Question

On August 31, 2024, Pharoah Company had a cash balance per its books of $26,720. The bank statement on that date showed a balance of $17,220. A comparison of the bank statement with the Cash account revealed the following. 1.The August 31 deposit of $17,230 was not included on the August bank statement. 2.The bank statement shows that Pharoah received EFT deposits from customers on account totalling $2,350 in August. Pharoah has not recorded any of these amounts. 3.Cheque 673 for $1,220 was outstanding on July 31. It did not clear the bank account in August. All of the cheques written in August have cleared the bank by August 31, except for cheque #710 for $2,300, and #712 for $2,460. 4.The bank statement showed on August 29 an NSF charge of $554 for a cheque issued by R. Clark, a customer, in payment of their account. This amount included an $10 service charge by Pharoah's bank. The company's policy is to pass on all NSF service charges to the customer. 5.Bank service charges of $28 were included on the August statement. 6.The bank recorded cheque #705 for $146 as $164. The cheque had been issued to pay for a building repair. Pharoah had correctly recorded the cheque.

Answer 1

The student's finance question involves reconciling the cash balance of Pharoah Company by making necessary adjustments to account for deposits in transit, unrecorded EFTs, outstanding checks, NSF charges, and bank service fees, ensuring the financial accuracy of the company's records.

Step-by-step explanation:

The scenario presented involves reconciling the cash balance of Pharoah Company and includes adjustment items such as deposits in transit, outstanding checks, electronic fund transfers (EFT), NSF (non-sufficient funds) charges, and bank service charges. Balancing the company's books against the bank statement requires adjusting for these items to reflect the true cash position of the company. This process is crucial for the company's financial accuracy and integrity.

Here is the list of adjustments needed:

1. Add the August 31 deposit of $17,230 not included in the bank statement.
2. Add EFT deposits totaling $2,350 not recorded by Pharoah Company.
3. Subtract outstanding cheques: #710 for $2,300 and #712 for $2,460.
4. Subtract NSF charge of $554 including the $10 bank service charge.
5. Subtract bank service charges of $28.
6. Correct the discrepancy of cheque #705 recorded by the bank as $164 instead of the correct amount of $146.

Understanding these types of adjustments is part of bank reconciliation and accounting practices that keep a company's financial records in order. The cash balance according to the company's ledger and the bank statement will match once these adjustments are accounted for.