Question

prepare the journal entries necessary to make the company’s book balance of cash equal to the reconciled cash balance as of july 31.

Answer 1

To make a company's book balance equal to the reconciled cash balance, journal entries based on the results of a bank reconciliation must be recorded. This involves adjustments for deposits in transit, outstanding checks, bank fees, interest income, and any errors found.

Step-by-step explanation:

To prepare the journal entries necessary to make a company's book balance of cash equal to the reconciled cash balance as of July 31, you need to adjust the company's books based on the results of a bank reconciliation. A bank reconciliation involves matching the company's recorded transactions with the transactions listed on the bank statement to identify any discrepancies.

Here are some typical adjustments that may be necessary:

• Adding deposits in transit (amounts received and recorded by the company but not yet recorded by the bank).
• Subtracting outstanding checks (issued by the company but not yet cleared by the bank).
• Accounting for bank charges and fees.
• Recording interest income if the bank account earns interest.
• Adjusting for any errors found in either the company's books or the bank statement.

Here is an example of a journal entry that might arise from these adjustments:

July 31
Bank Fees Expense $xx
Cash in Bank $xx(To record bank fees)

Make sure that every adjustment in the bank reconciliation is also reflected by a journal entry in the company's books. This will ensure that the book balance matches the reconciled cash balance on July 31.

Answer 2

Journal Entries:

1. Record deposits in transit:

Date Account Title Debit Credit

---------- -------------------------------------------------- ------- -------

July 31 Cash $2,310

Accounts Receivable $2,310

(To record deposited cash not yet reflected in bank statement)

2. Record outstanding checks:

Date Account Title Debit Credit

---------- -------------------------------------------------- ------- -------

July 31 Accounts Payable $1,824

Cash $1,824

(To record outstanding checks not yet cleared by bank)

3. Record bank service charges:

Date Account Title Debit Credit

---------- -------------------------------------------------- ------- -------

July 31 Miscellaneous Expense $35

Cash $35

(To record bank service charges)

4. Record NSF check:

Date Account Title Debit Credit

---------- -------------------------------------------------- ------- -------

July 31 Accounts Receivable $840

Cash $840

(To reverse dishonored check)

5. Record deposit error:

Date Account Title Debit Credit

---------- -------------------------------------------------- ------- -------

July 31 Cash $20

Deposits in Transit $20

(To correct deposit error)

These journal entries will adjust the book balance of cash to match the reconciled cash balance.

The Complete Question

Company: Sunshine Bakery

Date: July 31, 2023

Bank Statement:

Balance per bank statement: $15,642

Deposits in transit: $2,310

Outstanding checks: $1,824

Bank service charges: $35

Book Balance:

Cash balance per books: $17,104

Reconciling Items:

NSF check received from customer: $840

Deposit error: $20 (deposited but not recorded)