Question

Chavez Company most recently reconciled its bank statement and book balances of cash on August 31 and it reported two checks outstanding, No. 5888 for \(1,028.05 and No. 5893 for \)494.25. The following information is available for its September 30, 2017, reconciliation.

From the September 30 Bank Statement 16,800.45 9,620.05 11,272.85 18,453.25 PREVIOUS BALANCE TOTAL CHECKS AND DEBITS TOTAL DEPOSITS AND CREDITS CURRENT BALANCE Date 09/03 09/04 09/07 09/20 09/17 09/22 09/22 09/28 09/29 CHECKS AND DEBITS DEPOSITS AND CREDITS 5888 1,028.05 09/05 1,103.75 No. Amount Date Amount 5902 719.90 09/12 2,226.90 5901 1,824.25 09/21 4,093.00 5905 937.00 09/30 12.50 IN 09/25 2,351.70 5903 399.10 09/30 1,485.00 CM 5904 5907 5909 2,090.00 213.85 1,807.65

From Chavez Company’s Accounting Records Cash Acct. No. 101 Date Explanation PR Debit Credit Balance Aug. 31 Balance 15,278.15 Sep. 30 Total receipts R12 11,458.10 26,736.25 30 Total disbursements D23 9,332.05 17,404.20 Cash Receipts Deposited Cash Date Debit Sep. 5 1,103.75 12 2,226.90 21 4,093.00 25 2,351.70 30 1,682.75 11,458.10 Cash Disbursements Check Cash No. Credit 5901 1,824.25 5902 719.90 5903 399.10 5904 2,060.00 5905 937.00 5906 982.30 5907 213.85 5908 388.00 5909 1,807.65 9,332.05

Additional Information

Check No. 5904 is correctly drawn for \(2,090 to pay for computer equipment; however, the recordkeeper misread the amount and entered it in the accounting records with a debit to Computer Equipment and a credit to Cash of \)2,060. The NSF check shown in the statement was originally received from a customer, S. Nilson, in payment of her account. Its return has not yet been recorded by the company. The credit memorandum (CM) is from the collection of a \(1,500 note for Chavez Company by the bank. The bank deducted a \)15 collection expense. The collection and fee are not yet recorded.

Required

Analysis Component

3. The bank statement reveals that some of the prenumbered checks in the sequence are missing. Describe three situations that could explain this.

Short answer

Answer

There are a few possible motivations behind why some pre-numbered checks are absent from the arrangement of cancelled checks got back with a bank statement.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction to topic

Bank Statement- A bank statement is a statement showing the details regarding the banking transaction of an individual, and the bank gives this bank statement.

Reasons include:

(1) Some of the checks in the numbered succession mighthave gone through with the bank in a past periodand werereturned with the bank statement in that past period.

(2) Some of the checks in the numbered grouping might stay outstanding.Provided that this is true, they will be returned with the bank statement in a later period when they go through with the bank.

(3) The issuer of the checks might have voided at least one of the checks in the numbered sequence, maybe due to making an error in writing the checks.

(4) Occasionally, a check will arrive at the bank; however, the bank will incorrectly charge the check to some wrong account. Whenever the bank identifies the mistake, it will return the check independently with a note of clarification to the depositor.