I'm in my first accounting class and have a take home test and one of the questions covers material we have yet to talk about in class, and there are no examples on the book. The questions is finding the pre adjusted cash balance per the company using information from the bank statement. The reconciling information is as followed:
Cash balance per bank, end of month- $17,000
Note receivable collected by bank- $ 4,800
Outstanding checks- $ 6,500
Deposits-in-transit- $ 3,000
Bank Service Charge- $ 50
NSF check- $ 2,300
I don't really want the answer, but more how to find the answer to the question. I feel like for some reason this should be obvious to me, but I keep staring at the problem and draw a blank and am not sure where to even start with it.
=> A bank reconciliaton statement is mainly used to explain the "time difference"
between the month-ended bank balance on the company's record and that on the
bank statement.
When comparing with the Bank Statement, you need to identify the items
as shown on the bank statements whether they are "adjusted items" (i.e. need to
adjust the company's record) or "non-adjusted items" (i.e. the "time difference" items -
no need to adjust the company's record)
1. Note receivable collected by bank $ 4,800
=> It is an adjusted item
The company omit to record this cash receipts on the company's record.
2. Outstanding checks $ 6,500
=> It is a non-adjusted item.
(The outstanding checks are also called the "Unpresented checks)
The company had issued the checks to their creditors for settling the trade debts
or for the payment of expenses and recorded them in the company's record.
However, the creditors did not deposit the checks into their banks immediately
upon receiving from the Company. So the Company's bank statement do not reflect
such check payments as they have not yet been presented by the Bank.
Whether this check payments reflect on the bank statement is the queston
of time (i.e. when will the creditor deposit the checks into their banks)
3. Deposits-in-transit $ 3,000
=> It is a non-adjusted item.
Such deposit will reflect on the bank statement is only the question of time
(i.e. the time difference)
4. Bank Service Charge $50
=> It is an adjusted item.
The company omit to record this cash payment in the company's record.
5. NSF check $2,300
=> It is an adjusted item.
NSF check is the returned check (or the dishonoured check) as there is insufficient
fund in the customer's bank account.
The Company's record has to be adjusted so as to reverse the cash receipts
which was previously recorded upon receiving this check (which is now proved to be
"dishonoured")
Your question requires you to find out the "pre-adjusted" cash balance per the
company from the Bank Statement, the approach is
1. add back the "non-adjusted" items (as shown on the bank statement) to the
bank balance per bank statement to find out the adjusted cash balance per
the company
2. add back the adjusted items as shown on the balance sheet to the adjusted
cash balance to find out the pre-adjusted cash balance per the company
Try to work out the answer by yourself !!!!
(p.s. the answer is $11,050)
