Chapter Five CASH & Bank Reconciliation
Chapter Five CASH & Bank Reconciliation Chapter Five CASH & Bank Reconciliation Learning Objective After study this chapter, you should be able to : 1- Define internal control and identity its purpose and principles . 2- Describe the objectives of cash management and internal control over cash. 3- Prepare a bank reconciliation and explain its purpose. 4- Record entries of bank reconciliation. 5- مطابقة رصيد املصرف Adjustments the Bank Balance ناد اًر ما يتساوى الرصيد الشهري بموجب الكشف مع رصيد السجالت لممودعين ، فتسجيل الصفقات من قبل المودعين ربما ال تسجل بموجب المصرف ، وأن األمثمة الشائعة هي : ( )8 صكوك موقوفة :Outstanding checks صكوك أصدرت وسجمت من قبل الشركة ولكنها لم تقدم إلى المصرف لصرفها . ( )2 إيداعات بالطريق :Deposit in transit مبالغ استممت وسجمت من قبل المودعين ولكنها وصمت متأخرة إلى المصرف . باإلضافة إلى ذلك هناك عمميات ظهرت في كشف المصرف ولكنها لم تسجل لدى المودعين (السجالت) ، ومن األمثمة . ( )8 خدمات مصرفية ) :Service charges (SC عادتا ما يستقطع المصرف عمولة إتعاب عمى الحسابات الصغيرة . ( )2 صكوك مرفوضة :NSF(non-sufficient fund) checks عندما يتم إيداع الصكوك المستممة من الزبائن كإيداعات ، وقد يكون المبمغ الموجود في رصيد الزبون غير كافي وبذلك فأن المصرف سوف يعيد الصك إلى المودع لعدم كفاية الرصيد . ( )3 إيراد الفوائد الدائنة : interest collected by banks في نهاية كل شهر يتم احتساب الفائدة الدائنة بحساب المودع ويتم التقرير عنها . ( )4 الخدمات المصرفية المتنوعة ، تأخذ المصارف مصاريف خدمات مثل طباعة الصكوك ،Printing checks وتحصيل أوراق القبض Collection fee ومعالجة الصكوك المرفوضة وهذه المصاريف تستقطع من حساب المودع ، ويتم تحرير مذكرة مدينة ترسل إلى المودع . في كشف تسوية المصرف األرصدة يتم وضع الرصيد بموجب الكشف ورصيد المصرف في السجالت والتسويات عمى كال الرصيدين لموصول إلى الرصيد الصحيح كما في الشكل . [ ]88
Chapter Five CASH & Bank Reconciliation Bank Reconciliation Adjustments to the bank balance Cash balance per bank statement (before adjusted) Deposit in transit إيداعات بالطريق - Outstanding checks شيكات مسحوبة لم تقدم للصرف or - Bank errors أخطاء بنكية Adjusted cash balance per bank رصيد النقدية المعدل xx xx (xx) xx xx Adjustments to the book balance Cash balance per books (before adjusted) xx Notes receivable and interest collected by banks xx - Collection fee أتعاب تحصيل (xx) - Printing checks طباعة شيكات (xx) - Service charges (SC) خدمات مصرفية (xx) - NSF(non-sufficient fund) checks ( شيكات مرتجعة لعدم كفاية الرصيد xx) or - Book errors ) أخطاء ارتكبتها المنشأة (المودع xx Adjusted cash balance per books رصيد النقدية المعدل xx Example 1: Cash balance per bank, 31/3 Cash balance per books, 31/3 Outstanding checks NSF checks Printing checks Collection of note receivable Deposits in transit 6690 6000 1000 500 10 400 200 Instructions: (a) Prepare a bank reconciliation at March 31 (b) Journalize the entries required by the reconciliation. Solution (a) Bank reconciliation Adjustments to the bank balance Cash balance per bank statement (before adjusted) Deposit in transit - Outstanding checks Adjusted cash balance per bank ]82[ 6690 200 (1000) 5890
Chapter Five CASH & Bank Reconciliation Adjustments to the book balance Cash balance per books (before adjusted) Collection notes receivable - Printing checks NSF (non-sufficient fund) checks Adjusted cash balance per books 6000 400 (10) (500) 5890 (b) Accounts receivable 500 Bank Miscellaneous expense 10 Bank Bank 400 Notes receivable 500 10 400 Example 2 : At July 31, Rami Company has the following bank information: cash balance per bank 7420, outstanding checks 762, deposits in transit 1120 and a bank service charge 20 . Instructions: Determine the adjusted cash balance per bank at July 31. Cash balance per bank statement (before adjusted) 7420 Deposit in transit 1120 - Outstanding checks (762) 7778 Example 3 : At August 31, Hani Company has a cash balance per books of 8500 and the following additional data from the bank statement: charge for printing Hani Company checks 35, interest earned on checking account balance 40, and outstanding checks 800. Instructions: Determine the adjusted cash balance per book at August 31. Cash balance per books (before adjusted) 8500 Interest earned 40 - Printing checks (35) Adjusted cash balance per books 8505 ]83[
Chapter Five CASH & Bank Reconciliation Exampled 4 : Cash balance per bank, 31/5 Outstanding checks NSF checks Service charges (SC) Collection of note receivable Deposits in transit 12000 3000 1000 100 1500 2000 Instructions: Determine the cash balance per books at May31. (before adjusted). Bank Reconciliation Adjustments to the bank balance Cash balance per bank statement (before adjusted) Deposit in transit - Outstanding checks Adjusted cash balance per bank 12000 2.000 (3000) 11000 Adjustments to the book balance Cash balance per books (before adjusted) Collection of note receivable 1500 - Service charges (SC) - NSF (non-sufficient fund) checks Adjusted cash balance per books x (100) (1000) 11000 Adjusted cash balance per bank Adjusted cash balance per books 11.000 X 1500 - 100 – 1000 11000 X 400 11.000 X 10600 Adjustments to the book balance Cash balance per books (before adjusted) Collection of note receivable - Service charges (SC) (100) - NSF (non-sufficient fund) checks Adjusted cash balance per books ]84[ 10600 1500 (1000) 11000
