Accounting 2000 Chapter 7 Notes 1 Prepare a bank reconciliation Control Features Use of a Bank Contributes to good internal controls over cash Minimizes the amount of cash on hand Bank reconciliation Company s Books Bank s Books Cash asset Deposits liability XX XX Debit credit debits credits Cash Per Books Cash Per Books Bank Reconciliation Creates a double record of bank transactions company bank Bank Statements Debit Memorandum Bank service charge NSF not sufficient funds Credit Memorandum Collect notes receivable Interest earned 1 Accounting 2000 Chapter 7 Notes Ending balance Night deposit add to bank balance Checks written by co not yet cleared bank subtract from bank balance Service charges interest earned notes receivable NSF add or subtract from bank balance Add subtract bank book Reconcile balance per bank and balance per books co to their adjusted Reconciling the Bank Account corrected true balances Reconciling Items 1 Deposits in transit 2 Outstanding checks 3 Bank memoranda 4 Errors 2 Accounting 2000 Chapter 7 Notes Ending balance memos 3 Accounting 2000 Chapter 7 Notes 4 Subtract add Accounting 2000 Chapter 7 Notes 5 Accounting 2000 Chapter 7 Notes Add Deposit in transit Subtract outstanding checks Add Check Error 443 Notes Receivable Adjusting entries Subtract NSF JR Baron Check printing charges 2201 40 5904 00 12204 85 36 00 1035 00 425 60 30 00 12204 85 6 Accounting 2000 Chapter 7 Notes 7 Cash will always be part of the entry Accounting 2000 Chapter 7 Notes Journal Entries for Bank Reconciliation Journalize the adjusting entries at April 30 on the books of Laird Company To record collection of note receivable by bank Apr 30 Cash 1035 00 Miscellaneous Fee 15 00 Notes Recievable Interest Revenue 1000 50 To record NSF check Apr 30 Accounts recievable IRBoran 425 60 Cash 425 60 To record charge for printing company checks Miscellaneous expense 30 00 Cash To correct error in recording check No 443 Apr 30 Apr 30 Cash 36 00 Acccounts payable 30 00 36 00 8 Accounting 2000 Chapter 7 Notes In class Exercises E7 9 and P7 5A Exercise 7 9 This information relates to the Cash account in the ledger of Treanor Company Balance September 1 16 400 Balance September 30 17 600 Cash Checks deposited 64 000 Checks written 62 800 The September bank statement shows a balance of 16 500 at September 30 and the following memoranda Credits Debits Collection of 1 800 note plus interest of 30 Interest earned on checking account At September 30 deposits in transit were 4 738 and outstanding checks totaled 2 383 1 830 NSF check H Kane 45 Safety deposit box rent 560 60 Instructions a Prepare the bank reconciliation at September 30 2014 b Prepare the adjusting entries at September 30 assuming 1 the NSF check was from a customer on account and 2 no interest had been accrued on the note 16500 4738 2383 18855 17600 1830 45 60 18855 560 Equal each other Cash Balance per bank statement Add deposit in transit Subtract outstanding checks Adjusted bank balance Cash Balance per books company Add collection of notes Add interest Subtract NSF H Kane Subtract safety deposit box rent Adjusted book balance Entries 1 Cash Notes receivable 1830 1800 9 Accounting 2000 Chapter 7 Notes Interest revenue 2 Cash interest revenue 3 accounts receivable HKane 4 miscellaneous expense Cash cash 45 560 60 30 45 560 60 10 Accounting 2000 Chapter 7 Notes Problem 7 5A Zimmerman Company of Shawnee Kansas spreads herbicides and applies liquid fertilizer for local farmers On May 31 2014 the company s Cash account per its general ledger showed a balance of 6 738 90 ending balance per books The bank statement from Shawnee State Bank on that date showed the following balance Checks and Debits XXX Shawnee State Bank Deposits and Credits XXX Daily Balance 5 31 6 968 00 ending statement balance A comparison of the details on the bank statement with the details in the Cash account revealed the following facts 1 The statement included a debit memo of 40 for the printing of additional company checks 2 Cash sales of 883 15 on May 12 were deposited in the bank The cash receipts journal entry and the deposit slip were incorrectly made for 933 15 The bank credited Zimmerman Company for the correct amount 3 Outstanding checks on May 31 totaled 276 25 and deposits in transit were 1 880 15 4 On May 18 the company issued check No 1181 for 685 to M Hartley on account The check which cleared the bank in May was incorrectly journalized and posted by Zimmerman Company for 658 5 A 2 600 note receivable was collected by the bank for Zimmerman Company on May 31 plus 110 interest The bank charged a collection fee of 20 No interest has been accrued on the note Included with the cancelled checks was a check issued by Zinderberg Company to P Conard for 360 that was incorrectly charged to Zimmerman Company by the bank 6 7 On May 31 the bank statement showed an NSF charge of 380 for a check issued by Bev Sullivan a customer to Zimmerman Company on account a Prepare the bank reconciliation at May 31 2014 b Prepare the necessary adjusting entries for Zimmerman Company on May 31 2014 Instructions Cash balance per bank Add deposit in transit 6968 1880 15 11 Accounting 2000 Chapter 7 Notes 276 25 360 00 8931 90 6728 90 2690 00 40 00 50 00 27 00 380 00 8931 90 Subtract outstanding Add bank error Adjusted bank balance Cash balance per books Add collection of notes Subtract check printing charge Subtract may 12th error Subtract may 18th error Subtract NSF 1 Cash 2690 miscellaneous expense 20 notes receivable 2600 interest revenue 110 2 miscellaneous expense 40 cash 40 3 sales rev 50 cash 50 4 accounts payable 27 cash 27 5 accounts receivable 380 cash 380 12