Question

A company's Cash account shows a balance of $3,490 at the end of the month. Comparing the company's Cash account with the monthly bank statement reveals several additional cash transactions such as bank service fees ($50), an NSF check from a customer ($330), a customer's note receivable collected by the bank $(1,800), and interest earned $(100). Prepare the necessary entries to adjust the balance of cash.
1. Record the entries that increase cash
2. Record the entries that decrease cash

Answer 1

Answer:

1. Debit Cash account $1,900

  Credit Accounts receivable $1,800

  Credit Interest Income $100

2. Debit Accounts receivable  $330

   Debit Bank charge $50

   Credit Cash account $380

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.

Considering the transactions that are the reconciling items  in the question, the transactions that will;

Increase cash are a customer's note receivable collected by the bank $(1,800), and interest earned $(100)

Decrease cash balance are bank service fees ($50), and an NSF check from a customer ($330)