Bank Statement Reconciliation Taxation for Entrepreneurs ACCT 3376 Nelson Your name is Sal Proprietor, and you own a sole proprietorship called Up All Night, Inc. You have one employee named Ke Kelly has the authority to sign checks, but it is your policy that any check written to Kelly (like payroll) must be signed b. Today you are going to reconcile your bank Kelly Parker records and the bank 's records and to deal with any discrepancies Understanding the Documents Attached you will find three documents I. Your cash ledger for January 2019 was created by you and Kelly. It should contain your accounting of the cash account 2. Your bank reconciliation from December 2018 was created by you. In the bank column, you will find three items that didn't 3. Your bank statement for January 2019 was created by your bank. It has a summary at the top indicating how your balance including items that increase and decrease cash in January. All these items may clear the bank in January, but some may not clear the bank in December, but may clear in January changed since the last statement. Below that, there are all the individual changes (items that did clear the bank) in January. Pages 2 and 3 of your bank statement are copies of the checks you wrote that cleared the bank. You don't need to look at these unless something seems wrong. Put the bank statement on the left and your records on the right. On the bank statement, skip the summary section for now and move to the rest of the statement Find the first bank statement item (hint: it is a deposit of $3,275) Now look at your records to find that item. Remember, you have two records on which the item may appear. Below are all the possible outcomes and what actions you should take (dates don't matter) What to do Mark these items with a check mark on both documents.(These are the items you can ignore The item was On Bank Statement&On My Records For the same amount On the Bank Statement but not on my records On the Bank Statement & On My Records Mark these items with an X on both documents. For a different amount Don't mark these items on the bank statement Repeat these steps until you have been through every item on the bank statement (hint: there are 34 items on the bank statement). Step 2: Starting the Bank Reconciliation At the top of the blank bank reconciliation, enter the book balance and bank balance in the appropriate places. Step 3: Items on the Bank Statement with NO MARK Look at the items on the bank statement that don't have a mark beside them. These are items that the bank added to or subtracted from your account that you didn't have on your records. Examine each item carefully. List each item in the appropriate quadrant on the bank reconciliation. If you believe the bank is right, then you have to make a Book Adjustment, which will either increase or decrease your book balance. If you believe the bank is wrong, then you have a Bank Adjustment, which will either increase or decrease the bank balance. Step 4: Items on Your Records with NO MARK Look at the items on your records that don't have a mark beside them. These are items that you added to or subtracted from your account, but the bank doesn't know about them yet. Each of these is a Bank Adjustment, which will either increase or decrease the bank balance. Step 5: Items Marked with an X Now examine the items marked with an X These are items that were recorded differently on your records and the bank's records. Figure out who is right. If you believe the bank is right, then you have to make a Book Adjustment, which will either increase of decrease your book balance. If you believe the bank is wrong, then you have a Bank Adjustment, which will either increase or decrease the bank balance. Calculate an adjusted balance in both columns. Adjusted Balance Beginning Balance+ Increasing Adjustments-Decreasing Adjustmentse definitely If the two adjusted balances equal, you've probably reconciled correctly. If they o reconciled incorrectly t equal, you The final steps to wrap evervthing ur 1. Notify that just haven't cleared the bank yet. the bank of any misstatements they made. This is rare! It doesn't inclode items Describe below the error(s) you will call the bank about. Write it like you would say it to the bank Adjust your books. This is common. Every item listed as an adjustment on the book side of the reconciliation must be entered the cash ledger. How many items do you have to make an adjustment for? into 2. Examine the misstatement(s) made by you and Kelly. These are items that were recorded improperly by on your records. Describe each error and whether you think they occurred by mistake or on purpose. 