The following data were accumulated for use in reconciling the bank account of Mathers Co. for July:
1. Cash balance according to the company’s records at July 31, $32,110.
2. Cash balance according to the bank statement at July 31, $31,350.
3. Checks outstanding, $2,870.
4. Deposit in transit, not recorded by bank, $4,150.
5. A check for $170 in payment of an account was erroneously recorded in the check register as $710.
6. Bank debit memo for service charges, $20.
a. Prepare a bank reconciliation, using the format shown in Exhibit 13.
b. If the balance sheet is prepared for Mathers Co. on July 31, what amount should be reported for cash?
c. Must a bank reconciliation always balance (reconcile)?
Answer:
a.Cash balance according to bank statement$31,350
Add deposit in transit, not recorded by bank4,150 Deduct outstanding checks2,870 Adjusted balance$32,630 Cash balance according to company’s records$32,110 Add error in recording check as $710 instead of $170540 Deduct bank service charge20 Adjusted balance$32,630 b. $32,630; the adjusted balance from the bank reconciliation should be reported on the July 31 balance sheet for Mathers Co. c. Yes. The bank reconciliation must always balance (reconcile) to an adjusted balance.