Bank Reconciliation= Reconciliation of Cash Balance

Internal Control for cash= a good control for cash should provide adequate procedure for
protecting both cash receipts and cash disbursements
Three Basic Principles

1.) There should be separation of duties so that the people responsible for handling cash for
its custody are not the same people who keep records.
2.) All cash receipts should be deposited in bank intact each day.
3.) All payments should be made by checks.

Bank Balance 4,608 Bank Balance 3,934

Add: Collection fee of note 300 Add: Deposit 1,500
Interest Earned 12 Bank 20
4,920 5,454

Deduct: Service Charge 16 Deduct: Outstanding 750

NSF Charge 200 Checks
Reconciled Balance 4704 Reconciled Balance 4704

Problem 2- The following information was available to reconcile

a.) After all posting was completed on July 31, the companys cash account had a $6,550 but
its bank statement showed $5,745 balance.
b.) Check No. 555 for $500, No. 444 $700 were outstanding on June bank statement. Check
No. 444 was returned with the July cancelled checks, but check No. 555 was not.
c.) In comparing the cancelled checks returned, it was found that check no. 400for the
purchase of equipment was correctly drawn for $1,216 but as entered in the accounting
records as though it were for $2,116. It was also found that check No. 535 for $5,775 and
check No. 537 for $850 were not among that cancelled checks returned with the
statements.
d.) A credit memorandum indicated that the bank had collected a $2,000 note, deducted a
$50 collection fee.
e.) A debit memorandum for $1,500 listed a $1,490 NSK check plus $10 NSF charge.
f.) Also among the cancelled checks was a $50 debit memorandum for bank services.
g.) The July cash receipts $9,230 were placed in the banks night depository after banking
hours and the amount did not appear on the bank statement.

Book Bank

Beginning Balance 6,550 Beginning Balance 5,745

Error 990 OC# 555 (500)
Notes Collected 2,000 OC# 535 (5,775)
Collection Fee (50) OC# 537 (850)
NSF Check (1,490) Unrecorded Deposit 9,230
Bank Charge (50)
7,850 7,850