EX 7-16 Bank reconciliation Obj. 5 Identify each of the following reconciling it
ID: 2563618 • Letter: E
Question
EX 7-16 Bank reconciliation Obj. 5 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 bank debit and credit memos have been recorded by the company.) 1. Bank service charges, $75 2. Check of a customer returned by bank to company because of insufficient funds, $880. 3. Check for $275 incorrectly recorded by the company as $725 4. Check for $100 incorrectly charged by bank as $1,000. 5. Deposit in transit, $5,550 6. Outstanding checks, $10,350. 7. Note collected by bank, $12,720.Explanation / Answer
a. Addition to the balance per bank:
--Check for $100 incorrectly charged by banks as $1,000.
--Deposit in transit, $5,550
Explanation: Incorrect entries have to be corrected and deposit in process are added to the the balance per bank
b. Deduction from the balance per bank:
--Outstanding checks, $10,350
Explanation: Cheques which are not cleared yet have to be deducted from the balance per bank
c. Addition to the balance per company’s records:
--Check for $275 incorrectly recorded by the company as $725
--Note collected by bank, $12,720
Explanation: Incorrect entries and direct receipts by bank to be added in company's record
d. Deduction from the balance per company’s records:
-- Bank service charges, $75
--Check of a customer returned by bank to company because of insufficient funds, $880
Explanation: Direct payments/ return from bank will be deducted
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