Principles of Financial Accounting · free preview
Bank Reconciliations and Their Associated Journal Entries
A bank reconciliation compares the company's cash ledger with the bank statement and explains every difference through outstanding checks, deposits in transit, bank fees, and interest, generating adjusting entries that bring the book balance to the true cash amount.
1. Why two cash balances disagree
Why two cash balances disagree
2. The reconciliation format
The reconciliation format
3. Journal entries from the reconciliation
Journal entries from the reconciliation
4. The reconciliation as a control
The reconciliation as a control
5. Which side gets journal entries
After completing a bank reconciliation, on which side are journal entries required?
6. Outstanding check treatment
A 480 dollar check written to a supplier has not cleared the bank at month end. Where does it appear in the reconciliation, and what entry does it require?
7. NSF check handling
A customer's 340 dollar deposit is returned for non-sufficient funds. How does the reconciliation treat it, and what is the entry?
8. Reconciliation as control
Why is the monthly bank reconciliation considered such a powerful control over cash?
9. Adjusted balance computation
The bank statement shows 9,200 dollars. Deposits in transit are 1,300 dollars and outstanding checks total 2,450 dollars. Compute the adjusted bank balance in dollars, number only.
10. Service charge entry
A bank statement shows a 12 dollar monthly service charge. In the book-side adjusting entry, which account is debited? Two words.
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