The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6: 1. Cash balance according to the company's records at August 31, $23,680. 2. Cash balance according to the bank statement at August 31, $24,660. 3. Checks outstanding, $4,810. 4. Deposit in transit, not recorded by bank, $3,860. 5. A check for $340 in payment of an account was erroneously recorded in the check register as $430. 6. Bank debit memo for service charges, $60.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Bank Reconciliation**

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. **Cash balance** according to the company's records at August 31, $23,680.
2. **Cash balance** according to the bank statement at August 31, $24,660.
3. **Checks outstanding**, $4,810.
4. **Deposit in transit**, not recorded by bank, $3,860.
5. A **check** for $340 in payment of an account was erroneously recorded in the check register as $430.
6. **Bank debit memo** for service charges, $60.
Transcribed Image Text:**Bank Reconciliation** The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6: 1. **Cash balance** according to the company's records at August 31, $23,680. 2. **Cash balance** according to the bank statement at August 31, $24,660. 3. **Checks outstanding**, $4,810. 4. **Deposit in transit**, not recorded by bank, $3,860. 5. A **check** for $340 in payment of an account was erroneously recorded in the check register as $430. 6. **Bank debit memo** for service charges, $60.
The image contains a bank reconciliation template for Creative Design Co. as of August 31, 20Y6. The reconciliation involves several steps to adjust the bank and company records to reach a final adjusted balance.

**Bank Reconciliation Steps**

1. **Balance According to Bank Statement**
   - Initial bank statement balance: $23,680
   - Add: Deposit in transit on August 31: $3,860
   - Deduct: Outstanding checks: $4,810
   - Adjusted bank balance: $22,730

2. **Balance According to Company’s Records**
   - Initial company records balance: (left blank)
   - Add: Error in recording check: (left blank)
   - Deduct: Bank service charge: (left blank)
   - Adjusted company balance: (left blank)

**Additional Questions**

b. The question asks what amount should be reported for cash on Creative Design Co.’s balance sheet as of August 31.

c. It inquires whether a bank reconciliation must always reconcile.

**Diagram/Template Explanation**

The document uses a tabular format to display the bank reconciliation process. For both the bank statement and the company's records, the columns are structured to show the initial balance, adjustments (additions and deductions), and the final adjusted balance. The purpose is to ensure both the bank's records and the company's financial records are consistent and accurate. Several entries are marked with ticks and crosses, indicating important points to consider during reconciliation.
Transcribed Image Text:The image contains a bank reconciliation template for Creative Design Co. as of August 31, 20Y6. The reconciliation involves several steps to adjust the bank and company records to reach a final adjusted balance. **Bank Reconciliation Steps** 1. **Balance According to Bank Statement** - Initial bank statement balance: $23,680 - Add: Deposit in transit on August 31: $3,860 - Deduct: Outstanding checks: $4,810 - Adjusted bank balance: $22,730 2. **Balance According to Company’s Records** - Initial company records balance: (left blank) - Add: Error in recording check: (left blank) - Deduct: Bank service charge: (left blank) - Adjusted company balance: (left blank) **Additional Questions** b. The question asks what amount should be reported for cash on Creative Design Co.’s balance sheet as of August 31. c. It inquires whether a bank reconciliation must always reconcile. **Diagram/Template Explanation** The document uses a tabular format to display the bank reconciliation process. For both the bank statement and the company's records, the columns are structured to show the initial balance, adjustments (additions and deductions), and the final adjusted balance. The purpose is to ensure both the bank's records and the company's financial records are consistent and accurate. Several entries are marked with ticks and crosses, indicating important points to consider during reconciliation.
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