Concept explainers
Find the correct option, the option that explains the accounting treatment of customer’s note collected by bank.
Answer to Problem 1MCQ
The correct answer is option (a).
Explanation of Solution
Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.
Justification for correct answer: Note receivable being collected by bank, is credited to bank account. But the company is not aware of it. So, while preparing
Hence, options (b), (c), (d), and (e) are incorrect, and the option (a) is the correct answer.
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Chapter 8 Solutions
Principles of Financial Accounting.
- The bank reconciliation shows the following adjustments. Deposits in transit: $1,698 Notes receivable collected by bank: $2,500; interest: $145 Outstanding checks: $987 Error by bank: $436 Bank charges: $70 Prepare the correcting journal entry.arrow_forwardUsing the following information, prepare a bank reconciliation. Bank balance: $12,565. Book balance: $13,744. Deposits in transit: $2,509. Outstanding checks: $1,777. Bank charges: $125. Bank incorrectly charged the account for $412. The bank will correct the error next month. Check number 1879 correctly cleared the bank in the amount of $562 but posted in the accounting records as $652. This check was expensed to Utilities Expense.arrow_forward
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