3. Banks sometimes make mistakes . In a sole proprietorship, you should be the only one to sign your checks (not always possible). The person who signs checks should not be the one to record them in the cash ledger. .If you let someone else sign your checks, you should reconcile the bank statement Up All Night, Inc Cash Ledger Description Increase Decrease Balance Balance Forward Date 4,225.00 12,225.00 225.00 12,000.00 300.00 11,700.00 800.0010,900.00 1/2/19 Deposit 8,000.00 1/2/19 Check 534 1/2/19 Check 535 1/3/19 Check 536 11,400.00 100.00 11,300.00 125.00 11,175.00 1/8/19 Deposit 500.00 1/9/19 Check 537 1/9/19 Check 538 1/9/19 Check 539 1/11/19 Check 540 1/11/19 Check 541 1/11/19 Check 542 325.00 10,567.00 522.00| 10.04 5.00 800.009,245.00 543 300,00 8,945.00 1/15/19 Check 425.008,520.00 627.007,893.00 9,098.00 993.00 8,105.00 827.007,278.00 43.007,235.00 2.50 7,232.50 18.00 7.214.50 120.00 7,094.50 143.00 6,951.50 333.00 6,618.50 1/15/19 Check544 1/15/19 Check 545 1/15/19 Deposit 1/16/19 Check 546 1/16/19 Check 547 1/18/19 Check 548 1/18/19 Check 549 1/18/19 Check 550 1/18/19 Check 551 1/22/19 Check 552 1/22/19 Check553 1/22/19 Deposit 725.00 1/23/19 Check 554 1/24/19 Check 555 1/24/19 Check 556 1/24/19 Check 557 1,576.00 5,767.50 28.005,456.50 534.00 4,922.50 1/30/19 Deposit 1,255.00 1,009.00 7,186.50 399.00 6,787.50 1/31/19 Check 558 BankOfUCA 1/31/2019 Up All Night, Inc. 333 Donaghey University of Central Arkansas Conway AR 72035 SUMMARY Beginning Deposits Withdrawals &Service and Ending Balance Balance& Other Credits Other Debits Other Fees $2,225.00 $15,990.00 $11,296.00 $8.00 $6,911.00 12/31/2018 1/31/2019 Deposits and Other Credits 1/2/2019 3,275.00 1/2/2019 8,000.00 500.00 1/15/2019 1,205.00 1/22/2019 725.00 1/30/2019 1,255.00 Collected Note 1/30/19 1,000.00 30.00 1/8/2019 Interest on Note 1/30/19 Withdrawals and Other Debits 525 533 534 535 536 537 538 540 541 542 543 544 875.00 400.00 225.00 300.00 800.00 100.00 125.00 325.00 522.00 800.00 300.00 452.00 993.00 827.00 43.00 250.00 18.00 143.00 333.00 554 1,576.00 83.00 556 228.00 534.00 8723 1,024.00 546 547 548 549 550 552 553 557 Indicates break in sequence NSF Check 20.00 Service and Other Fees Monthly Service Fee 8.00 Up All Night Inc Up All Night, Inc. Date December 25,201 Mchael Hargis Eight hundred seventy five and no What bugs you One hundred and wenty dellars and no Kely Parker 525 123456789 987654321 123456789 987654321 12500 87500 Up All Night, Inc. Up All Night, Inc. Date Janary 11 2019 A NJ Stat Three hundred twenty five and no Conway Corp Four hundred and 123456789 987654321 533 40000 123456789 987654321 540 32500 Up All Night, Inc. Up All Night, inc. Conway AR 7203 Office Depot 225 00 Two hundred twenty five Memo ofice Sueplies 123456789 987654321 22500 123456789 987654321 541 52200 up All Night, Inc. Up All NigM, Inc. Spikes Suppy Warehouse300 00 Alkinson Mechanical Supplys Eight hundred and no- 123456789 987654321 535 30000 123456789 987654321 80000 Up All Night, Inc Up All Night, Inc. Dale January 15 2019 Paul Jensen KATV Three hundred and no Kely Parker 543 123456789 987654321 536 80000 123456789 987654321 30000 Up Al Night, Inc. 537 Up All Night, Inc. Date Jnay9 2013 McAlister's Deli World Wide Webster One hundred and Four hundred fifty-two Sreet Conway AR 72035 Memo Lunch for meeirg Kelly Parker Memo Web design 123456789 98765432154445200 Kely Parker 123456789 987654321 537 10000 UpANighe, ic 987654321 Page 2 Up All Night, Inc. Up All Night, Inc. Date January 22, 2019 Date Jenuary 16. 