Question

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation? Check for $95 recorded by the company as $59. Deposit of $400 recorded by the bank as $40. Check for $93 recorded by the company as $39. A returned $900 check recorded by the bank as $90.

Answer 1

Answer:

Cheque for $93, recorded by the company as $39

Explanation:

The goal of a reconciliation statement is to ascertain the differences between the banks records and the depositor’s records and make accounting changes as deemed appropriate. There is a general flow that is used to make the correcting entries:

1. The process flow starts with the bank’s ending cash balance

2. Add any deposits made by the company to the bank that are in transit

3. Deduct any cheques that are uncleared by the bank

4. Add or deduct any other differences available as necessary

5. In the company bank records, once again start with the ending balance

6. Add interests earned

7. Deduct any bank service fees, penalties and NSF (Non-Sufficient Funds) cheques.

8. Add or deduct any other differences available as necessary

At the end of this process, it is likely that both accounts would be equal and tally.

The above transaction mentioned is an error by the company in recording the transaction where it has overstated the cash book balance. Hence, the difference of $54 ($93 - $39) would be deducted in the company’s books in order to help tally with the bank’s balance.