Can anyone let me know if I have these correct and if not what am I doing wrong.
1. For each of the following items, indicate whether its amount (i) affects the bank or book side of
a bank reconciliation and (ii) represents an addition or a subtraction in a bank reconciliation:
a. Outstanding checks d. Unrecorded deposits g. Bank service charges
b. Debit memos e. Interest on cash balance
c. NSF checks f. Credit memos
2. Which of the items in part 1 require an adjusting journal entry?
a) Bank , -
b) Books, -
c) Books, -
d) Bank, +
e) Books, +
f) Books, +
g) Books, -
2) All those that affect book
To determine whether each item in question 1 affects the bank or book side of a bank reconciliation, as well as whether it represents an addition or a subtraction, you need to understand the nature of each item.
1. Outstanding checks: These are checks that have been issued by the company but have not yet been cashed or cleared by the bank.
- (i) Outstanding checks affect the book side of a bank reconciliation.
- (ii) Outstanding checks represent a subtraction in a bank reconciliation because they reduce the book balance compared to the bank balance.
2. Unrecorded deposits: These are deposits made to the bank but have not yet been recorded in the company's books.
- (i) Unrecorded deposits affect the book side of a bank reconciliation.
- (ii) Unrecorded deposits represent an addition in a bank reconciliation because they increase the book balance compared to the bank balance.
3. Bank service charges: These are fees charged by the bank for services provided, such as monthly maintenance fees.
- (i) Bank service charges affect the book side of a bank reconciliation.
- (ii) Bank service charges represent a subtraction in a bank reconciliation because they reduce the book balance compared to the bank balance.
4. Debit memos: These are reductions in the company's account by the bank due to various reasons, such as returned checks or bank fees.
- (i) Debit memos affect the bank side of a bank reconciliation.
- (ii) Debit memos represent a subtraction in a bank reconciliation because they reduce the bank balance compared to the book balance.
5. Interest on cash balance: This is the interest earned on the company's cash balance in the bank account.
- (i) Interest on cash balance affects the book side of a bank reconciliation.
- (ii) Interest on cash balance represents an addition in a bank reconciliation because it increases the book balance compared to the bank balance.
6. NSF checks: These are checks that have been returned by the bank due to insufficient funds in the account.
- (i) NSF checks affect the bank side of a bank reconciliation.
- (ii) NSF checks represent a subtraction in a bank reconciliation because they reduce the bank balance compared to the book balance.
7. Credit memos: These are additions in the company's account by the bank, such as a refund or deposit made by the bank.
- (i) Credit memos affect the book side of a bank reconciliation.
- (ii) Credit memos represent an addition in a bank reconciliation because they increase the book balance compared to the bank balance.
Regarding question 2, the items that require an adjusting journal entry are those that affect the book side. Based on the information provided, the items that require an adjusting journal entry are:
- Outstanding checks
- Unrecorded deposits
- Bank service charges
These items need to be adjusted in the company's books to reconcile the bank and book balances accurately.