Question

Preparing a bank reconciliation

The Cash account of Guard Dog Security Systems reported a balance of \(2,540 at December 31, 2018. There were outstanding checks totaling \)400 and a December 31 deposit in transit of \(100. The bank statement, which came from Park Cities Bank, listed the December 31 balance of \)3,340. Included in the bank balance was a collection of \(510 on account from Brendan Ballou, a Guard Dog customer who pays the bank directly. The bank statement also shows a \)30 service charge and $20 of interest revenue that Guard Dog earned on its bank balance. Prepare Guard Dog’s bank reconciliation for December 31.

Short answer

The ending balance of the bank reconciliation statement is $3,040.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of the bank reconciliation statement

A bank reconciliation statement is a statement that is prepared to remove the difference in the balance of cash balance and bank balance.

Bank reconciliation statement

In the bank reconciliation statement, there are two sides one is the bank, and the second is the book side. On the bankside, the opening balance of the bank account is entered. After this, the amount of deposit transit is added to the bank balance, and the number of outstanding checks is deducted.

The second side of the bank reconciliation statement is started with the opening balance of the company’s book. After this, the amount of bank collection and interest revenue is added to the balance, and the amount of service charge is deducted from the book side balance.

Guard Dog Security Systems
Bank Reconciliation Statement
December 31, 2018
Bank		Book
Balance, December 31, 2018	$3,340	Balance, December 31, 2018	$2,540
Add:		Add:
Deposit in transit	$100	Bank Collection	$510
	$3,440	Interest Revenue	$20
			$3,070
Less:		Less:
Outstanding Checks	$400	Service Charge	$30
Adjusted bank balance, December 31, 2018	$3,040	Adjusted cash balance December 31, 2018	$3,040