LET US MAKE THE BANK RECONCILIATION OF THE PREVIOUS CASH TRANSACTION OF THE COMPANY AND THAT OF THE BANK STATEMENT.
Let us first compare the deposits entry of the book compared to the bank.
a, notice that the bank has 1000 deposit entry on the first day, this is the deposit in transit last month .this will not be a reconciling item because this is already taken up by the book last month.
b. you will also noticed that there is a 5.00 feb. 10 not posted in the bank statement . this should be investigated because it is feb. 10 and not end of month.
c. the collection of 2.28 is not reflected in the bank.
d. there is a deposit reflected in the bank but not in the books 1.00.
e. there is 20,000 deposits in the bank but not in the books
f. an interest of saving deposit is also reflected in the deposit column of the bank
LET US COMPARE THE CREDITS OF THE BOOK COMPARED TO THE BANK.
a. thebank has a withdrawal captioned returned checks , not yet in the books
b. there is also withdrawal in the bank 30.00 not in the books.
c. you will notice that the bank withdrawal showed check no. 395 but the amount is 30.00 , an investigation showed that it is actually 3.00 as per the check itself which was the amount recorded by book..
d. comparing the checks issued by the book against the checks paid by the bank
first you must get the list of outstanding last month. say the ff:
check no. 385 20
384 60
383 6
356
386
388
389
total 400
2nd get also the list of checks no. amount in the book, compare now all the check entries of the bank in the list of outstanding check beginning and that of the current checks issued by the book.
after all of these are done, you will notice that , check no. 385, 84, 83 , from the beg. outstanding checks are not still paid by the back hence still outstanding at the end.
also you will notice that check no. 96, 97, 98 are not in the withdrawal column of the bank , that means these still outstanding checks end of the month.
YOU CAN NOW PREPARE THE BANK RECONCILIATION AS FF:
BOOK BANK
UNADJUSTED BALANCES 22,681 42,705
1. proceeds of loan from bank 20,000
2. interest earned 30
3. returned check ( 40)
4. deposit not recorded by book 1
5. cost of checkbook ( 30)
1. deposit in transit 2.28 12.
deposit 2.10 5
2. error by bank.:
actual check 3.00
paid by bank 30.00 27
3. outstanding checks end ( 107)
ADJUSTED BALANCES 42642 42,642
the list of outstanding checks as ff:
balance from last month outstanding checks still unpaid to this month:
check no. 385
384
383
balance from this month checks issued
396
397
398
total outstanding checks end 107.00
LET US NOW PREPARE , THE PROOF OF CASH BANK RECONCILIATION OR THE FOUR COLUMN BANK RECONCILIATION.
BEG DEPOSITS WITDRAWAL END
BALANCE PER BANK 21,130 22,019 444 42,705
1.outstanding check beg (400) (400)
2 outstanding check end 107 (107)
3.deposit in transit beg 1000 (1000 )
4. deposit in transit end 17 17
5. proceeds of loan (20,000) ( 20,000)
6. interest earned (30) ( 30)
7. cost of check (30 ) 30
8. returned checks (40) 40
9. error in check amout (27 ) 27
10. deposit not in book (1) (1 )
balance per book 21,730 1,005 54 22,681
LET ME EXPLAIN ONE BY ONE:
FIRST, PLEASE BE AWARE THAT IN THIS SET UP, IT IS ASSUMED THAT THE BOOK IS CORRECT.
1. THE beginning balance is just the one made last month
2. why the 400 is deducted , because that 400 is part of 444 and that 400 is not anymore in the credits side of the books because that 400 was already credited by the book preveious months.
3. why the 107 is added in the withdrawal column , because that 107 is already recorded in the books credits but not yet recorded in the bank withdrawal, but why deducted from ending balance , because , the book has already deducted that amount from its book balance since those checks are already credited to cash in bank.
4. why 1000 is deducted because that 1000 was already recorded by the book last month but only recorded now in the bank
5. why 17 is added, because the book has already recorded that deposit , bank not yet.
6. why 20,000 deducted , because the book has not recorded it.
7. why 30 deducted from deposits, because the book has not yet recorded it.
