The bank statement for August 2017 shows an ending balance of PKR 568,870/-.
2. On August 31 the bank statement shows charges of PKR 5,705/- for the service charge for
maintaining the checking account.
3. On August 28 the bank statement shows a return item of PKR 16,300/- plus a related bank fee of
PKR 1,630/-. The return item is a customer's check that was returned because of insufficient funds.
The check was also marked "do not redeposit."
4. The bank statement shows a charge of PKR 13,040/- for check printing on August 20.
5. The bank statement shows that PKR 1,304/- was added to the checking account on August 31 for
interest earned by the company during the month of August.
6. The bank statement shows that a note receivable of PKR 163,000 was collected by the bank on
August 29 and was deposited into the company's account. On the same day, the bank withdrew
PKR 6,520 from the company's account as a fee for collecting the note receivable.
7. The Company’s Cash account at the end of August shows a balance of PKR 157,621/-.
8. During the month of August the company wrote checks totaling more than PKR 8,150,000. As of
August 31 PKR 492,423/- of the checks written in August had not yet cleared the bank and PKR
32,600 of checks written in June had not yet cleared the bank.
9. The PKR 236,350/- of cash received by the company on August 31 was recorded on the company's
books as of August 31. However, the PKR 236,350/- of cash receipts was deposited at the bank on
the morning of September 1.
10. On August 29 the company's Cash account shows cash sales of PKR 23,635/-. The bank statement
shows the amount deposited was actually $25,102. The company reviewed the transactions and
found that PKR 25,102/- was the correct amount.
You are required to draw up the Bank Reconciliation Statement
Answers
Answer:
Checking Account Terminology
In this section we provide brief definitions of the terms commonly used when discussing checking accounts and bank reconciliations. We grouped the terms into the following categories:
General terms for checking accounts
Terms for adjustments to the balance per bank
Terms for adjustments to the balance per books
General Terms for Checking Accounts
Checking accounts are known as demand deposit accounts since the bank must pay/return the depositors' account balances (except for uncollected funds) on demand. Companies report the checking account balances as part of its cash. Companies should safeguard their checking accounts through internal controls, which includes timely bank reconciliations prepared by an independent person.
Checks are a company's written orders to its bank to pay an amount from the company's checking account. Hence, checks state "Pay to the order of ______". The person or company named on the check is known as the payee. The payee is required to endorse (sign the back of) the check as evidence that the money was received. (In place of the endorsement, a bank can indicate that the amount was deposited/credited to the payee's bank account.)
Cancelled checks are the checks the company issued and were paid by the company's bank. Cancelled checks are also referred to as checks that "cleared" the bank account on which they are drawn.
Voided checks are checks that were written in error. These checks will have the word "VOID" clearly written across the front of the check.
Stop payment order is a company's instruction to its bank to not pay a specific check that the company had already written but was not yet paid by the bank. Generally, the bank charges a fee for the special effort required by the customer's order.
Deposits often consist of currency and checks (received from customers) that a company takes to its bank with instructions to add the amount to the company's checking account. The bank records the deposit with the date the bank processes the deposit. (However, the company's general ledger Cash account shows the date that the company had received the money from its customers or others.)
Authorized signers are a limited number of people designated to sign checks drawn on the company's checking account. Their names and signatures appear on a bank signature card along with the approval of the company's key officers.
Bank overdraft occurs when checks written by a company are presented to its bank for payment and the company's checking account balance is not sufficient to pay the checks. If the checks were to be paid, the checking account balance would become a negative amount. Without a prior arrangement with the bank (such as an automatic loan), the bank will likely return or "bounce" the check back to the endorser. (The related terms NSF check and return item are described under Terms for Adjustments to the Balance per Books.)
Uncollected funds occur when a company deposits a check into its bank account, but the check is drawn on an account at a different bank. Since the company's bank is not certain that the check will be honored by the bank on which it is drawn, the company's bank will not allow the company/depositor to use the amount until the deposited check is paid by the other bank. (Some people refer to the amount of outstanding checks as the company's float.)
Terms for Adjustments to the Balance per Bank
Outstanding checks are checks that a company had written and recorded in its Cash account, but the checks have not yet been paid by the company's bank (or have not "cleared" the bank). It is common for a few checks written in earlier months to remain outstanding at the end of the current month.
Since the outstanding checks are not yet in the bank's records/bank statement, the company's bank reconciliation will show the outstanding checks as a subtraction from the balance per bank.