Question

On August 31, 2021, the general ledger of The Dean Acting Academy shows a balance for cash of $7,804. Cash receipts yet to be deposited into the checking account total $3,198, and checks written by the academy but not yet processed by the bank total $1,285. The company's balance of cash does not reflect a bank service fee of $21 and interest earned on the checking account of $32. These amounts are included in the balance of cash of $5,902 reported by the bank as of the end of August.

Required:
1. Prepare a bank reconciliation to calculate the correct ending balance of cash on August 31, 2021.
2. Record the necessary entry(ies) to adjust the balance for cash.
Record the entries that increase cash.
Record the entries that decrease cash.

Answer 1

Answer and Explanation:

1. The Preparation of bank reconciliation is shown below:-

The Dean Acting Academy

Bank reconciliation

August 31, 2021

Bank cash balance Amount Company cash balance Amount

Per bank statement $5,902 Per general ledger $7,804

Deposit outstanding $3,198 Service fees ($21)

Checks outstanding ($1,285) Interest earned $32

Bank balance per Company balance per

reconciliation $7,815 reconciliation $7,815

2. The Journal entries are shown below:-

a. Cash Dr, $32

To Interest Revenue $32

(Being note and interest collected by the bank is recorded)

Here we debited the cash as it increased the assets and we credited the interest revenue as it also increased the revenue

b. Service Fee Expense Dr, $21

To Cash $24

(Being bank service fee is recorded)

Here we debited the service fee expenses as it increased the expense and we credited the cash as it decreased the assets