Question

Logan Bruno Company has just received the August 31, 2017, bank statement, which is summarized below.

County National Bank Disbursements Receipts Balance
Balance, August 1 $9,369
Deposits during August $32,200 41,569
Note collected for depositor, including $40 interest 1,040 42,609
Checks cleared during August $34,500 8,109
Bank service charges 20 8,089
Balance, August 31 8,089

The general ledger Cash account contained the following entries for the month of August.

Cash
Balance, August 1 10,050 Disbursements in August 34,903
Receipts during August 35,000

Deposits in transit at August 31 are $3,800, and checks outstanding at August 31 total $1,050. Cash on hand at August 31 is $310. The bookkeeper improperly entered one check in the books at $146.50 which was written for $164.50 for supplies (expense); it cleared the bank during the month of August.

Instructions

(a) Prepare a bank reconciliation dated August 31, 2017, proceeding to a correct balance.

Answer 1

Bank reconciliation involves adjusting the bank statement balance and the company's book balance for agreements, including deposits in transit, outstanding checks, bank errors, interest income, and recording errors.

Step-by-step explanation:

To conduct a bank reconciliation, you start by comparing the company’s cash records against the bank statement to identify any discrepancies. Adjust both the company's cash records and the bank statement with any transactions that have not been recorded by both the company and the bank. This includes deposits in transit, outstanding checks, and any errors in recording transactions.

Considering the provided details for Logan Bruno Company, the adjustments to the bank balance would include adding deposits in transit ($3,800) and subtracting outstanding checks ($1,050). The adjustment to the book balance would include adding interest income ($40), correcting the check recording error by adding the difference ($18) and subtracting bank service charges ($20).