Question

in comparing the canceled checks on the bank statement with the entries in the accounting records, obrien company found that check number 4239 for mays rent was correctly written and drawn for 9855 but was erroneously entered in the accounting records as 9585 when preparing the may bank reconciliation the obrien company should

Answer 1

In the preparation of a bank reconciliation statement, the Obrien Company should make a deduction of $270 from the cash balance.

What is bank reconciliation?

The rectification of errors in the bank accounts and entries is done via bank reconciliation. In the above case, bank reconciliation is required for rectification of entry errors in the following way,

• There is no need for rectification in bank balance, as the deduction in the bank balance is error-free;
• Cash balance showed an erroneous entry of $9585, instead of $9855;
• The difference between the correct entry and erroneous entry of $(9855-9585)=$270 shall be made in the cash balance of the books.

Hence, the significance of bank reconciliation to be done by the O'brien Company is given as above.

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