The January bank statement sent by Awash bank to RAM campany shows Br.5,000.17. Assume also that on January 31,2000,the cash account of RAM Co shows a balance of Br.4,262.83. The accountant of RAM campany has identified the following items.
1. A deposit of Br.410.90 made after banking hour on Jan 31 doesn't appear on the bank statement.
2. Two checks issued in January have not yet been paid by the bank.
Check No.301 Br.110.65
Check No.342 607.50
3. A credit memorandum was included in the bank statement,which was for proceeds for collection of a non interest bearing note receivable from MAN campany Br.524.74
4. Three debit memorandum accompanied the bank statement:fee charged bank for handling collection of note receivable Br.5; a check of Br.50.25 received from customer, RON campany, and deposited by RAM campany charged bank as NSF; and service charge by bank for the month of January amount to Br.12.00
5. Check No.305 was issued by RAM campany for payment of telephone expense in the amount of Br.85 but was erroneously recorded in the cash payments journal as Br.58
Based on the given information, we can prepare the following reconciliation for RAM Company's cash account:
RAM Company's Cash Account Reconciliation - January 31, 2000:
Balance per bank statement: Br. 5,000.17
Add:
1. Deposit after banking hours on Jan 31: Br. 410.90
Adjusted balance per bank: Br. 5,411.07
Less:
2. Outstanding checks:
- Check No.301: Br. 110.65
- Check No.342: Br. 607.50
Total outstanding checks: Br. 718.15
Adjusted balance per bank after outstanding checks: Br. 4,692.92
Add:
3. Credit memorandum - Collection of note receivable: Br. 524.74
Adjusted balance per bank after credit memorandum: Br. 5,217.66
Less:
4. Debit memorandums:
- Fee charged by bank: Br. 5.00
- Check received from customer - NSF: Br. 50.25
- Service charge for January: Br. 12.00
Total debit memorandums: Br. 67.25
Adjusted balance per bank after debit memorandums: Br. 5,150.41
Adjusted balance per bank: Br. 5,150.41
Balance per cash account: Br. 4,262.83
Add:
5. Correction for erroneous recording:
- Check No.305: Br. 27.00 (Br. 85 - Br. 58)
Adjusted balance per cash account: Br. 4,289.83
The adjusted balance per bank and the adjusted balance per cash account do not yet match. To reconcile the two, you may need to review the transactions further or check for any additional errors or items not yet considered.
To reconcile the cash balance of RAM Company, we need to make adjustments for the items identified. Let's go through the steps one by one:
Step 1: Start with the balance per the bank statement.
- Balance per bank statement: Br.5,000.17
Step 2: Adjust for deposits in transit.
- Deposit made after banking hours on Jan 31: Br.410.90
- Add the deposit to the balance per bank statement: Br.5,000.17 + Br.410.90 = Br.5,411.07
Step 3: Adjust for outstanding checks.
- Check No.301: Br.110.65
- Check No.342: Br.607.50
- Deduct both outstanding checks from the adjusted balance: Br.5,411.07 - (Br.110.65 + Br.607.50) = Br.4,692.92
Step 4: Adjust for credit memorandum.
- Credit memorandum for note receivable from MAN Company: Br.524.74
- Add the credit memorandum to the adjusted balance: Br.4,692.92 + Br.524.74 = Br.5,217.66
Step 5: Adjust for debit memorandums.
- Debit memorandum for fee charged by the bank: Br.5
- Debit memorandum for a check received from customer RON Company, charged by the bank as NSF: Br.50.25
- Debit memorandum for service charge by the bank: Br.12.00
- Deduct the total of the debit memorandums from the adjusted balance: Br.5,217.66 - (Br.5 + Br.50.25 + Br.12.00) = Br.5,150.41
Step 6: Compare the adjusted balance to the company's cash account balance.
- Balance per company's cash account on Jan 31: Br.4,262.83
Step 7: Identify any differences between the adjusted balance and the company's cash account balance.
- Adjusted balance: Br.5,150.41
- Cash account balance: Br.4,262.83
- Difference: Br.5,150.41 - Br.4,262.83 = Br.887.58
Step 8: Investigate the difference and make necessary adjustments.
- Check No.305 was erroneously recorded in the cash payments journal as Br.58 instead of Br.85.
- Adjust the cash account balance by the difference: Br.4,262.83 - Br.58 + Br.85 = Br.4,262.83 + Br.27 = Br.4,289.83
- Adjusted difference: Br.5,150.41 - Br.4,289.83 = Br.860.58
After investigating, the adjusted difference is Br.860.58. Further analysis may be needed to identify the exact cause of the remaining difference. It's recommended to review transactions and reconcile them with supporting documentation to ensure accuracy.