The following June 30 bank reconciliation was prepared for Poway Co.
Poway Co. Bank Reconciliation For the Month Ended June 30 Cash balance according to bank statement . . . . . . . . . . . . . . . . . . . . . . . . . . $16,185 Add outstanding checks: No. 1067. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 575 1106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 1110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050 1113. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 3,005 $19,190 Deduct deposit of June 30, not recorded by bank . . . . . . . . . . . . . . . . . . . . 6,600 Adjusted balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,590 Cash balance according to company’s records . . . . . . . . . . . . . . . . . . . . . . . $ 8,985 Add: Proceeds of note collected by bank: Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,000 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 $6,300 Service charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 6,315 $15,300 Deduct: Check returned because of insufficient funds . . . . . . . . . . . . . . . . $ 890 Error in recording June 17 deposit of $7,150 as $1,750 . . . . . . . 5,400 6,290 Adjusted balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,010
a. Identify the errors in the following bank reconciliation:
b. Prepare a new bank reconciliation for Poway Co., using the format shown in the illustrative problem.
Answer:
a.
1. The heading should be “June 30,” and not “For the Month Ended June 30.”
2. The outstanding checks should be deducted from the balance per bank.
3. The deposit of June 30, not recorded by the bank, should be added to the balance per bank.
4. Service charges should be deducted from the balance per company’s records.
5. The error in recording the June 17 deposit of $7,150 as $1,750 should be added to the balance per company’s records.
6. The adjusted balances ($12,590 and $9,010) are not equal.
b. A correct bank reconciliation would be as follows: Cash balance according to bank statement$16,185 Add deposit of June 30, not recorded by bank6,600 Deduct outstanding checks: No. 1067$ 575 1106470 11101,050 1113910 3,005 Adjusted balance$19,780 Cash balance according to company’s records$ 8,985 Add: Note and interest collected by bank $6,300 Error in recording June 17 deposit as $1,750 instead of $7,1505,400 11,700 Deduct: Check returned because of insufficient funds $ 890 Service charges15 905 Adjusted balance$19,780