Bank Reconciliation Identify each of the following reconciling items as: (a) an

Question

Bank Reconciliation

Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company's records, or (d) a deduction from the cash balance according to the company's records. (None of the transactions reported by the bank debit and credit memos have been recorded by the company.)

1. Bank service charge, $36.

2. Check drawn by company for $375 but incorrectly recorded by company at $735.

3. Check for $50 incorrectly charged by bank as $500.

4. Check of a customer returned by bank to company because of insufficient funds, $1,200.

5. Deposit in transit, $12,375.

6. Outstanding checks, $14,770.

7. Note collected by bank, $10,600.

Explanation / Answer

Transaction Treatment Bank service charge a deduction from the cash balance according to the company's records Check drawn by company for $375 but incorrectly recorded by company at $735. an addition to the cash balance according to the company's records Check for $50 incorrectly charged by bank as $500. an addition to the cash balance according to the bank statement, Check of a customer returned by bank to company because of insufficient funds, $1,200. a deduction from the cash balance according to the company's records. Deposit in transit, $12,375. an addition to the cash balance according to the bank statement Outstanding checks, $14,770. a deduction from the cash balance according to the bank statement, Note collected by bank, $10,600. an addition to the cash balance according to the company's records

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