Taxation for Entrepreneurs Bank Statement Reconciliation ACCT 3376 Nelson Your name is Sal Proprietor, and you own a sole proprietorship called Up All Night, Inc. You have one employee named Kelly Parker. Kelly has the authority to sign checks, but it is your policy that any check written to Kelly (like payroll) must be signeyd records and the bank 's records and to deal with any discrepancies Understanding the Documents for January 2019. The purpose of the bank reconciliation is to verify both your you will find three Your cash ledger for January 2019 was created by you and Kelly. It should contain your accounting of the cash account including items that increase and decrease cash in January. All these items may clear the bank in January, but some may not. 1. Your bank reconciliation from December 2018 was created by you. In the bank column, you will find three items that didn't clear the bank in December, but may clear in January. 2. Your bank statement for January 2019 was created by your bank. It has a summary at the top indicating how your balance 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 3. 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 The item was On Bank Statement&On My Records For the same amount On the Bank Statement Mark these items with a check mark on both documents.(These are the items you can ignore Don't mark these items 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 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+ If the two adjusted balances equal, you've probably reconciled correctly If they don't equal, you The final steps to wrap evervthing un 1. Notify the bank of any misstatements Increasing Adjustments- Decreasing Adjustments reconciled correctly. If they don't equal, you've definitely reconciled incorrectly the bank of any misstatements they made. This is rare! It doesn't include itemst Describe below the error(s) you will call the bank about. Write it like you would say it to the they made. This is raret lt doesn't inclode items that just havenclar 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 11,700.00 800.00 10,900.00 11,400.00 100.00 11,300.00 125.00 11,175.00 1/2/19 Deposit 8,000.00 1/2/19 Check 534 1/2/19 Check 535 1/3/19 Check 536 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 1/15/19 Check 543 1/15/19 Check544 1/15/19 Check 545 325.00 10,567.00 522.00 10,045.00 800.009,245.00 300.00 8,945.00 425.008,520.00 627.007,893.00 9,098.00 993.00 8,105.00 827.00 7,278.00 43.00 7,235.00 2.50 7,232.50 18.00 7.214.50 120.00 7,094.50 143.006,951.50 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 333.00 6,618.50 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 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 & Other Credits Other Debits Other Fees $2,225.00 $15,990.00 $11,296.00 Balance $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 Cane Januy 9 2012 What bugs you Eight hundred sevent-ve and no- One hundred and wenty dellars and no Kely Parker 525 123456789 987654321 87500 123456789 987654321 538 12500 Up All Night, Inc. 533 Up All Night, Inc Date Decembes 25. 201 Date Janary 11 2019 A Nu Start Three hundred wenty-five and no Conway Corp Four hundred and 123456789 987654321 533 40000 123456789 987654321 540 32500 Up All Night, Inc. Up All Night, inc. Office Deget 22500 Memo ofice Sueplies 123456789 987654321 534 123456789 987654321 52200 Up All Night, Inc. Up All NigM, Inc. 842 Spikes Suppy Warehouse300 00 Alkinson Mecharical Supplys Eight hundred and n Memo Equiment 123456789 987654321 542 123456789 987654321 535 30000 80000 Up All Night, Inc Up All Nigt Inc. Date JanurY3.2019 Dale January 15 2019 Paul Jensen 30000 Eight hundred and n Three hundred and no Mema Comissions 123456789 987654321 536 Kely Parker 80000 123456789 987654321 543 30000 Up Al Night, Inc. 537 Up All Night, Inc. Date Jaruary 15 2019 McAlister's Dei World Wide Webster One hundred and Four hundred fifty-two Memo Lunch fer meetg 123456789 987654321 Memo Web design 123456789 98765432154445200 Kely Parker 537 10000 Up All Night, Inc 987654321 Page 2 Up All Night, Inc Date January 22, 2019 Up All Night, Inc. Date Jenuary 16. 