Question

(Bank Reconciliation and Adjusting Entries) Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.

June 30 Bank Reconciliation Statement
Balance per bank	\(7,000
Add: Deposit in transit	1,540
Less: Outstanding checks	(2,000)
Balance per books	\)6,540

Month of July Results
	Per Bank	Per Books
Balance July 31	\(8,650	\)9,250
July Deposits	5,000	5,810
July Checks	4,000	3,100
July note collected (not included in July deposits)	1,000	-
July bank service charge	15	-
July NSF check from a customer, returned by the bank (recorded by bank as a charge)	335	-

Instructions

(a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance.

(b) Prepare the general journal entry or entries to correct the Cash account.

Answer

Short answer

The correct balance is$9,900.

Step-by-step solution

Definition of Bank Reconciliation Statement

A bank reconciliation statement can be defined as the statement prepared by the business entity to correct the balance of the cash account of the business entity.

Bank Reconciliation Statement

Particular	Amount $
Balance as per bank passbook	$8,650
Add:
Deposit in Transit	2,350
Less:
Outstanding checks	(1,100)
Correct Bank balance	$9,900
Balance as per book	$9,250
Add:
Collection of notes	1,000
Less:
Service charge	(15)
NSF checks	(335)
Correct cash balance	$9,900

Working note:

Calculation of deposit in transit:

Particular	Amount $
Deposit as per book	$5,810
Less: deposit as per bank	(5,000)
	810
Add: Deposit in transit as per reconciliation	1,540
Deposit in transit	$2,350

Calculation of outstanding checks:

Particular	Amount $
Checks issued as per book	$3,100
Less: Checks cleared by bank in July	(4,000)
Add: Outstanding checks in BRS	2,000
Outstanding checks	$1,100

Journal Entries for Correcting the Cash Account

Date	Accounts and Explanation	Debit $	Credit $
30 June	Cash	$650
	Office Expense	$15
	Accounts receivables	$335
	Note receivable		$1,000