Question

Entries for 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, $15,440. 2. Cash balance according to the bank statement at August 31, $16,360. 3. Checks outstanding, $3,130. 4. Deposit in transit not recorded by bank, $2,520. 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. Journalize the entries that should be made by the company that (a) increase cash and (b) decrease cash. a. 20Y6 Aug. 31 b. Aug. 31

Answer 1

AS PAR INFORMATION GIVEN IN QUESTION  
JOURNAL ENTRIS
A. ENTRIS THAT INCREASES THE CASH OF THE COMPANY
i) check outstanding with the bank $3130
No entry is made to a company's general ledger for outstanding checks when preparing a bank reconciliation. The reason is outstanding checks are an adjustment to the bank balance. Outstanding checks are not an adjustment to the company's Cash account in its general ledger.

ii) A check for $480 in payment of an account was erroneously recorded in check register as$840
bank a/c dr. $360
to creditor $360
(being cash recieved from the creditor extra paid erroneously)

B.ENTRIS THAT DECREASES THE CASH OF THE COMAPNY
i) deposite in transite not recorded by the bank $2520
Deposits in Transit, also known as outstanding deposits, are those deposits that are not reflected in the bank statement on the reconciliation date due to the time lag between when a company deposits cash or cheque in its account and when the bank credits it. Since the company records the increase in bank balance in its accounting records as soon as the cash or cheque is deposited, the balance as per bank statement would be lower than the balance as per cash book until the deposit is processed by the bank. Therefore, any outstanding deposits must be subtracted from the balance as per cash book in the bank reconciliation statement.

ii) bank debit memo for service charges of $50
service charges a/c dr. $50
to bank a/c $50
(being service charges paid to bank)