Question1:
The following relates to Tim's Business entity, not Tim theowner. Tim's business prepares monthly bank reconciliations of his cheque account balance. The bank statement for August 2015 indicated the following:
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Balance, August 31, 2015
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$7,920
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Bank servicecharges forAugust
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20
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Interest earned during August
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30
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NSF (bounced)cheque from a customer previously deposited by Tim
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32
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Collection of note ($1,000) and the related interest ($40) from customer
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1,040
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An analysis of cancelled cheques and deposits and the records of Tim revealed the following items:
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Cheque account balance per Tim's accounting records August 31
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$7,170
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Outstanding cheques as of August 31
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952
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Deposits in transit on August 31
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1,310
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Error in recording cheque# 247 issued byTim
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90
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The correct amount of cheque# 247 is $340, but it was recorded as acash disbursement of
$430. The cheque was issued to pay for inventory purchased. The cheque was written correctly and appeared on the bank statement correctly it was just recorded in Tim's Business accounting records incorrectly.
Required:
A) Prepare bank reconciliation in proper form for August 31, 2015.
B) What amount would Tim report his cash balance in the statement of financial position (balancesheet) at August 31, 2015?
C) Record the transaction (adjustments) Tim will need as a result of this bank reconciliation process?
D) How does the preparation of bank reconciliations aid in internal control?