car’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2021. Date Amount No. Date Amount Deposits: 2/4 $ 2,250 Checks: 321 2/2 $ 4,250 2/11 1,850 322 2/8 550 2/18 2,750 323 2/12 2,050 2/25
Oscar’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2021.
| Date | Amount | No. | Date | Amount | |||||||
| Deposits: | 2/4 | $ | 2,250 | Checks: | 321 | 2/2 | $ | 4,250 | |||
| 2/11 | 1,850 | 322 | 2/8 | 550 | |||||||
| 2/18 | 2,750 | 323 | 2/12 | 2,050 | |||||||
| 2/25 | 3,650 | 324 | 2/19 | 1,750 | |||||||
| Cash receipts: | 2/26-2/28 | 1,150 | 325 | 2/27 | 350 | ||||||
| $ | 11,650 | 326 | 2/28 | 850 | |||||||
| 327 | 2/28 | 1,450 | |||||||||
| Balance on February 1 | $ | 6,350 | $ | 11,250 | |||||||
| Receipts | 11,650 | ||||||||||
| Disbursements | (11,250 | ) | |||||||||
| Balance on February 28 | $ | 6,750 | |||||||||
Information from February's bank statement and company records reveals the following additional information:
- The ending cash balance recorded in the bank statement is $10,580.
- Cash receipts of $1,150 from 2/26–2/28 are outstanding.
- Checks 325 and 327 are outstanding.
- The deposit on 2/11 includes a customer's check for $350 that did not clear the bank (NSF check).
- Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount.
- An automatic withdrawal for Oscar's February rent was made on February 4 for $1,100.
- Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $155.
- In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,100 from Oscar. On February 24, Titanic paid $5,350 ($5,100 borrowed amount plus $250 interest) directly to Academy Bank in payment for January's borrowing.
- Academy Bank charged service fees of $125 to Oscar’s for the month.
The process of trying to match the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement is known as bank reconciliation. The goal of this process is to identify the differences between the two and make necessary changes to the accounting records. The data on the bank statement is the bank's record of all exchanges affecting the entity's bank account during the previous month.
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