Bank Reconciliation

A bank reconciliation is an important Internal Control over the Cash account. By comparing the records in our accounting system to the statements received from the bank, we can ensure that our records are complete and error-free.

Concept: Bank Reconciliation: Bank Column

5m

Concept: Bank Reconciliation: Book Column

6m

Problem: A company has a current balance in its Cash account of $3,400. The bank statement arrived showing a bank balance of $5,900. Prepare the cash reconciliation noting the following events:

• Deposits in transit total $600

• EFT receipt of dividend revenue of $900

• Bank error: the bank deducted $100 for a check written by another company.

• Service charge $20

• NSF check from a customer $50

• Book error: Company Check no. 333 was recorded for $510. The actual amount paid on account was $150.

• Outstanding checks total $2,010

12m

Bank Reconciliation Additional Practice Problems

The proper treatment on the bank reconciliation of NSF checks returned with the statement is to

a. add them to the book balance of cash.

b. add them to the bank balance of cash.

c. deduct them from the book balance of cash.

d. deduct them from the bank balance of cash.

Watch Solution

The proper treatment on the bank reconciliation of outstanding checks is to

a. add them to the book balance of cash.

b. add them to the bank balance of cash.

c. deduct them from the book balance of cash.

d. deduct them from the bank balance of cash.

Watch Solution

After a bank reconciliation is performed, journal entries will be required for which of the following?

a. Outstanding checks

b. A bank error

c. An NSF check from a customer

d. Deposits in transit

Watch Solution

When preparing a bank reconciliation for ABC Company, all but which of the following would be considered deductions on the book side?

a. A customer’s bounced check

b. A fee charged for checks ordered by ABC Company

c. Outstanding checks

d. A check error for Check #101, where the company wrote the check for $250 but recorded the check in the general ledger for $25.

Watch Solution

A bank statement

a. lets a depositor know the financial position of the bank as of a certain date.

b. is a credit reference letter written by the depositor's bank.

c. is a bill from the bank for services rendered.

d. shows the activity which increased or decreased the depositor's account balance.

Watch Solution

A firm 's bank reconciliation statement shows a book balance of $31,640, an NSF check of $800, and a service charge of $40. The service charge is

a. Deducted from the bank balance

b. Added to the bank balance

c. Deducted from the book balance

d. Added to the book balance

Watch Solution

In preparing a bank reconciliation, a service charge shown on the bank statement should be:

a. Added to the balance per the bank statement.

b. Deducted from the balance per the bank statement.

c. Added to the balance per the depositor's records.

d. Deducted from the balance per the depositor's records.

Watch Solution

When preparing a bank reconciliation, an NSF check will:

a. Increase the balance per depositor's records.

b. Decrease the balance per depositor's records.

c. Increase the balance per the bank statement.

d. Decrease the balance per the bank statement.

Watch Solution

After preparing a bank reconciliation, a journal entry would be required for which of the following?

a. A deposit in transit.

b. A check for $48 given to a supplier but not yet recorded by the company's bank.

c. Interest earned on the company's checking account.

d. A deposit made by another company and mistakenly credited to your account.

Watch Solution

The bookkeeper prepared a check for $68 but accidentally recorded it as $86. When preparing the bank reconciliation, this should be corrected by:

a. Adding $18 to the bank balance.

b. Subtracting $18 from the bank balance.

c. Adding $18 to the book balance.

d. Subtracting $18 from the book balance.

Watch Solution