Chapter 6, Problem 8E

To determine

Bank reconciliation: A procedure through which difference between bank balance provided in the bank statement and bank balance appearing in the books of account, is being ascertained at a particular point of time of a company is known as bank reconciliation

To prepare: Table for monthly bank reconciliation on September 30.

Explanation of Solution

Given items added or subtracted from bank balance or book balance is showing in below table. Further, any item required to be adjusted also showing here.

SI.	Bank Balance		Book Balance			Not shown on the reconciliation
	Add	Deduct	Add	Deduct	Adjust
1						X
2			X		Dr.
3						X
4	X
5				X	Cr.
6						X
7				X	Cr.
8			X		Dr.
9						X
10				X
11	X
12				X	Cr.

1. NSF check returned from a customer is not recorded in the reconciliation table because the maker of the check does not have sufficient balance required for the transaction to be done.

2. Interest earned increases the bank balance thus it increases book balance as well by added to the table of reconciliation.

3. In such case on September 5 transaction would not be recorded until or unless bank records or increases the bank balance for respective deposits.

4. Since bank balance of the company has increased, same would be added to the bank balance.

5. Service charges levied by the bank decreases the bank balance thus it would be deducted in the book balance as well.

6. If checks are outstanding not cleared by the bank then it would be adjusted at the time when bank would consider it.

7. Since check is cleared but not recorded by the company’s record keeper then it would decrease the bank balance. Hence, deducted from the book balance.

8. Principal and interest collected would increase bank balance that is why added to the book balance.

9. Check written and mailed would not be shown in the table of reconciliation since it occurred on October 2 while reconciliation table is made as on September 30.

10. Checks written would decrease the bank balance that is why deducted from book balance as well.

11. Deposit increases bank balance thus added to the bank balance.

12. Bank charges decreases bank balance. Hence, deducted from the book balance.

Thus, 1,3,6,9 will not be shown in the reconciliation.