Question

Nolan Company's cash account shows a $22,064 debit balance and its bank statement shows $22,531 on deposit at the close of business on June 30.
a. Outstanding checks as of June 30 total $2,655.
b. The June 30 bank statement lists $24 in bank service charges; the company has not yet recorded the cost of these services.
c. In reviewing the bank statement, a $50 check written by the company was mistakenly recorded in the company’s books as $59.
d. June 30 cash receipts of $2,200 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement.
e. The bank statement included a $27 credit for interest earned on the company’s cash in the bank. The company has not yet recorded interest earned.

Required:
Prepare a bank reconciliation using the above information.

Answer 1

Answer:

Nolan Company

Bank Reconciliation

June 30

                                                                                                     $

Balance per cash book                                                            22,064

Less: Bank Service charges                                                    (       24)

Add: Error in  recording payment ( $ 59- $ 50)                                9

Add: Interest earned                                                                       27

Adjusted balance per cash book                                           22,076

Balance per bank statement                                                    22,531

Less: Outstanding checks                                                       (  2,655)

Add; Deposits in Transit                                                             2,200

Adjusted balance per bank statement                                     22,076      

     

Explanation:

The bank service charges and the interest earned appear on the bank statement and has to be adjusted in the cash book balance. The errors found in recording the payment at $ 59 instead of  $ 50 results in an overpayment and the correction needs to be added to the cash book balance

the outstanding checks has not yet been cleared by the bank so there is a reduction on the bank statement balance. The deposits in transit has not been received by the bank so needs to be adjusted as an addition on the bank statement balance.