Question

Identify each of the following reconciling items as:

a. an addition to the cash balance according to the bank statement
b. a deduction from the cash balance according to the bank statement
c. an addition to the cash balance according to the company's records
d. a deduction from the cash balance according to the company's records

Item Treatment
1. Bank service charges, $30.
2. Check of a customer returned by bank to company because of insufficient funds, $400.
3. Check for $320 incorrectly recorded by the company as $230.
4. Check for $1,100 incorrectly charged by bank as $110.
5. Deposit in transit, $3,300.
6. Outstanding checks, $7,950.
7. Note collected by bank, $10,500.

Answer 1

Reconciling Items

Item Treatment

1. b. a deduction from the cash balance according to the bank statement

2. b. a deduction from the cash balance according to the bank statement

3. d. a deduction from the cash balance according to the company's records

4. a. an addition to the cash balance according to the bank statement

5. a. an addition to the cash balance according to the bank statement

6. a. an addition to the cash balance according to the bank statement

7. a. an addition to the cash balance according to the bank statement

Step-by-step explanation:

a) Data and Analysis:

1. Bank service charges, $30 Cash $30

2. Accounts Receivable (NSF) $400 Cash $400

3. Accounts Payable $90 Cash $90

4. Cash $990 Bank $990.

5. Bank $3,300 Cash $3,300

6. Cash $7,950 Bank $7,950

7. Cash $10,500 Accounts Receivable $10,500