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Ad libitum [116K]
3 years ago
15

Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.) a) The Cash ac

count balance in the general ledger is accurate, but the bank statement balance is not. b)Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. c) The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.d) We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two.
Business
2 answers:
nlexa [21]3 years ago
6 0

Answer:

b)Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation.

c) The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.

d) We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two

Explanation:

The bank reconciliation is one done between the balance per the books and balance per the bank statement. This is usually as a result of transactions known as reconciling items.

These are items that have either been recognized in books but yet to be recorded by the bank or vice versa, transactions recorded wrongly by one of the parties etc.

Alexandra [31]3 years ago
3 0

Answer: The correct options are B and D.

Explanation: A bank reconciliation statement is prepared for the sole purpose of reconciling the balances reflected in the cash account (cash book) of a business entity and the cash account maintained by the bank on behalf of the business organisation at regular intervals (usually every month).

The normal procedure is to compare entries in your cash account with those in the bank statement provided by your bank. Ideally, all entries are supposed to be in agreement. In other words, all your debit transactions in your cash account should have been in the credit of your bank statement, and all credit transactions should have been on the debit side of your bank statement.

However, the ideal situation is not always achievable in real practice. Timing of certain transactions like check payments can account for a difference in month end balances. To illustrate, a check paid in to your bank would have been recorded as a debit in your cash account but the bank does not usually credit your account with the check amount on the same date. If this transaction occurs on the last day of the month, it would not be reflected until the following month and your current bank statement would show a difference.

Also, some charges are recorded into the debit of your bank statement and this would not be reflected in your cash account until your bank statement is made available. Such differences would also be taken care of by a bank reconciliation statement and in way does this mean your cash account is inaccurate.

So basically, a bank reconciliation statement does not try to prove accuracy or otherwise of your cash account, but it is meant to identify and explain any difference or differences (in terms of entries) between your cash account and the bank records.

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The order from least risky to most risky would be:

1. A rated bonds

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Charlie’s Furniture Store has been in business for several years. The firm's owners have described the store as a "high-price, h
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Answer:

a. Calculate current sales and ROI for Charlie’s Furniture Store.

asset turnover formula = net sales / average assets

0.4 = net sales / $800,000

net sales = $320,000

ROI = net income / investment

net income = $320,000 x 34% = $108,800

ROI = $108,800 / $800,000 = 13.6%

b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie’s currently earns.

net income = net sales x 20% (new margin)

net sales = $108,800 / 20% = $544,000

c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to practically double my sales volume to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required?

sales increase = ($544,000 - $320,000) / $320,000 = 70% increase

d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI.

An extensive market research and a "successful" marketing campaign are generally expensive. Even if the marketing campaign is really successful in increasing sales, costs would also increase. So the equation may or may not change, depending if the contribution margin of the additional units sold will be able to cover the expenses of a complex marketing campaign. If you spend $100 to earn $100 more, your situation hasn't changed at all. Which means that net income may or may not increase, therefore, the profit margin, ROI and asset turnover may not change.

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