Question

A. The August 31 balance shown on the bank statement is $9,799.

b. There is a deposit in transit of $1,247 at August 31.
c. Outstanding checks at August 31 totaled $1,870.
d. Interest credited to the account during August but not recorded on the company's books amounted to $115.
e. A bank charge of $37 for checks was made to the account during August. Although the company was expecting a charge, the amount was not known until the bank statement arrived.
f. In the process of reviewing the canceled checks, it was determined that a check issued to a supplier in payment of accounts payable of $625 had been recorded as a disbursement of $367.
g. The August 31 balance in the general ledger Cash account, before reconciliation, is $9,356.

Required:
Prepare the adjusting journal entry that should be prepared to reflect the reconciling items.

Answer 1

Part a.

No entry

Part b.

Debit : Deposits in Transit $1,247

Credit : Bank Reconciliation Statement $1,247

Increase the Bank Statement Balance

Part c.

Debit : Bank Reconciliation Statement $1,247

Credit : Out Standing Checks $1,870

Decrease the Bank Statement Balance

Part d.

Debit : Cash $115

Credit : Interest received $115

Interest credited in Bank Statement not recorded

Part e.

Debit : Bank Charges $37

Credit : Cash $37

Recording of Bank Charges in the Books

Part f.

Debit : Accounts Payable $258

Credit : Cash $258

Payment to Supplier understated by $258

Part d.

No entry

Step-by-step explanation:

Corrections and Adjustments may be either to correct the Cash Book or the Bank Statement Balance as above.