8. why 30 cost of check deducted , because , the book has not recorded it. It is added in the ending because the ending balance of bank is reduced because of this amount
9 the returned checks was deducted from wthdrawal because the book has not recorded it and it was added to the balance of the bank because the balance was reduced because of this./
10. the error of 27 is added in the withdrawal because the bank recorded it as 30 but should be 3 or an over credit of 27. , this tends to decrease the bank balance so it was added to the end balance
11. the 1 is deducted from the deposits because it is not in the books, and deducted in teh ending balance
TAKE NOTE THAT YOU CAN also PREPARE THIS METHOD WHERE THE BANK IS PRESUMED CORRECT. SO IT WILL BE JUST A REVERSE.
=========================================================================
PROBLEM
The following data of IBM as of SEPT 30.
ENDING CASH BALANCE PER BANK 15,496.91
ENDING CASH BALANCE PER BOOK 14,692.71
DEPOSIT IN TRANSIT END OF MONTH 2,615.23
OUTSTANDING CHECKS END OF MONTH 25.00
A notes receivable of the company were collected by the bank 1,045.00
TO INCLUDE THE INTEREST INCOME OF 45.00
a check issued by TALIBAN WAS REFLECTED IN THE
WITHDRAWAL COLUMN OF THE BANK 617.08
A CASH SALE WAS MADE AND WAS DEPOSIT
1,,729.00 BUT BUT WAS JORNALIZED AS 1792.00
PREPARE BANK RECONCILIATION.
AND PREPARE ENTRY====
=====================================================================
ON JULY 2, APPLE CO. RECEIVES BANK STATMENT FOR JUNE 30.,
BANK BALANCE 5,680
BOOK BAL 3,275
1. COLLECTION OF JUNE 30 , DEPOSITED JULY 1
2. OUTSTANDING CHECKS END 12,310
3. COLLECTION OF NOTES FOR 150.00 LESS COLLECTION FEES OF 25.0 WAS NOT TAKEN BY THE CO.
4. THE BANK CHARGED THE COM. FOR OVERDRAFT 80
5. A CANCELLED CHECK OR PAID CHECKS ISSUED TO A SUPPLIER FOR 9,618 WAS RECORDED AS 9,168 IN BOOKS.
PREPARE BANK RECON
========================================================================
PROBLEM 3
the following data was available in the bank reconciliation made for june. WHAT WAS THE TOTAL OUTSTANDING CHECKS END OF MAY LAST MONTH
CHECKS PAID BY THE BANK IN JUNE 17,180
BANK CHARGES BY BANK 30
SERVICE CHARGE BY BANK IN MAY AND
RECORDED IN TH BOOK JUNE 20
TOTAL CREDITS TO CASH BY BOOK JUNE 19,802
A DEBIT BY BANK ON RETURNED CHECK
IN JUNE , NO ENTRY IN BOOK YET 100
RETURNED CHECK DEBIT BY BANK IN MAY
BUT REDEPOSIT BY BOOK IN JUNE ( NO ENTRY
IN MAY ,NOR IN JUNE BY THE COM. 250
OUTSTANDING CHECKS JUNE 8,060
DEP. INTRANSIT JUNE END 600
SOLUTION GUIDE.
THE UNKNOWN IS THE OUTSTANDING CHECK END OF LAST MONTH.
IN COMPUTING FOR THE OUTSTANDING CHECKS END OF MONTH , THE FF; PROCEDURE
BEG OUTSTANDING 100
PLUS ISSUED CHECKS 25
TOTAL EXPECTED TO BE DEBITED BY BANK 125
less: ACTUAL DEBIT BY BANK FOR PAID CHECK ( 80)
STILL OUTSTANDING CHECKS END 45
HAVING THIS AS A GUIDE, AND THE UNKNOWN IS THE BEG OUSTANDING , YOU SIMPLY DO A WORK BACK TECHNIQUE
OUTSTANDING END 45
add actual debit by bank 80
total 125
less. issued checks by the company 25
end outstanding 100
in the case at hand , the outstanding checks amount is 5,438
TO BE EASIER FOR YOU TO DETERMINE THE UNKNOWN ESPECIALLY WHEN A MATHEMATICAL COMPUTATION IS ONLY NEEDED, SIMPLY DRAW THE SEQUENCE OF THE ADDITION AND SUBTRACTION AND FILL IT WITH THE AVAILABLE FIGURE AND BY WORK BACK YOU CAN COMPUTE FOR THE UNKNOWN
IN THE ABOVE TECHNIQUE, THERE MAY BE TWO UNKNOWN SAY , THE ISSUED CHECKS BY BOOK AND THE PAID BY BANK and yet to can still reconstruct to arrive at the unknown.