2019 Sal Proprietor Nine hundred ninety three and no uS Treasury 993.00 hree hundred thirty-three and no Sruce Street Conway AR 72035 Kelly Parker Kely Parke 546 Memo Fed Payrell Tax 123456789 987654321 33300 553 123456789 987654321 99300 554 Up All Night,Inc. Up All Night, Ine. Conway AR Paoss Date Janusn 23, 2019 Date Janvary 16. 2019 Manufacturing Superior Nissan Eight hundred twenty seven and no One thousand five hundred seventy-six and no 123 Bruce Street Conway AR 1203 Memo Vehicle Repa Breet Conway AR 72035 Kely Parker 547 Kelly Parker 554 123456789 987654321 82700 123456789 987654321 157600 Up All Night, inc. Up All Night, Inc. Date Oate Jaruary 24. 2019 AAA Alarm Company Forty three and Eighty-three and no 123 Bruce Kelly Parker Memo Alarm Monitoring 123456789 987654321 123456789 987654321 548 4300 8300 Up All Night, Inc. Up All Night, Inc Dae January 1B 2019 Conway AR 72 Date Jaruary 24, 2019 Kelly Parker AT&T 228 Two hundred fifty and no Two hundred twenty-eight and no Memo office Supplies 123456789 987654321 Kelly Parker 549 Memo Telephone B4 123456789 987654321 25000 22800 Up All Night Inc. 550 Up All Night, Inc. Date Jaruary 18,2 Dunkin Donuts 18.00 Eighteen and no 123 Bruce Sreet Conway AR 72035 123456789 987654321 550 1800 123456789 987654321 53400 Up All Night, Inc. Comeay AR 72035 Up Till Dawn Caneay AR 72035 8723 Date January 22 2019 Arkansas Dept of Finance & Admin s143 One hundred forty three and no 123 Buce Street Conway AR 7203 Kelly Parker Mema Stabe Payroll Tax 123456789 987654321 14300 123456789 456852179 8723 102400 Up All Night, Inc Bank Reconciliation Up All Night, Inc Bank Reconciliation January 31, 2019 Bank Books Bank Books Books Bank Beginning Balance Beginning Balance 3,203.00 2,225.00 Increasing Adjustments Increasing Adjustments Increasing Adjustments Collect Note 1,000.00 Outstanding Deposit and Interest Increasing Adjustments 2/28 3,275.00 Decreasing Adjustments Decreasing Adjustments Decreasing Adjustments Service Charge 8.00 Outstanding Checks 525 875.00 533 400.00 Adjusted Balance Adjusted Balance Adjusted Balance Adjusted Balance 4,225.00 Bank Statement Reconciliation Taxation for Entrepreneurs ACCT 3376 Nelson Your name is Sal Proprietor, and you own a sole proprietorship called Up All Night, Inc. You have one employee named Ke Kelly has the authority to sign checks, but it is your policy that any check written to Kelly (like payroll) must be signed b. Today you are going to reconcile your bank Kelly Parker records and the bank 's records and to deal with any discrepancies Understanding the Documents Attached you will find three documents I. Your cash ledger for January 2019 was created by you and Kelly. It should contain your accounting of the cash account 2. Your bank reconciliation from December 2018 was created by you. In the bank column, you will find three items that didn't 3. Your bank statement for January 2019 was created by your bank. It has a summary at the top indicating how your balance including items that increase and decrease cash in January. All these items may clear the bank in January, but some may not clear the bank in December, but may clear in January changed since the last statement. Below that, there are all the individual changes (items that did clear the bank) in January. Pages 2 and 3 of your bank statement are copies of the checks you wrote that cleared the bank. You don't need to look at these unless something seems wrong. Put the bank statement on the left and your records on the right. On the bank statement, skip the summary section for now and move to the rest of the statement Find the first bank statement item (hint: it is a deposit of $3,275) Now look at your records to find that item. Remember, you have two records on which the item may appear. Below are all the possible outcomes and what actions you should take (dates don't matter) What to do Mark these items with a check mark on both documents.