ABC received its bank statement for the month ending March 31, 2002, and reconciled the statement balance to the March 31, 2002, balance in the cash account. The reconciled balance was determined to be $5,600.
The reconciliation recognized the following items:
1. ABC had deposits in transit in the amount of $1,700. These deposits had not been processed by the bank yet.
2. There were outstanding checks totaling $2,000. These are checks written by ABC but not collected yet by the holders of these checks.
3. The bank charged a service charge of $50. ABC was previously unaware of this charge.
4. An NSF check from a customer for $500 was included with the bank statement. ABC had not been previously notified that the check had been returned NSF.
5. Included in the canceled checks was a check actually written for $780. However, it had been recorded as a disbursement of $870.
a. What was the balance in ABC's cash account before recognizing any of the above reconciling items?
b. What was the balance shown on the bank statement before recognizing any of the above reconciling items?
Here is how the adjustments are made:
1. The deposits in transit are added to the bank statement since these are funds that still need to be received by the bank and is money that the company has received from other companies.
2. Outstanding checks are subtracted from the bank statement since these funds still need to be ...
This solution looks at reconciling a bank statement.