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Chapter 7: Q-7-6TI (page 403)

Question: For each of the following items, determine whether the item would be:

a. added to the bank balance

b. subtracted from the bank balance

c. added to the book balance

d. subtracted from the book balance

11. Interest revenue earned

12. NSF check

13. Deposit in transit

14. Service charge

15. Outstanding check

Short Answer

Expert verified

Answer:

11)added to the book balance

12) subtracted from the book balance

13) added to the bank balance

14) subtracted from the book balance

15) subtracted from the bank balance

Step by step solution

01

Definition of outstanding check

Outstanding checks are those checks that are not presented for the payment.

02

Whether the item is added or subtracted

11. Interest revenue is revenue that increases the balance of the company. Hence, it is added to the book balance.

12. NSF check means checks that do not have sufficient balance in the account. Hence, these checks are deducted from the book balance.

13. Deposit in transit is the balance deposited into the bank but not recorded by the bank; hence, this amount is added to the bank balance.

14. Service charges are the charges collected by the bank hence, it deducted from the book balance as it is not recorded in book balance.

15. Outstanding check is the check that is issued but not presented for the payment. Outstanding checks are deducted from the bank balance.

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Most popular questions from this chapter

Defining internal control

Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate accounting records.

Requirements

1. Which objective do you think is most important?

2. Which objective do you think the internal controls must accomplish for the business to survive? Give your reason.

Preparing a bank reconciliation and journal entries

The December cash records of Davidson Insurance follow:


Davidson鈥檚 Cash account shows a balance of \(17,450 at December 31. On December

31, Davidson Insurance received the following bank statement:

Additional data for the bank reconciliation follow:

a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.

b. The NSF check was received from a customer.

c. The \)1,400 bank collection was for a note receivable.

d. The correct amount of check no. 1419, for rent expense, is \(1,930. Davidson鈥檚

controller mistakenly recorded the check for \)1,390.

Requirements

1. Prepare the bank reconciliation of Davidson Insurance at December 31, 2018.

2. Journalize any required entries from the bank reconciliation.

Accounting for petty cash Jackie鈥檚 Dance Studio created a \(220 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows: Petty Cash Ticket No. Item Account Debited Amount

1 Delivery of programs to customers Delivery Expense \) 20 2 Mail package Postage Expense 10 3 Newsletter Printing Expense 25 4 Key to closet Miscellaneous Expense 40 5 Copier paper Office Supplies 70

Requirements

1. Make the general journal entry to create the petty cash fund. Include an explanation.

2. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals \(40. Include an explanation.

3. Assume that Jackie鈥檚 Dance Studio decides to decrease the petty cash fund to \)120. Make the general journal entry to record this decrease.

The following petty cash transactions of Green Golf Equipment occurred in May:

May 1 Established a petty cash fund with a \(200 balance.

31 The petty cash fund has \)18 in cash and \(180 in petty cash tickets that were issued to pay for Office Supplies(\)81), Delivery Expense (\(36), Postage Expense (\)54), and Miscellaneous Expense ($9).

The petty cash custodianreplenished the fund and recorded the expenses.

Prepare the journal entries.

: Identifying timing differences related to a bank reconciliation

For each timing difference listed, identify whether the difference would be reported on

the book side of the reconciliation or the bank side. In addition,

identify whether the difference would be an addition or subtraction.

a. Deposit in transit

b. Bank collection

c. Debit memorandum from bank

d. EFT cash receipt

e. Outstanding checks

f. \(1,000 deposit erroneously recorded

by the bank as \)100

g. Service charges

h. Interest revenue

i. \(2,500 cash payment for rent

expense erroneously recorded by

the business as \)250

j. Credit memorandum from bank
See all solutions

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