eBook

Show Me How

Question Content Area

Bank reconciliation

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. Cash balance according to the company's records at August 31, $25,700.
2. Cash balance according to the bank statement at August 31, $27,040.
3. Checks outstanding, $5,220.
4. Deposit in transit not recorded by bank, $4,190.
5. A check for $480 in payment of an account was erroneously recorded in the check register as $840.
6. Bank debit memo for service charges, $50.

Question Content Area

a. Prepare a bank reconciliation, using the format shown in Exhibit 13.

Line Item Description	Amount
Cash balance according to bank statement	$Cash balance according to bank statement
Add: Bank service chargeAdd: Deposit in transit on August 31Add: Error in recording checkAdd: Outstanding checksAdd: Deposit in transit on August 31	Add: Deposit in transit on August 31
Deduct: Bank service chargeDeduct: Deposit in transit on August 31Deduct: Error in recording checkDeduct: Outstanding checksDeduct: Outstanding checks	Deduct: Outstanding checks
Adjusted balance	$Adjusted balance
Cash balance according to company's records	$Cash balance according to company's records
Add: Bank service chargeAdd: Deposit in transit on August 31Add: Error in recording checkAdd: Outstanding checksAdd: Error in recording check	Add: Error in recording check
Deduct: Bank service chargeDeduct: Deposit in transit on August 31Deduct: Error in recording checkDeduct: Outstanding checksDeduct: Bank service charge	Deduct: Bank service charge
Adjusted balance	$Adjusted balance

Feedback Area

Feedback

a. Set up two sections: one for the company cash account section and the other for the bank balance section. Determine the effect of the data on each section. Recall that when you are finished, the adjusted balances in the bank and company sections of the reconciliation must be equal. If not, an item has been overlooked or treated in error.

Question Content Area

b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash? fill in the blank 1 of 1$

c. Must a bank reconciliation always balance (reconcile)?

YesNo

Feedback Area

Feedback

b. Recall that the company's cash account balance is updated for any items in the company section of the bank reconciliation.

c. Consider the purpose of the bank reconciliation and what it does.

Feedback Area

Feedback

Partially correct