(These are the items you can ignore The item was On Bank Statement&On My Records For the same amount On the Bank Statement but not on my records On the Bank Statement & On My Records Mark these items with an X on both documents. For a different amount Don't mark these items on the bank statement Repeat these steps until you have been through every item on the bank statement (hint: there are 34 items on the bank statement). Step 2: Starting the Bank Reconciliation At the top of the blank bank reconciliation, enter the book balance and bank balance in the appropriate places. Step 3: Items on the Bank Statement with NO MARK Look at the items on the bank statement that don't have a mark beside them. These are items that the bank added to or subtracted from your account that you didn't have on your records. Examine each item carefully. List each item in the appropriate quadrant on the bank reconciliation. If you believe the bank is right, then you have to make a Book Adjustment, which will either increase or decrease your book balance. If you believe the bank is wrong, then you have a Bank Adjustment, which will either increase or decrease the bank balance. Step 4: Items on Your Records with NO MARK Look at the items on your records that don't have a mark beside them. These are items that you added to or subtracted from your account, but the bank doesn't know about them yet. Each of these is a Bank Adjustment, which will either increase or decrease the bank balance. Step 5: Items Marked with an X Now examine the items marked with an X These are items that were recorded differently on your records and the bank's records. Figure out who is right. If you believe the bank is right, then you have to make a Book Adjustment, which will either increase of decrease your book balance. If you believe the bank is wrong, then you have a Bank Adjustment, which will either increase or decrease the bank balance. Calculate an adjusted balance in both columns. Adjusted Balance Beginning Balance+ Increasing Adjustments-Decreasing Adjustmentse definitely If the two adjusted balances equal, you've probably reconciled correctly. If they o reconciled incorrectly t equal, you The final steps to wrap evervthing ur 1. Notify that just haven't cleared the bank yet. the bank of any misstatements they made. This is rare! It doesn't inclode items Describe below the error(s) you will call the bank about. Write it like you would say it to the bank Adjust your books. This is common. Every item listed as an adjustment on the book side of the reconciliation must be entered the cash ledger. How many items do you have to make an adjustment for? into 2. Examine the misstatement(s) made by you and Kelly. These are items that were recorded improperly by on your records. Describe each error and whether you think they occurred by mistake or on purpose. 3. Banks sometimes make mistakes . In a sole proprietorship, you should be the only one to sign your checks (not always possible). The person who signs checks should not be the one to record them in the cash ledger. .If you let someone else sign your checks, you should reconcile the bank statement Up All Night, Inc Cash Ledger Description Increase Decrease Balance Balance Forward Date 4,225.00 12,225.00 225.00 12,000.00 300.00 11,700.00 800.0010,900.00 1/2/19 Deposit 8,000.00 1/2/19 Check 534 1/2/19 Check 535 1/3/19 Check 536 11,400.00 100.00 11,300.00 125.00 11,175.00 1/8/19 Deposit 500.00 1/9/19 Check 537 1/9/19 Check 538 1/9/19 Check 539 1/11/19 Check 540 1/11/19 Check 541 1/11/19 Check 542 325.00 10,567.00 522.00| 10.04 5.00 800.009,245.00 543 300,00 8,945.00 1/15/19 Check 425.008,520.00 627.007,893.00 9,098.00 993.00 8,105.00 827.007,278.00 43.007,235.00 2.50 7,232.50 18.00 7.214.50 120.00 7,094.50 143.00 6,951.50 333.00 6,618.50 1/15/19 Check544 1/15/19 Check 545 1/15/19 Deposit 1/16/19 Check 546 1/16/19 Check 547 1/18/19 Check 548 1/18/19 Check 549 1/18/19 Check 550 1/18/19 Check 551 1/22/19 Check 552 1/22/19 Check553 1/22/19 Deposit 725.00 1/23/19 Check 554 1/24/19 Check 555 1/24/19 Check 556 1/24/19 Check 557 1,576.00 5,767.50 28.005,456.50 534.00 4,922.50 1/30/19 Deposit 1,255.00 1,009.00 7,186.50 399.00 6,787.50 1/31/19 Check 558 BankOfUCA 1/31/2019 Up All Night, Inc. 333 Donaghey University of Central Arkansas Conway AR 72035 SUMMARY Beginning Deposits Withdrawals &Service and