Question

On October 31, the Company's general ledger shows $88,000 for the checking account balance. The company's cash receipts for the month which haven't cleared the bank yet are $20,000 and checks written by the company this month which have not cleared the bank total $35,000 While comparing the bank statement with the general ledger the company determined the bank overcharged the company $1,000 for a check the company wrote. The bank statement also reported service fees of $50, interest earned on their account of $15, and an automatic withdrawal of $900 for the phone bill. The bank statement also showed the bank had collected a $3,000 note receivable for the company. The company noted that one of the checks they wrote was incorrectly recorded in the general ledger, it was written for $560 but they had subtracted $650 from their checking account The bank statement reported the company checking account balance was $104,155 on October 31st. Answer the following based on performing a bank reconciliation for the Company 1. How should the company treat the bank error? (add/sub from bank/general ledger) 2. How should the company treat the company error? (add/sub from bank/ general ledger) 3. What is the general ledger cash balance before reconciliation 4. What is the bank statement balance before reconciliations 5. What is the general ledger balance after reconciliation?

Answer 1

Bank Reconciliation Statement As on October 31 Cash Balance per Bank Add: Deposit in transit Cheque wrongly charged $104,155 $20,000 $1,000 $125,155 (35,000) $90,155 Less: Outstanding Cheques Adjusted Cash Balance per Bank $88,000 Company's Cash Balance(Books) Add: Interest Earned Collection of Note Receivable Error in recording Check($650 - $560) 15 3,000 90 3,105 91,105 Less : Bank Service charges Phone Bill Payment Adjusted Company's Cash Balance 50 900 (950) $90,155 Answer(1) add / sub from Bank Answer(2) add / sub from General Ledger Answer(3) $88,000 Answer(4) $104,155 Answer(5) $90,155