance as per bank		14,134
Balance as per books		12,600
Add: Bank credited wrongly		410
Add: Notes receivable with interest (1,500+135)		1,635
		14,645
Less: Bank service charges	31
NSF checks	300
Error in recording (910-730)	180	(511)
Adjusted balance as per books		14,134

2. Journal entries-

S.NO.	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Bank charges	31
	Cash		31
	(To record bank charges)
2.	Miscellaneous expense	180
	Cash		180
	(To record error in recording cheque 6281)
3.	Cash	1,635
	Notes receivable		1,500
	Interest revenue		135
	(To record collection of note receivable)
4.	Accounts receivable	300
	Cash		300
	(To record NSF cheque)