Q21E - Horngren'S Financial And Managerial Accounting

Question

Preparing a bank reconciliation

Hardy Photography’s checkbook lists the following:

Date Check No. Item Check Deposit Balance

Nov. 1 \( 500

4 622 Quick Mailing \) 45 455

9 Service Revenue \( 135 590

13 623 Photo Supplies 85 505

14 624 Utilities 45 460

18 625 Cash 50 410

26 626 Office Supplies 110 300

28 627 Upstate Realty Co. 290 10

30 Service Revenue 1,235 1,245

Hardy’s November bank statement shows the following:

Learning Objective 6

1. Adjusted Balance \)1,137

Balance

Deposits

Checks: No. Amount

622 \( 45

623 85

624 105*

625 50

Other charges:

Printed checks

Service charge

Balance

*This is the correct amount for check number 624.

\) 500

135

(285)

(48)

$ 302

23

25

Requirements

1. Prepare Hardy Photography’s bank reconciliation at November 30, 2018.

2. How much cash does Hardy actually have on November 30, 2018?

3. Journalize any transactions required from the bank reconciliation.

Step-by-Step Solution

Answer

The cash account is credited with $25.

Step 1: Definition of bank reconciliation statement

The bank reconciliation statement is the statement prepared to remove the errors of bank balance and cash balance.

Step 2: Bank reconciliation statement

In the bank reconciliation statement, there are two sides one is the bank, and the second is the book side. On the bankside, the opening balance of the bank account is entered. After this, the amount of deposit transit is added to the bank balance, and the number of outstanding checks is deducted.

The second side of the bank reconciliation statement is started with the opening balance of the company’s book. After this, the amount of bank collection and interest revenue is added to the balance, and the amount of service charge is deducted from the book side balance.

Guard Dog Security Systems
Bank Reconciliation Statement
November 30, 2018
Bank		Book
Balance, November 30, 2018	$302	Balance, November 30, 2018	$1,245
Add:		Add:
Deposit in transit	$1,235
	$1,537		$1,245
Less:		Less:
Outstanding Checks:		Error Check 624	$60
Check 626	$110	Printed checks	$23
Check 627	$290	Service Charge	$25
Adjusted bank balance, November 30, 2018	$1,137	Adjusted cash balance November 30, 2018	$1,137

In this, the error check is subtracted because the wrong amount of the check is recorded in the book balance.

Step 3: Cash balance

On November 30, 2018, their cash balance was $1,137.

Step 4: Journal entries

Date	Particulars	Debit	Credit
November 30	Utilities Expense	$60
	Cash		$60
	(To record the payment of utilities expense)
November 30	Bank Expense	$23
	Cash		$23
	(To record the payment of printed check expenses)
November 30	Bank Expense	$25
	Cash		$25
	(To record the payment of service charges)

The following entries are passed for the payment of utilities expense, printed check expense and service charge.