a.
A bank reconciliation statement is prepared to project the causes of the difference between the bank account balance as per the bank statement and the bank balance as per the accounting records. There can be multiple reasons why these two balances may appear to be different. Some of the examples may be that checks issued but not cleared by the bank, checks received from the customer deposited into the bank but not reflected in the statement, check from a customer returned due to insufficiency of funds, direct debit due to bank charges, etc.
The ending balance as per the bank statement and the accounting records should be the starting point and all the necessary adjustments are to be made to or from both of these balances to arrive at a common balance called Adjusted Balance. While arriving at the uniform adjusted balance proves the accuracy of the bank reconciliation statement.
Requirement 1
To prepare:
The bank reconciliation statement of Severino Co. as of December 31st.
b.
The month-end journal entries are required to be passed for only those entries affecting the accounting balance for adjusting the book balance to the reconciled balance. These entries will alter the cash balance and bring it up to the adjusted or reconciled balance.
Requirement 2
To prepare:
The journal entries as of December 31st register the reasons for differences between the balance as per the statement and as per the books.
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