Question

6) On July 31 Dubeau Ltd had a cash balance per books of $7,393. The statement from the bank showed a balance of $9,134. A comparison of the bank statement with the company's accounting records revealed the following: 1. The bank statement included a debit memo of $50 for bank service charges 2. The bank statements included two credit memos. The first was an electronic deposit of $2,031 received from a customer on account. The second was for $24 of interest earned during the month 3. The July 31 cash receipts of $1,393 were not included in the bank deposits for July. These receipts were deposited by the company in the bank's night deposit after the bank closed on July 31. 4. Company cheque for $585 to settle an account payable had been cashed but incorrectly recorded in the company's general journal at $855. 5. Cheques outstanding on June 30 were $922. Of these, S689 cleared the bank the bank in July. There were $1,446 of cheques written in July that were still outstanding 6. On July 31, the bank showed an NSF charge of $820 for a cheque received by the company from a customer on account. This amount includes a $20 service charge by the bank. a) prepare a bank reconciliation at July 31 (8 marks) b) Prepare the adjusting entries required at July 31 (4 marks)

Answer 1

a)

Bank Reconciliation

Bank		Books
Balance, July 31	9,134	Balance, July 31	7,393
Add:		Add:
Deposit in transit	1,393	Interest revenue earned	24
		EFT collection	2,031
		Correction of book error	270
	10,527		9,718
Less:		Less:
Outstanding checks	- 1,679	NSF check	- 820
		Bank service charges	- 50
Adjusted bank balance	$8,848	Adjusted book balance	$8,848

b)

Journal

July 31	Bank service charge	50
	Cash		50
July 31	Cash	2,031
	Accounts receivable		2,031
July 31	Cash	24
	Interest revenue		24
July 31	Cash	270
	Accounts payable		270
July 31	Accounts receivable	820
	Cash		820

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