Queestion #2 Star Systems Company has provided their completed bank reconciliati

Question

Queestion #2

Star Systems Company has provided their completed bank reconciliation for the month of August 2015

Star System Company

Bank Reconciliation

Month of August 31, 2015

Cash balance per bank statement

$ 33,650.00

Outstanding checks at the end of the month

A check written by Star System for $1,800 was

was incorrectly charged by the bank as $1,180

$(630.00)

Deposit in transit at the end of the month

Adjusted balance

Cash balance according to the ledger

Note receivable collect by the bank

Interest on note receivable collected by the bank

Bank service fee

A check for $390 returned with the bank statement had been incorrectly recorded by Start System as $930

      $540.00

Adjusted balance

Required:

A Prepare the journal entries for the above bank reconciliation.

B Explain why a bank reconciliation is a form of internal control.

C Identify the dollar amount for Cash that will be reported on Star System’s Balance Sheet at August 31, 2015.

Cash balance per bank statement

$ 33,650.00

Outstanding checks at the end of the month

$(17,865)

A check written by Star System for $1,800 was

was incorrectly charged by the bank as $1,180

$(630.00)

Deposit in transit at the end of the month

$9,150.00

Adjusted balance

$24,305.00

Cash balance according to the ledger

$17,750.00

Note receivable collect by the bank

$5,750.00

Interest on note receivable collected by the bank

$345.00

Bank service fee

$(80.00)

A check for $390 returned with the bank statement had been incorrectly recorded by Start System as $930

      $540.00

Adjusted balance

$24,305.00

Explanation / Answer

Answer A. Journal Entry Date Particulars Dr Amount Cr Amount 31.08.2015 Bank A/c                                                                Dr. $630    To Accounts Payable A/c $630 (Adjustment Entry passed for the Chq. Written as $1800 was incorrectly charged by Bank as $1180) 31.08.2015 Bank A/c                                                                 Dr. $6,095     To Note Receivable A/c $5,750     To Int. on Note receivable A/c $345 (Note Receivable and Interest collected by Bank directly) 31.08.2015 Bank Charges A/c                                                Dr. $80    To Bank A/c $80 (Bank Charges charged by Bank) 31.08.2015 Bank A/c                                                                 Dr. $540    To Account Payable A/c            $540 (Adjustment entry for check for $390 returned was incorrectly recorded as $930) Answer B. Bank Reconcilation Statement is a statement prepared by the account holder on a particular date to reconcile the bank balance as per Cash Book with the Balance as per Bank statement or Bank Pass Book showing entries causing differences between the two balances. Bank Reconcilation Statement is a form of internal control due to following reasons: 1. BRS brings to light errors that may be committed either in Cash book or in the Bank Statement. 2. Undue delay in clearing of cheques deposited is known for BRS. 3. Regular BRS discourage embezzlements. 4. BRS helps the management to verify the accuracy of entries recorded in the Cash Book. Answer C Dollar amount for Cash that will be reported in Balance Sheet at August 31, 2015 - $24395 Bank Account Particulars Amount Particulars Amount To Balance B/f $17,750 By Bank Charges A/c                        $80 To Accounts Payable A/c $630 To Note Receivable A/c $5,750 By Balance C/f $24,935 To Int. on Note receivable A/c $345 (Balancing Figure) To Accounts Payable A/c $540 $25,015 $25,015

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