Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the...
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Transcript of Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the...
![Page 1: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/1.jpg)
Bank reconciliation
• Cash account is Debit in our records but Credit in bank’s records (as from the bank’s view the entity is a creditor).
• The bank sends the entity a summary of the transactions in the form of a bank statement, thereby allowing a comparison of records.
![Page 2: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/2.jpg)
Reasons balance in bank statements does not equal
cash account• Timing differences
– Outstanding checks– Deposits in transit
• New Information– Bank fees (SC), FID– Interest paid/received– NSF checks– Direct deposits
• Errors
![Page 3: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/3.jpg)
Reconciliation process
• Schedule that explains the differences between bank statement balance and company’s cash balance is called a bank reconciliation.
![Page 4: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/4.jpg)
Balance as per bank statement:
+ Deposits in transit (outstanding deposit) – Outstanding checks+ or – Bank errors = Adjusted cash balance: bank
NB: Non of the above need to be recorded in company’s records, i.e. journal entries.
No Entries
![Page 5: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/5.jpg)
Cash balance per ledger:
+ Receipts reported on bank statement but not in ledger (e.g. note receivable, direct deposit, interest) – Bank charges – NSF cheques+ or – Bank errors = Adjusted balance as per ledger accountNB: All of the above need to be recorded in company’s records, i.e. journal entries.
![Page 6: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/6.jpg)
ExampleYou have been supplied with the following information produced by comparing the records of Oneup Limited with the most recent bank statement:a debit balance as per cash at bank account in ledger as
at 30 June, $13 100.00.b credit balance as per bank statement as at 30 June,
$17 315.90.c deposits not reflected on bank statement, $2 400.00.d unpresented cheques (outstanding cheques) 30 June, $6 285.90.e service charge on bank statement not recorded in books,
$50.00.f cheque for postage expense, $400.00, incorrectly recorded
in books as $780.00.
1 Prepare a bank reconciliation statement as at 30 June.2 Prepare entries in general journal form to update the
records of Oneup Limited.
![Page 7: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/7.jpg)
OneUp Limited Bank reconciliation statement at 30 J une
Balance as per bank statement 17 315.90 Cr Add: Deposit in transit 2 300.00 19 615.90 Less: Outstanding cheques 6 285.90 Adjusted balance as per cash at bank account
13 330.00 Cr
Ending balance per company records 13 100.00 Cr Add: Correction – cheque for $400
incorrectly recorded as $780
380.00
13 480.00 Deduct: Bank charges 150.00 Adjusted balance as per cash at bank account
13 330.00 Cr
Bank
Books
![Page 8: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/8.jpg)
General journal
J une 30 Bank charges 150.00Cash at bank 150.00
Cash at bank 380.00Postage expense 380.00
![Page 9: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/9.jpg)
Petty cash
• Fund set up to handle small cash expenditures (e.g. postage and miscellaneous supplies). Avoids inconvenience and expense of writing many small cheques.
• Size – depends on number and amounts of minor expenditures.
• Can be maintained by handling the fund on an imprest basis – fund contains a fixed amount.
![Page 10: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/10.jpg)
Prepare the following general journal entries for petty cash
1 Establishing a $200 fundDr. Petty Cash $200 Cr. Cash - Bank $200
2 Replenish the fund – the following expenses had been incurred: postage $27.50, office supplies $50.80, transportation $73.40, coffee $15.90
![Page 11: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/11.jpg)
Journal to replenish fund:
Dr. Postage expense $27.50Dr. Office supplies exp $50.80Dr. Transportation exp $73.40Dr. Miscellaneous exp $15.90
Cr. Cash-Bank $167.60
![Page 12: Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5517f675550346d5568b4db7/html5/thumbnails/12.jpg)
Journal to increase the petty cash fund up to $ 300
Dr. Petty Cash $200 Cr. Cash - Bank $200
Whereas the entry to decrease the petty cash fund:
Dr. Cash-Bank $xxx Cr. Petty Cash $xxx