Co. for August:
1. Cash balance according to the company’s records at August 31, $31,080.
2. Cash balance according to the bank statement at August 31, $38,280.
3. Checks outstanding, $12,460.
4. Deposit in transit, not recorded by bank, $5,850.
5. A check for $180 in payment of an account was erroneously recorded in the check register as $810.
6. Bank debit memo for service charges, $40.
a. Prepare a bank reconciliation, using the format shown in Exhibit 7.
b. If the balance sheet were prepared for Allenby Co. on August 31, what amount should be reported for cash?
c. Must a bank reconciliation always balance (reconcile)?
Answer:
a.
ALLENBY CO.
Bank Reconciliation
August 31, 20—
Cash balance according to bank statement $38,280
Add deposit in transit, not recorded by bank 5,850
$44,130
Deduct outstanding checks 12,460
Adjusted balance $31,670
Cash balance according to company’s records $31,080
Add error in recording check as $810 instead of $180 630
$31,710
Deduct bank service charge 40
Adjusted balance $31,670
b. $31,670; the adjusted balance from the bank reconciliation should be reported on the August 31 balance sheet for Allenby Co.
c. Yes, the bank reconciliation must always balance (reconcile) to an adjusted balance.