IN THE BANK RECONCILIATION , ONE OF THE DIFFICULT TO ANALIZE IS THE RETURNED CHECK OF THE NSF CHECKS.
ESPECIALLY WHEN THE COMPANY'S RULE IS THE RETURNED check DEPOSIT BY THE BANK IS NOT NECESSARILY CREDITED TO CASH IN BANK by the company , IN THE ASSUMPTION THAT ANYWAY IT WILL BE REDEPOSITED , THE PROBLEM IS SOMETIMES THE PAYOR OR THE DRAWER OF THAT CHECK WILL REDEEMED or recall THE CHECK AND REPLACED IT BY NEW ONE WHICH NECESSITATES THE ISSUING OF OFFICIAL RECEIPT AND MAKING A DEBIT TO CASH IN BANK. , FORGETTING THAT THERE WAS NO credit TO CASH WHEN THAT WAS RETURNED BY THE BANK.
the book ledger would appear like this
DR CR. balance
deposit 100
returned check of 1000 no entry
check replacement 100 200
so assuming the returned has no entry, then the replacement check was entered as deposit again. there will be a reconciling item,
the procedure where the returned check will have no entry in the assumption that anyway this will be redeposited is not a proper way, because the redeposit of this check will be covered by a deposit slip, though will not be covered by an OFFICIAL RECEIPT and therefore will not be debited to cash in bank but you may be confused because how come there is a deposit slip but has no official receipt.
but in case the drawer of that check has recall the check and issue a replacement check with of course has a different check no. ,it would be necessary that an OFFICIAL RECEIPT be issued and an entry debiting cash in bank will made and the returned check has no entry, then a reconciling will occur.
ANOTHER CONFUSION THERE IS IF THE RETURNED WILL BE REDEPOSITED THAT WILL BE COVERED AGAIN BY A DEPOSIT SLIPS , THAT IT MAY BE MERGED TO A NUMEROUS CHECKS COLLECTION. THE BANK NOW HAS TWO ENTRIES ON THAT SAME CHECK ,WHILE THE BOOK MAY ONLY HAVE ONE DEPOSIT ENTRY., IF THE COMPANY IS NOT CREDITING THE RETURNED AND NOT DEBITING CASH WHEN IT IS REDEPOSITED.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROBLEM 4
TYLER CO. STARTED BUSINESS OCT 1.. ON THAT DATE , THE COM HAS 4,000 CASH BALANCE. THE FOLLWING TRANSACTIONS TRANSPIRED.
TYLER THE BANK
OCT DEPOSITS 7,350 7,110
OCT CHECKS ISSUED AND PAID respectively 6,290 6,130
oct. bank charges 10
oct. balance 5,070 4,970
november deposits 8,220 8,280
nov. checks 9,410 9,220
november bank charge 15
notes collected by bank in november include int. income 1,015
oct bank charge only in november recorded by company 10
november cash balances 3,870 5,030
prepare four column bank reconciliation. END OF NOV. use this format
BEG BAL COLLECT DISBURSE END BAL
PER BOOK 5,070 8,220 9420 3,870
CORRECTED BOOK ____________________________________________________
PER BANK 4,970 9,295 9,235 5,030
CORRECTED BANK_________________________________________________________
THE TECHNIQUE
RECONCILE FIRST THE BEG. BALANCE, SINCE THERE IS NO BANK RECON MADE LAST OCT.
ALTHOUGH THERE IS A DATA IN OCTOBER . THERE IS DEPOSIT IN TRANSIT BECAUSE THE BOOK DEPOSITS IS BIGGER, THERE IS ALSO OUTSTANDING CHECKS BECAUSE THE ISSUED CHECKS IS BIGGER THAN THE PAID CHECKS BY BANK.
TAKE NOTE THAT THE DEPOSIT IN TRANSIT LAST OCT END IS LIKELY TO BE PART OF THE BANK DEPOSITS IN NOVEMBER., WHERE THAT DEPOSIT WAS ALREADY RECORDED BY THE BOOK IN OCT. AND SO A RECON ITEM IN DEPOSIT COLUMN.
IN THE DISBURSEMENT COLUMN , THE POSSIBLE RECON ITEM IS THE BANK CHARGES
TAKE NOTE THAT THE OUTSTANDING CHECK END OF OCT, MAY BE PAID BY BANK IN NOVENMBER BUT THIS IS ALREADY RECORDED BY BOOK IN OCT.
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