Ending Balance Balance& Other Credits Other Debits Other Fees $2,225.00 $15,990.00 $11,296.00 $8.00 $6,911.00 12/31/2018 1/31/2019 Deposits and Other Credits 1/2/2019 3,275.00 1/2/2019 8,000.00 500.00 1/15/2019 1,205.00 1/22/2019 725.00 1/30/2019 1,255.00 Collected Note 1/30/19 1,000.00 30.00 1/8/2019 Interest on Note 1/30/19 Withdrawals and Other Debits 525 533 534 535 536 537 538 540 541 542 543 544 875.00 400.00 225.00 300.00 800.00 100.00 125.00 325.00 522.00 800.00 300.00 452.00 993.00 827.00 43.00 250.00 18.00 143.00 333.00 554 1,576.00 83.00 556 228.00 534.00 8723 1,024.00 546 547 548 549 550 552 553 557 Indicates break in sequence NSF Check 20.00 Service and Other Fees Monthly Service Fee 8.00 Up All Night Inc Up All Night, Inc. Date December 25,201 Mchael Hargis Eight hundred seventy five and no What bugs you One hundred and wenty dellars and no Kely Parker 525 123456789 987654321 123456789 987654321 12500 87500 Up All Night, Inc. Up All Night, Inc. Date Janary 11 2019 A NJ Stat Three hundred twenty five and no Conway Corp Four hundred and 123456789 987654321 533 40000 123456789 987654321 540 32500 Up All Night, Inc. Up All Night, inc. Conway AR 7203 Office Depot 225 00 Two hundred twenty five Memo ofice Sueplies 123456789 987654321 22500 123456789 987654321 541 52200 up All Night, Inc. Up All NigM, Inc. Spikes Suppy Warehouse300 00 Alkinson Mechanical Supplys Eight hundred and no- 123456789 987654321 535 30000 123456789 987654321 80000 Up All Night, Inc Up All Night, Inc. Dale January 15 2019 Paul Jensen KATV Three hundred and no Kely Parker 543 123456789 987654321 536 80000 123456789 987654321 30000 Up Al Night, Inc. 537 Up All Night, Inc. Date Jnay9 2013 McAlister's Deli World Wide Webster One hundred and Four hundred fifty-two Sreet Conway AR 72035 Memo Lunch for meeirg Kelly Parker Memo Web design 123456789 98765432154445200 Kely Parker 123456789 987654321 537 10000 UpANighe, ic 987654321 Page 2 Up All Night, Inc. Up All Night, Inc. Date January 22, 2019 Date Jenuary 16. 2019 Sal Proprietor Nine hundred ninety three and no uS Treasury 993.00 hree hundred thirty-three and no Sruce Street Conway AR 72035 Kelly Parker Kely Parke 546 Memo Fed Payrell Tax 123456789 987654321 33300 553 123456789 987654321 99300 554 Up All Night,Inc. Up All Night, Ine. Conway AR Paoss Date Janusn 23, 2019 Date Janvary 16. 2019 Manufacturing Superior Nissan Eight hundred twenty seven and no One thousand five hundred seventy-six and no 123 Bruce Street Conway AR 1203 Memo Vehicle Repa Breet Conway AR 72035 Kely Parker 547 Kelly Parker 554 123456789 987654321 82700 123456789 987654321 157600 Up All Night, inc. Up All Night, Inc. Date Oate Jaruary 24. 2019 AAA Alarm Company Forty three and Eighty-three and no 123 Bruce Kelly Parker Memo Alarm Monitoring 123456789 987654321 123456789 987654321 548 4300 8300 Up All Night, Inc. Up All Night, Inc Dae January 1B 2019 Conway AR 72 Date Jaruary 24, 2019 Kelly Parker AT&T 228 Two hundred fifty and no Two hundred twenty-eight and no Memo office Supplies 123456789 987654321 Kelly Parker 549 Memo Telephone B4 123456789 987654321 25000 22800 Up All Night Inc. 550 Up All Night, Inc. Date Jaruary 18,2 Dunkin Donuts 18.00 Eighteen and no 123 Bruce Sreet Conway AR 72035 123456789 987654321 550 1800 123456789 987654321 53400 Up All Night, Inc. Comeay AR 72035 Up Till Dawn Caneay AR 72035 8723 Date January 22 2019 Arkansas Dept of Finance & Admin s143 One hundred forty three and no 123 Buce Street Conway AR 7203 Kelly Parker Mema Stabe Payroll Tax 123456789 987654321 14300 123456789 456852179 8723 102400 Up All Night, Inc Bank Reconciliation Up All Night, Inc Bank Reconciliation January 31, 2019 Bank Books Bank Books Books Bank Beginning Balance Beginning Balance 3,203.00 2,225.00 Increasing Adjustments Increasing Adjustments Increasing Adjustments Collect Note 1,000.00 Outstanding Deposit and Interest Increasing Adjustments 2/28 3,275.00 Decreasing Adjustments Decreasing Adjustments Decreasing Adjustments Service Charge 8.00 Outstanding Checks 525 875.00 533 400.00 Adjusted Balance Adjusted Balance Adjusted Balance Adjusted Balance 4,225.00