Chap006wildtextbook

Why are the balances different 6 14 first national

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Why are the balances different? 6-14 First National Bank Nashville, TN 37459 May 31, 2011 Clothes Mart Nashville, TN Acct No 278609 Previous Balance Total Checks Total Deposits Current Balance 1488.79 1,367.09 2,604.22 2,725.92 5/1 107 55.00 5/2 1,251.88 5/4 108 279.50 5/7 109 44.75 5/9 110 21.81 5/12 111 37.55 5/15 825.04 5/18 112 175.98 5/21 113 288.31 5/27 114 12.54 5/30 527.30 5/31 115 451.65 Bank Statement GENERAL LEDGER Account: Cash Acct. No. 102 Balance Date Item PR Debit Credit DR (CR) May 31 Balance 2,481.18
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Reconciling Items Bank Statement Balance l Add : Deposits in transit. l Deduct: Outstanding Checks l Add or Deduct : Bank errors. Book Balance Add : Collections made by the bank. Add : Interest earned on checking account. Deduct : Nonsufficient funds check (NSF). Deduct : Bank service charge. Add or Deduct : Book errors. 6-15
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Bank Reconciliation Two sections: 1. Reconcile bank statement balance to the adjusted bank balance. 2. Reconcile book balance to the adjusted book balance. The adjusted balances should be equal. 6-16
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Bank Reconciliation Example Let’s prepare a July 31 bank reconciliation statement for the Simmons Company. n The July 31 bank statement indicated a balance of $9,610. n The cash general ledger account on that date shows a balance of $7,430. Additional information necessary for the reconciliation is shown on the next screen. 6-17
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Bank Reconciliation Example 1. Outstanding checks totaled $2,417. 2. A $500 check mailed to the bank for deposit had not reached the bank at the statement date. 3. The bank returned a customer’s NSF check for $225 received as payment on account receivable. 4. The bank statement showed $30 interest earned during July. 5. Check No. 781 for supplies expense cleared the bank for $268 but was erroneously recorded in our books as $240.
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