Name: 1. Edgar Garcia was at his banker's trying to get a short term loan. "I need about $10,000 for three months, just until I get things straightened out. This is my situation: I got this nice order last February from Baker Company. Their bill was due last month, but so far I haven't seen anything. Now I have another big order, this time from Gisher Construction and I need to order raw materials, but I can't since Baker hasn't paid. Even when they do pay, it's only about 75% of what I'll need to order to do the Gisher contract. And then, we're headed into our slow months; no one much does anything through the winter. And with the hurricane down in Florida, people are thinking twice before placing their orders." Edgar was experiencing a number of cash flow problems that small businesses (and often larger businesses) face. Can you identify five problems? 2. Clara North is really confused. "I've got three different numbers here and I don't know what is right. My records show that I have $35,463 in the bank, but the bank statement says $37,428. When I called the bank to see about making a transfer payment, they said I had only $34,299 to spend. What the heck is going on? Can you explain what there three balances are likely to be and why they are different? 3 3. Bob's Vitamins has just completed its first month of business and Bob has received his first bank statement and needs to reconcile it. Below are the bank statement and Bob's Cash Account, along with the details that went into creating the cash account. Can you help him reconcile the two? Hint: The process of reconciling bank balance and book balance is quite simple. Add (subtract) to the bank balance those things that you know about account that the bank does not know. Add (Subtract) to your book balance those things that the bank knows about your account that you do not know until reported by the bank. Sparta Community Bank 123 East Main Street Sparta, Illinois Bob's Vitamins 223 West Market Street Sparta, Illinois BUSINESS ACCOUNT 03-4538245 Balance Last statement 10000 Deposits Withdrawals 10856 6808 Balance This Statement 14048 Deposits/Credits 3-Mar 10-Mar 17-Mar 1685 2465 2899 20-Mar 24-Mar 31-Mar 325 Direct deposit 3450 32 Interest paid Checks 1001 1002 1004 1005 25 200 4560 200 1006 1008 1010 1011 56 1500 200 24 Other withdrawals debits NSF check 43 Bob's Vitamins Cash Account Summary for The Month of March, 20xx March 1 Balance March Deposits March Checks March 31 Balance 10,000 13,152 (7,729) 15,423 1685 25 200 38 2465 4560 200 56 Details 3-Mar Deposit Check 1001 Check 1002 Check 1003 10-Mar Deposit Check 1004 Check 1005 Check 1006 17-Mar Deposit Check 1007 Check 1008 Check 1009 24-Mar Deposit Check 1010 Check 1011 31-Mar Deposit Check 1012 2899 526 1500 200 3450 200 24 2653 200 Fill in the blank. Bob's Vitamins Reconciliation of bank and book balance at March 31, 20XX $_ Bank Balance Ending Balance, March 31 Additions: Deposit in transit Subtraction Checks outstanding Total Book Balance Ending book balance, March 31 Additions: Direct deposit Interest earned Subtractions NSF check returned Total JJ Correct cash balance $15. Correct cash balance $15