2019 Sal Proprietor Nine hundred ninety three and no US Treasury ee hundred thirty-three and no- 993.00 Kelly Parker Memo Dewig 123456789 987654321 Kely Parker 546 Memo Fed Payrell Tax 123456789 987654321 33300 553 99300 554 Up All Night,Inc. Up All Night, Inc. 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 andn 123 Bruce Street Conway AR 203 Breet Conway AR 72035 Memo Vehicie Repai Kelly Parker 123456789 987654321 547 82700 123456789 987654321 157600 Up All Night, Inc. Consay AR 723 Up All Night, Inc. Date January 24. 2019 US Postmaster AAA Alarm Company Forty three and o-reen asii.. mm. Eighty-three and no Kely Parker 548 Memo Alarm Monitoring 123456789 987654321 123456789 987654321 4300 8300 Up All Night, Inc. Up All Night, Inc 556 Date Jaruary 24, 2019 Kely Parker AT&T Two hundred fifty and no Two hundred twenty-eight and no Kelly Parker Memo office Supplies 123456789 987654321 549 Memo Telephone B4 123456789 987654321 Kelly Parker 25000 22800 Up All Night Inc 550 Up All Night, Inc. Date Jaruary 18. 2013 Dunkin Donuts Conway AR 72as 123456789 987654321 18.00 Eighteen and no 123 Bruce Street Cenway AR 72035 550 1800 123456789 987654321 53400 Up All Night, Inc. Up Till Dawn Date January 22 2019 Arkansas Dept of Finance & Admin s114300 One hundred forty three and no 123 Baace Street Conway AR 72035 Kely Parker 123456789 987654321 14300 123456789 456852179 8723 102400 Up All Night, Inc Bank Reconciliation January 31, 2019 Up All Night, Inc Bank Reconciliation Books Bank Books Bank Beginning Balance Beginning Balance Books Bank 3,203.00 2,225.00 Increasing Adjustments Increasing Adjustments Collect Note 1,000.00 Outstanding Deposit and Interest Increasing Adjustments Increasing Adjustments 2/28 3,275.00 Decreasing Adjustments 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 Taxation for Entrepreneurs Bank Statement Reconciliation ACCT 3376 Nelson Your name is Sal Proprietor, and you own a sole proprietorship called Up All Night, Inc. You have one employee named Kelly Parker. Kelly has the authority to sign checks, but it is your policy that any check written to Kelly (like payroll) must be signeyd records and the bank 's records and to deal with any discrepancies Understanding the Documents for January 2019. The purpose of the bank reconciliation is to verify both your you will find three Your cash ledger for January 2019 was created by you and Kelly. It should contain your accounting of the cash account including items that increase and decrease cash in January. All these items may clear the bank in January, but some may not. 1. Your bank reconciliation from December 2018 was created by you. In the bank column, you will find three items that didn't clear the bank in December, but may clear in January. 2. Your bank statement for January 2019 was created by your bank. It has a summary at the top indicating how your balance 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 3. 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 The item was On Bank Statement&On My Records For the same amount On the Bank Statement Mark these items with a check mark on both documents.(These are the items you can ignore Don't mark these items 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 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+ If the two adjusted balances equal, you've probably reconciled correctly If they don't equal, you The final steps to wrap evervthing un 1. Notify the bank of any misstatements Increasing Adjustments- Decreasing Adjustments reconciled correctly. If they don't equal, you've definitely reconciled incorrectly the bank of any misstatements they made. This is rare! It doesn't include itemst Describe below the error(s) you will call the bank about. Write it like you would say it to the they made. This is