Exercise 8-14 Bank reconciliation LO P3 Wright Company's cash account shows a $30,500 debit balance and its bank statement shows $28,800 on deposit at the close of business on May 31. The May 31 bank statement lists $250 in bank service charges; the company has not yet recorded the cost of these services. Outstanding checks as of May 31 total $7,100. May 31 cash receipts of $7,700 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement. In reviewing the bank statement, a $550 check written by Smith Company was mistakenly drawn against Wright’s account. The bank statement shows a $300 NSF check from a customer; the company has not yet recorded this NSF check. Prepare its bank reconciliation using the above information.

Bank Reconciliation Statement

Balance at Bank as per updated cash book            $29,950

Add Unpresented Cheques                                          $7,100

Less Bank Lodgements not yet credited                   ($7,700)

Balance as per Bank Statement                                $29,350

Explanation:

The first step is to update the Cash Book Bank Balance as follows :

Debit :

Balance as at May 31 (un-adjusted)                           $30,500

Totals                                                                           $30,500

Credit:

Service Charges                                                              $250

Dishonored Cheque                                                        $300

Updated Cash Book Balance (balancing figure)     $29,950

Totals                                                                          $30,500

The next step is to prepare a Bank Reconciliation Statement

Bank Reconciliation Statement

Balance at Bank as per updated cash book            $29,950

Add Unpresented Cheques                                          $7,100

Less Bank Lodgements not yet credited                   ($7,700)

Balance as per Bank Statement                                $29,350

The Bank Statement has an error and must be reported :

After the Error is Reported, the Bank Statement will show a Balance of $29,350.

Adjustment Being as follows,

Balance as at May                                                                  $28,800

Add Back Check Mistakenly drawn against Wright’s account $550

Balance as per Bank Statement                                            $29,350

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