Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 27

Bank reconciliation adjustment

a. Show the reconciling items in a horizontal model or write the adjusting jour­nal entry (or entries) that should be prepared to reflect the reconciling items of Exercise 5.1.

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b. What is the amount of cash to be included in the October 31 balance sheet for the bank account reconciled in Exercise 5.1?

Step 1 of 2

Prepare journal entry to reflect the above reconciling items

Journal entry
S. No	Date	Account title and explanation	Post. Ref	Debit	Credit
		Accounts receivable		$75
		Accounts payable		$9
		Cash			$84
		To record the adjustments that reconcile the general ledger balance with the bank statement balance

Customer check of $75 returned because the customer’s account was overdrawn. Since, the check was returned, the customer’s account has to be debited to reflect the adjustment.

Check issued for payment of accounts payable was erroneously recorded as $56 instead of $65. To rectify this error, the balance of account payable has to be reduced by $9. Hence, the account payable was debited with $9 to reflect the adjustment. Cash has been credited for both the entries to reflect the adjustments.