Chapter Five CASH & Bank Reconciliation Example 5 : ABC Company's bank statement for May 2008 shows the following data. Balance 5/31 14,280 Debit memorandum: NSF check 175 Credit memorandum: Collection of note receivable 505 The cash balance per books at May 31 is 13,319 . Your review of the data reveals the following. 1. The NSF check was from XYZ Co., a customer. 2. The note collected by the bank was a 500, 3-month, 12% note. The bank charged a 10 collection fee. No interest has accrued. 3. Outstanding checks at May 31 total 2,410. 4. Deposits in transit at May 31 total 1,752. 5. XYZ Company check for 352, dated May 10, cleared the bank on May 25. The company recorded this check, which was a payment on account, for 325. Instructions : (a) Prepare a bank reconciliation at May 31. (b) Journalize the entries required by the reconciliation. (a) Bank reconciliation May 31, 2008 Cash balance per bank statement (before adjusted) Deposit in transit - Outstanding checks Adjusted cash balance per bank Cash balance per books (before adjusted) Collection of notes receivable Interest earned (500 x12% x 3/12) - Collection fee - NSF (non-sufficient fund) checks - Book errors ( 325 - 352) Adjusted cash balance per books ]85[ 14,280 1,752 (2.410) 13622 13319 500 15 (10) (175) (27) 13622
Chapter Five CASH & Bank Reconciliation (b) Bank Bank 500 Notes receivable 15 Interest Revenue 500 15 Miscellaneous expense 10 Bank Accounts receivable 175 Bank Accounts payable 27 Bank 10 175 27 Bank May 31 Bal. 13.319 500 15 May 31 Bal. 13.622 10 175 27 Example 6 : National oil company's books show a Cash balance at the Rafidain Bank on Nov , 30 , 2007 , of (20502) . The bank Statement the month Of Nov , Shows an ending balance of (22190) . The examination of the Company's records and bank Statement identified the following reconciling items . (1) A deposit of (3680) that the Company mailed Nov , 30 , dose not appear on the bank Statement . (2) Checks Written in Nov . but enraged to the Nov . bank Statement in the following month are : Cheek Number 7327 at 150 Number 7348 at 4820 Number 7349 at 31 (3) The Company has not yet recorded the (600) of interest collated by the bank Nov . 20 on Iraqi store company bonds held by the bank for the company . (4) Bank service charges of (18) are not yet recorded on the company book. ]86[
Chapter Five CASH & Bank Reconciliation (5) The bank returned one of the company's checks for (220) with the bank statement , marked ((NSF)) (6) The company discovered that it in correctly recorded check 7322 , written in Nov for (131) in payment of an recount payable as (311). (7) A check for national company in the amount of (175) that the bank in correctly charged to national oil company Required : Reconcile bank statement balance and the cash balance in the records to the correct balance . Balance per bank statement 22190 (end Of Period) Add : Deposit in transit 3680 Bank error – incorrect 175 Deduct : outstanding checks (5001) Correct Cash balance 21044 Balance per books Add : Interest Collected by the bank Error in recording 20502 600 180 Deduct : Bank Service Charges NSF check returned Correct Cash balance Bank 600 Interest ( 88) (220) 21044 . * القيــود تسجــل في السج ــالت 600 Add : Bank 180 A/P 180 Bank charges 18 Bank 18 Deduct: A/R 220 Bank 220 Example 7 : The following information pertains to Terry's Pest Control Company (TPCC) for July: (1) The unadjusted bank balance at July 31 was 870. (2) The bank statement included the following items: ]87[
Chapter Five CASH & Bank Reconciliation (a) 60 credit memo for interest earned by TPCC. (b) A 200 NSF check made payable to TPCC. (c) A 110 debit memo for bank service charges. (3) (4) The unadjusted book balance at July 31 was 1,400. A comparison of the bank statement with company accounting records disclosed the following : (a) A 400 deposit in transit at July 31. (b) Outstanding checks totaling 120 at the end of the month. Required: Prepare a bank reconciliation& Prepare in general journal Solution : TERRY'S PEST CONTROL COMPANY Bank Reconciliation July 31 Unadjusted bank balance Add: Deposits in transit Less: Outstanding checks True cash balance Unadjusted book balance Add: Interest revenue Less: NSF check Less: Bank service charges True cash balance Ref. 1 2 3 Account Title 870 400 (120) 1150 1400 60 (200) (110) 1150 Debit Bank Interest revenue 66 Accounts receivable Bank 266 Bank service charge expense Bank 886 Credit 66 266 ]88[ 886
