Chapter 8

1. Chapter 8 Cash and Internal Controls

2. Bank Statement Balance Add: Deposits in transit Deduct:Outstanding Checks 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 Reconciling Items

3. Bank Reconciliation Example Let’s prepare a November 30 bank reconciliation statement for Jamboree Enterprises. • The November 30 bank statement indicated a balance of $38,520. • The cash general ledger account on that date shows a balance of $16,380. Additional information necessary for the reconciliation is shown on the next two screens.

4. Then book and bank balances were as detailed on the preceding slide. Checks No. 2024 for $4,810 and no. 2036 for $5,000 are outstanding. A $1,000 rent check was erroneously recorded in the records as $880. The Nov. 30 deposit of $17,150, which had been deposited the previous night did not appear on the bank statement. A check written by Jumbo enterprises in the amount of $160 was erroneously drawn against Jamborees acct. Bank Reconciliation Example

5. A credit memo indicated a collection of $30,000 plus $900 interest was collected on Jamboree’s behalf, but hadn’t been recorded in the accounting records. A debit memo for $1,100 lists a $1,100 NSF check received from a customer, Marilyn Welch. Jamboree had not recorded the item. Bank service charges for November total $40. These charges have not been recorded by Jamboree. Bank Reconciliation Example

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7. Only amounts shown on the book portion of the reconciliation require an adjusting entry. Here is the entry to record the increase to cash. Recording Adjusting Entries from a Bank Reconciliation

8. Only amounts shown on the book portion of the reconciliation require an adjusting entry. Here are the entries to record the decreases to cash. Recording Adjusting Entries from a Bank Reconciliation