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Bank Reconciliation - Solved

Sarah prepares a bank reconciliation statement for her business account. Her ledger shows a credit balance of $2,759 but the bank statement shows $131. Adjusting entries are needed for unpaid charges, a deposit not recorded, a withdrawal not recorded, an incorrectly recorded cheque, a lodgement not yet processed, interest not yet paid, unpresented cheques, and a cancelled cheque not recorded. After corrections, Sarah's ledger shows an overdrawn balance of $302, reconciling with the adjusted bank statement balance. The overdrawn balance will be reported in Sarah's final accounts.

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MUHAMMAD NADEEM
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0% found this document useful (0 votes)
598 views2 pages

Bank Reconciliation - Solved

Sarah prepares a bank reconciliation statement for her business account. Her ledger shows a credit balance of $2,759 but the bank statement shows $131. Adjusting entries are needed for unpaid charges, a deposit not recorded, a withdrawal not recorded, an incorrectly recorded cheque, a lodgement not yet processed, interest not yet paid, unpresented cheques, and a cancelled cheque not recorded. After corrections, Sarah's ledger shows an overdrawn balance of $302, reconciling with the adjusted bank statement balance. The overdrawn balance will be reported in Sarah's final accounts.

Uploaded by

MUHAMMAD NADEEM
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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At the end of each month, Sarah prepares a bank reconciliation statement

for
her business bank account. At 31 May 2007 her ledger balance was $2,759
(credit) and her bank statement showed that she had funds of $131 at the
bank. She has the following information:

(i) The bank debited Sarah’s account with charges of $129 during May.
Sarah has not recorded these charges.

(ii) Sarah arranged for $2,500 to be transferred from her personal bank
account into the business bank account. The bank made the transfer on
30 May, but Sarah has not made any entry for it in her records.

(iii) On 22 May, Sarah withdrew $100 cash which she did not record.

(iv) Cheque number 543987, which Sarah issued to a supplier, appears


on the bank statement as $650. Sarah incorrectly recorded the cheque
as $560.

(v) On 31 May, Sarah lodged $457. On the bank statement, this amount is
dated 3 June.

(vi) Sarah was advised by the bank that she earned $52 interest for the
period in May that her account was in credit. Sarah recorded this in May,
but the bank did not credit her account until June.

(vii) Three of the cheques issued in May, with a total value of $942, were not
debited on the bank statement until after 31 May.

(viii) A cheque for $276, issued to a supplier, was cancelled but Sarah has
not recorded the cancellation of the cheque.

Required:
(a) Show the bank account in Sarah’s general ledger, including any
adjusting entries required due to the information given in points (i) to
(viii). Note: You MUST present your answer in a format which clearly
indicates whether each entry is a debit or a credit.
(b) Prepare a reconciliation of the bank statement balance to the corrected
balance on the bank account in Sarah’s general ledger.
(c) Indicate how the bank balance will be reported in Sarah’s final
accounts, and the value to be reported.
Bank account
Bank Account

(ii) Transfer 2,500 Balance as given 2,759


(viii) Cancelled cheque 276 (i) Charges 129
(iii) Cash withdrawal 100
Balance (corrected) 302 (iv) Corrected cheque 90
3,078 3,078
Balance 302

Balance per statement 131


Add Outstanding lodgement (v) 457
Interest (vi) 52 509
640
Less Unpresented cheques ( vii) (942)
Revised balance (302)
The negative balance confirms that the bank account is overdrawn.

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