South Hampton Pool Supplies’ May 31, 2024, bank balance was $7,350. The company’s cash balance at May 31 was $8,210. Other information follows:
1. Outstanding cheques were #321 for $653, #371 for $238, #375 for $281, and #376 for $958. Cheque #321 was also outstanding on April 30 and was included on April’s bank reconciliation.
2. Included with the statement were EFT deposits totalling $975 during May in payment of accounts receivable. These deposits have not been recorded by the company.
3. Cheque #370 was correctly written and paid by the bank for $488. The cheque had been issued to pay an account payable and the company had recorded it as $408.
4. The bank statement showed a cheque #3723 for $600, which did not appear on the company’s books. Investigation revealed that the cheque was actually issued by South Hampton Pizzeria and was charged to South Hampton Pool Supplies’ account in error.
5. The bank returned an NSF cheque from a customer for $249.
6. The bank statement showed two debit memoranda for service charges: one for $17 related to the NSF cheque (see item [5] above) and one for $44 for monthly bank charges. The company’s policy is to pass on all NSF processing fees to the customer.
7. The company’s records showed the May 15 deposit as $2,850. On the bank statement it was correctly recorded as $2,580. The deposit was for cash sales.
8. The company has a pre-authorized EFT payment for its monthly utilities for $225 scheduled for the last day of each month. As May 31 was a Saturday this year, the bank posted it on June 2. The company recorded it in May.
9. The $1,370 April 30 bank deposit was recorded on May 1 on the bank statement. The May 31 bank deposit of $2,930 was not included on the May bank statement.

Instructions
a. Prepare a bank reconciliation.
b. Prepare any necessary journal entries.
c. What amount should be reported as cash on the May 31 balance sheet?

Taking It Further

Explain how the bank reconciliation process can strengthen internal control.