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How should the adjustment be recorded in the general ledger?

by Rockefeller

Question:

The bank statement ending balance is $45 lower than the general ledger bank balance. On the bank statement, there is a line item for bank charges and fees of $45. 

How should the adjustment be recorded in the general ledger? 

SELECT ONLY ONE 

Debit Bank Fees Expense $45; Credit Retained Earnings $45 

Debit Bank Fees Expense $45; Credit Bank Account $45 

Debit Bank Account $45; Credit Retained Earnings $45 

Debit Retained Earnings $45; Credit Bank Account $45 

Debit Bank Account $45; Credit Bank Fees Expense $45


Solution:

Due to unrecorded items, the cash book bank balance and the balance on the bank statement are sometimes unbalanced.


The bank fee of $45 is an item recorded by the bank in the bank statement, not an item recorded in the cash book.


Therefore, the adjustment for this is to reduce the cash book-bank balance and recognize the expenses related to these bank charges in the income statement.


The following adjustment should be recorded in General Ledger:

Account titleDebitCredit
Bank Fees Expense$45
Bank Account
$45
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