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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Chapter 6 Solutions
FINAN. AND MANAGERIAL ACCT. CONNECT+PROC
- Richard has the following potential liabilities: William, a former employee, has sued Richard for $880,000. Richard contacted his attorney, and the case is believed to be frivolous. Carter sued Richard for an undisclosed amount for a class action lawsuit. Richard thinks it's frivolous, but his attorneys indicate a loss is probable for $88,000. Charles sued Richard because he slipped outside of Richard's store. The claim is $264,000 and Richard is certain he will lose the case but believes Charles will settle. The attorneys agree and based on conversations with Charles's attorneys, have stated that it is remote the claim will be settled for $255,200. Charles's attorneys indicated he would be willing to accept either cash of $242,000 or shares of Richard's closely-held common stock currently valued at $233,200. Richard would prefer not to settle in cash. Richard is suing William for $264,000 because William is in violation of a non-compete agreement he has with Richard. Richard is…arrow_forwardNeed answer the financial accounting question not use aiarrow_forwardHow much were SMS's liabilities on these general accounting question?arrow_forward
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