Question

ACC201: Financial Accounting

The Baby Pte Ltd deposits all cash receipts on the day when they are received and it makes all cash payments by cheques. At the close of business on 31 December 20X1, its Cash account in its books shows a debit balance of $36,606. The following information was discovered during the bank reconciliation.

• Cheque payment of $90,000 made for the baby powder purchases in December had not been cleared by the bank.

• Included in the bank statement was a bank service charge in the amount of $70.

• Cheque No. 737777 was correctly drawn for $1,610 in payment of a utility bill on December 16. The store mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $1,700.

• A cheque received from a customer of $2,456 was rejected by the bank after it was deposited on 20 December. This was subsequently informed to be a bounced cheque.

Required:

1. Prepare a bank reconciliation statement and determine the balance reflected on the bank statement at the end of December 20X1. (6 marks)
2. Prepare the journal entries for the items revealed from the bank reconciliation. Journal narratives are not required. (6 marks)

Answer 1

Solution - Baby Pte Ltd. ) Bank Reconciliation - Particulars Amount ($) Balance as per cash Alc Addi Cheque not cleared o no 90.000 lei Excess amount recoreled for - utility bill (1700-1610) ao Amount (8) 36,606 | 90,090 mess : not recorded a Bonk Cheque charges bounced (70 f (2456) (2526) Balance as per bank Statement 1,24,170 Scanned with CamScanner

Credit te a Journal Entries Date Accounts Debit ($) 112/31x1 Bank 90,000. . - Accounts Payable in Being cheque not cleared on written back) 12/311 X1 Bank with expenses recorded 90 _ 90 Bank Utility Expenses (Being expense wrong recorded so extra, now rectified) .. 70 4 Болт си 112/31/01 Bank Charges to 1 70 - Bank (Being book charges recerded) 12/31/X1 - Accounts Receivable in 2426 De Bank b Scanned ubeing cheque bounced, written off 2426 Sca 1° CamScanner U