raret lt doesn't inclode items that just havenclar 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 11,700.00 800.00 10,900.00 11,400.00 100.00 11,300.00 125.00 11,175.00 1/2/19 Deposit 8,000.00 1/2/19 Check 534 1/2/19 Check 535 1/3/19 Check 536 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 1/15/19 Check 543 1/15/19 Check544 1/15/19 Check 545 325.00 10,567.00 522.00 10,045.00 800.009,245.00 300.00 8,945.00 425.008,520.00 627.007,893.00 9,098.00 993.00 8,105.00 827.00 7,278.00 43.00 7,235.00 2.50 7,232.50 18.00 7.214.50 120.00 7,094.50 143.006,951.50 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 333.00 6,618.50 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 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 & Other Credits Other Debits Other Fees $2,225.00 $15,990.00 $11,296.00 Balance $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 Cane Januy 9 2012 What bugs you Eight hundred sevent-ve and no- One hundred and wenty dellars and no Kely Parker 525 123456789 987654321 87500 123456789 987654321 538 12500 Up All Night, Inc. 533 Up All Night, Inc Date Decembes 25. 201 Date Janary 11 2019 A Nu Start Three hundred wenty-five and no Conway Corp Four hundred and 123456789 987654321 533 40000 123456789 987654321 540 32500 Up All Night, Inc. Up All Night, inc. Office Deget 22500 Memo ofice Sueplies 123456789 987654321 534 123456789 987654321 52200 Up All Night, Inc. Up All NigM, Inc. 842 Spikes Suppy Warehouse300 00 Alkinson Mecharical Supplys Eight hundred and n Memo Equiment 123456789 987654321 542 123456789 987654321 535 30000 80000 Up All Night, Inc Up All Nigt Inc. Date JanurY3.2019 Dale January 15 2019 Paul Jensen 30000 Eight hundred and n Three hundred and no Mema Comissions 123456789 987654321 536 Kely Parker 80000 123456789 987654321 543 30000 Up Al Night, Inc. 537 Up All Night, Inc. Date Jaruary 15 2019 McAlister's Dei World Wide Webster One hundred and Four hundred fifty-two Memo Lunch fer meetg 123456789 987654321 Memo Web design 123456789 98765432154445200 Kely Parker 537 10000 Up All Night, Inc 987654321 Page 2 Up All Night, Inc Date January 22, 2019 Up All Night, Inc. Date Jenuary 16. 2019 Sal Proprietor Nine hundred ninety three and no US Treasury ee hundred thirty-three and no- 993.00 Kelly Parker Memo Dewig 123456789 987654321 Kely Parker 546 Memo Fed Payrell Tax 123456789 987654321 33300 553 99300 554 Up All Night,Inc. Up All Night, Inc. 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 andn 123 Bruce Street Conway AR 203 Breet Conway AR 72035 Memo Vehicie Repai Kelly Parker 123456789 987654321 547 82700 123456789 987654321 157600 Up All Night, Inc. Consay AR 723 Up All Night, Inc. Date January 24. 2019 US Postmaster AAA Alarm Company Forty three and o-reen asii.. mm. Eighty-three and no Kely Parker 548 Memo Alarm Monitoring 123456789 987654321 123456789 987654321 4300 8300 Up All Night, Inc. Up All Night, Inc 556 Date Jaruary 24, 2019 Kely Parker AT&T Two hundred fifty and no Two hundred twenty-eight and no Kelly Parker Memo office Supplies 123456789 987654321 549 Memo Telephone B4 123456789 987654321 Kelly Parker 25000 22800 Up All Night Inc 550 Up All Night, Inc. Date Jaruary 18. 2013 Dunkin Donuts Conway AR 72as 123456789 987654321 18.00 Eighteen and no 123 Bruce Street Cenway AR 72035 550 1800 123456789 987654321 53400 Up All Night, Inc. Up Till Dawn Date January 22 2019 Arkansas Dept of Finance & Admin s114300 One hundred forty three and no 123 Baace Street Conway AR 72035 Kely Parker 123456789 987654321 14300 123456789 456852179 8723 102400 Up All Night, Inc Bank Reconciliation January 31, 2019 Up All Night, Inc Bank Reconciliation Books Bank Books Bank Beginning Balance Beginning Balance Books Bank 3,203.00 2,225.00 Increasing Adjustments Increasing Adjustments Collect Note 1,000.00 Outstanding Deposit and Interest Increasing Adjustments Increasing Adjustments 2/28 3,275.00 Decreasing Adjustments 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
