Question

On October 31, 2021, Damon Company’s general ledger shows a checking account balance of $8,442. The company’s cash receipts for the month total $74,620, of which $71,370 has been deposited in the bank. In addition, the company has written checks for $72,512, of which $71,252 has been processed by the bank. The bank statement reveals an ending balance of $12,822 and includes the following items not yet recorded by Damon: bank service fees of $300, note receivable collected by the bank of $6,500, and interest earned on the account balance plus from the note of $1,070. After closer inspection, Damon realizes that the bank incorrectly charged the company’s account $900 for an automatic withdrawal that should have been charged to another customer’s account. The bank agrees to the error. Required: 1. Prepare a bank reconciliation to calculate the correct ending balance of cash on October 31, 2021. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

the adjusted cash balance is $25, 712

Step-by-step explanation:

Bank Reconciliation: Damon Company

A bank reconciliation is the process of matching the balance in the entity’s accounts for bank/ cash to the corresponding information on the bank statement. The main aim of this process is to ascertain the differences between the two, and to record the changes/ differences as appropriate.

The reason why a company needs to make a bank reconciliation is:

A company’s general ledger bank / cash account has many transactions recorded on it, and the bank also creates a record of the company’s bank/ cash account when it processes cheques, deposits, and other items that involve the movement of cash.

It happens that the bank will have transactions on the bank statement that the company does not have in its general ledger, and vice versa. This results in the balance in the general ledger not matching the balance on the bank statement. The bank reconciliation is that done to reconcile the two balances.

Damon Company

Bank reconciliation statement for October 31, 2021

($)

Balance as per bank statement 12, 822

Outstanding cash receipts 3,250

Outstanding cheques -1, 260

Incorrect charge 900

Adjusted cash balance 15, 712

Balance as per general ledger 8, 442

Bank service fees -300

Note receivable 6, 500

Interest earned 1, 070

Adjusted cash balance 15, 712

Above is the bank reconciliation statement with the general ledger balance and the bank statement balance reconciled.

Outstanding cash receipts = $74, 160 - $71, 370 = $3, 250

Outstanding cheques = $72, 512 - $71, 252 = $1, 260

Answer 2

Step-by-step explanation:

Bank Reconciliation: The bank reconciliation deals with the bank statement balance and the cash statement balance. The motive is to compare these two statements so that the organization can run in the smoothly manner.

There are various transactions due to which the bank statement balance and the cash statement balance do not match. To match these statements, we adjust the transactions accordingly.

The outstanding deposits is computed below:

= Company cash receipts - bank deposited

= $74,620 - $71,370

= $3,250

And, the outstanding checks is computed below:

= Company written checks - Processed by bank

= $72,512 - $71,252

= $1,260

The preparation of the bank reconciliation statement on May 31 is presented in the spreadsheet. Kindly find the attachment below: