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Preparing a bank reconciliation and journal entries

The August 31 bank statement of Well Healthcare has just arrived from United Bank.

To prepare the bank reconciliation, you gather the following data:

a. The August 31 bank balance is \(4,540.

b. The bank statement includes two charges for NSF checks from customers. One is

for \)380 (#1), and the other is for \(180 (#2).

c. The following Well Healthcare checks are outstanding at August 31:

Check No. Amount

237 \) 80

288 190

291 570

294 600

295 30

296 70

d. Well collects from a few customers by EFT. The August bank statement lists a

\(1,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Well hasn’t recorded yet:

\)800 for dividend revenue, and \(120 for the interest revenue Well earned on its

bank balance during August.

f. The bank statement lists a \)50 subtraction for the bank service charge.

g. On August 31, the Well treasurer deposited \(260, but this deposit does not appear

on the bank statement.

h. The bank statement includes a \)1,050 deduction for a check drawn by Multi-State

Freight Company. Well notified the bank of this bank error.

i. Well’s Cash account shows a balance of $2,800 on August 31.

Requirements

1. Prepare the bank reconciliation for Well Healthcare at August 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include anexplanation for each entry.

Step by step solution

01

Definition of bank reconciliation statement

The bank reconciliation statement is the statement prepared to remove the errors of bank balance and cash book balance.

02

Bank reconciliation statement

Well Healthcare
Bank Reconciliation Statement
August 31, 2018
Bank Side		Book Side
Particulars	Amount	Particulars	Amount
Balance as per bank	$4,540	Balance as per cash book	$2,800
Add:		Add:
Outstanding Deposits	$260	Dividend Revenue	$800
Bank Error	$1,050	Interest Revenue	$120
		EFT Collection	$1,200
Deductions:		Deductions:
Outstanding Checks	$1,540	NSF Cheque	$560
		Service Charge	$50
Adjusted Balance on August 31	$4,310	Adjusted Balance on August 31	$4,310

In the bank reconciliation statement, the opening balance as per bank and cashbook is $4,540 and $2,800. You add the outstanding deposit and deduct the outstanding checks to find the adjusted balance on the bank side. You add rent receipts and note collection to the book balance on the book side. After this, you deduct the NSF check, incorrect recording of the check, EFT payment, and service charge. After making these adjustments on both sides, you got the adjusted balance of $4,310.

03

Journal Entries

Date	Particulars	Debit	Credit
August 31	Cash	$800
	Dividend Revenue		$800
	(To record the dividend revenue)
August 31	Cash	$120
	Interest Revenue		$120
	(To record the interest revenue)
August 31	Accounts Receivable	$560
	Cash		$560
	(To record NSF Check)
August 31	Cash	$1,600
	Accounts Receivable		$1,600
	(To record the receipt of account receivable)
August 31	Bank Charges	$50
	Cash		$50
	(To record the payment of bank charges)

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