Final answer:
The student's query concerns adjusting cash balance records after a bank reconciliation process, which leads to a discussion on a bank's T-account balance sheet and calculating its net worth. The net worth is found by subtracting the bank's liabilities from its assets.
Step-by-step explanation:
Understanding Bank Reconciliation and Net Worth of a Bank
The student's question involves a company making adjustments to its cash balance based on the information gathered during bank reconciliation. When a company reconciles its books, it must adjust its records to reflect transactions recorded by the bank. In the example provided, the company must account for outstanding deposits, an NSF (non-sufficient funds) check, checks outstanding, a note collected by the bank, and service fees charged by the bank. These adjustments ensure that the cash records show the accurate balance corresponding to the company's actual cash position.
For educational purposes, a T-account balance sheet example for a hypothetical bank is given. A T-account balance sheet shows a bank's assets and liabilities and helps in calculating the bank's net worth. Assets include reserves, government bonds, and loans made to customers. Liabilities consist of deposits the bank owes to its customers. Net worth, also known as shareholders' equity, is the difference between the bank's total assets and its total liabilities.
To calculate the bank's net worth:
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- Sum up all the assets: Reserves ($50) + Government Bonds ($70) + Loans ($500) = $620.
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- Identify the liabilities: Deposits ($400).
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- Subtract the liabilities from the assets to get the net worth: Assets ($620) - Liabilities ($400) = Net Worth ($220).
This example demonstrates how a bank's balance sheet is structured and shows the process for determining its financial health.