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Prepare a bank reconciliation in proper form for august

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Reference no: EM132018732

Question - The following relates to Tim's Business entity, not Tim the owner. Tim's business prepares monthly bank reconciliations of his cheque account balance. The bank statement for August 2015 indicated the following:

Balance, August 31, 2015

$7,920

Bank service charges for August

20

Interest earned during August

30

NSF (bounced) cheque from a customer previously deposited by Tim

32

Collection of note ($1,000) and the related interest ($40) from customer

1,040

An analysis of cancelled cheques and deposits and the records of Tim revealed the following items:

Cheque account balance per Tim's accounting records August 31

$7,170

Outstanding cheques as of August 31

952

Deposits in transit on August 31

1,310

Error in recording cheque # 247 issued by Tim

90

The correct amount of cheque # 247 is $340, but it was recorded as a cash disbursement of $430. The cheque was issued to pay for inventory purchased. The cheque was written correctly and appeared on the bank statement correctly it was just recorded in Tim's Business accounting records incorrectly.

Required

A) Prepare a bank reconciliation in proper form for August 31, 2015.

B) What amount would Tim report his cash balance in the statement of financial position (balance sheet) at August 31, 2015?

C) Record the transaction (adjustments) Tim will need as a result of this bank reconciliation process?

D) How does the preparation of bank reconciliations aid in internal control?

Reference no: EM132018732

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