Chapter Five CASH & Bank Reconciliation Q 1- Choose the correct answer A-The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is : a. outstanding Checks. b. deposit in transit. c. a bank error. d. bank service charges. B/Quinn Company's bank statement at January 31 shows a balance of 13360, while the ledger account for Cash in Quinn's ledger shows a balance of 12890 at the same date. The only reconciling items are the following: Deposit in transit, 890. Bank service charge, 24. A 426 NSF check . Error in recording check no .398 for rent :check was written in the amount of 1320 , but was written improperly in the accounting records as 1230. Outstanding checks ?. Required: what is the total amount of Outstanding checks at January 31? A. 1048 B.868 C .1900 D 1720 Q 2/: As of May 31, 2009, the bank statement showed an ending balance of 18500. The unadjusted cash account balance was 16950. The following information is available: (1) Deposit in transit, 2630. (2) Credit memo in bank statement for interest earned. in May, 25. (3) Outstanding check, 4208. (4) Debit memo for bank service charge, 53. Required a. Determine the true cash balance by preparing a bank reconciliation as of May 31, 2009. b. Record adjusting entries necessary . ]89[
Chapter Five CASH & Bank Reconciliation Q 3/: The following information is available for Marble Company for the month of August : (1) The unadjusted balance per the bank statement on August 31 was 57800. (2) Deposits in transit on August 31 were 2900 . (3) A debit memo was included with the bank statement for a service charge of 20. (4) A 5620 check written in August had not been paid by the bank. (5) The bank statement included a 1000 credit memo for the collection of a note. The principal of the note was 950, and the interest collected was 50 . Required Determine the true cash balance as of August 31,& Record adjusting entries necessary. Q 4/: Smith Company had an unadjusted cash balance of 8.550 as of April 30. The company's bank statement, also dated April 30, included a 100 NSF check written by one of Smith's customers. There were 920 in outstanding checks 250 in deposits in transit as of April 30 . According to the bank statement , service charges were 75, and the bank collected a 700 note receivable for Smith. The bank statement also showed 12 of interest revenue earned by Smith. Required Determine the true cash balance as of April 30,& Record adjusting entries necessary. Q 5/: Tom Landry owns a construction business, Landry Supply Co. The following cash information is available for the month of October 2008 . As of October 31, the bank statement shows a balance of 13800 . The October 31 unadjusted balance in the Bank account of Landry Supply Co. is S12700. A review of the bank statement revealed the following information: (1) A deposit of 1600 on October 31, 2008 , does not appear on the October 31 bank statement. (2) A debit memo for 250 was included in the bank statement for the purchase of a new supply of checks. ]96[
Chapter Five CASH & Bank Reconciliation (3) When checks written during the month were compared with those paid by the bank, three checks amounting to 4450 were found to be outstanding . (4) It was discovered that a check to pay for repairs was correctly written and paid by the bank for 3100 but was recorded on the books as 1600 . Required Prepare a bank reconciliation at the end of October showing the true cash balance. Prepare any necessary journal entries to adjust the books to the true cash balance. Q 6/: The following data apply to Owens Sports, Inc., for April 2009 : 1-Balance per the bank on April 30, 12250. 2- Deposits in transit not recorded by the bank, 2700. 3- Bank error; check written by Owens on his personal checking account was drawn on the Owens Sports, Inc., account, 900 . 4- The following checks written and recorded by Owens Sports, Inc., were not included in the bank statement . 1901 250 1920 580 1921 1650 5- Credit memo for note collected by the bank, 1100. 6- Service charge for collection of note, 10 . 7- The bookkeeper recorded a check written for 560 to pay for April's office supplies as 650 in the cash disbursements journal . 8- Bank service charge in addition to the note collection fee, 40. 9- NSF checks returned by the bank, 150. Required Determine the amount of the unadjusted cash balance per Owens Sports, Inc.'s books,& Record adjusting entries necessary. ]98[
Chapter Five CASH & Bank Reconciliation ]92[
CASH & Bank Reconciliation Learning Objective After study this chapter, you should be able to :- 1- Define internal control and identity its purpose and principles . 2- Describe the objectives of cash management and internal control over cash. 3- Prepare a bank reconciliation and explain its purpose. 4- Record entries of bank reconciliation. 5-
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TO KILL A MOCKINGBIRD. Contents Dedication Epigraph Part One Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Part Two Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18. Chapter 19 Chapter 20 Chapter 21 Chapter 22 Chapter 23 Chapter 24 Chapter 25 Chapter 26
