Identify each of the following reconciling items as: Bank service charges, $30

Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company’s records, or (d) a deduction from the cash balance according to the company’s records. (None of the transactions reported by bank debit and credit memos have been recorded by the company.)

1. Bank service charges, $30.
2. Check of a customer returned by bank to company because of insufficient funds, $1,750.
3. Check for $390 incorrectly recorded by the company as $930.
4. Check for $50 incorrectly charged by bank as $500.
5. Deposit in transit, $9,700.
6. Outstanding checks, $33,110.
7. Note collected by bank, $24,600.


Answer:
a. Addition to the balance per bank: (4), (5)
b. Deduction from the balance per bank: (6)
c. Addition to the balance per company’s records: (3), (7)
d. Deduction from the balance per company’s records: (1), (2)






Which of the reconciling items listed in Exercise 8-16 require an entry in the company’s accounts?


Answer:
(1), (2), (3), (7)
The preceding additions and deductions to the cash balance according to the company’s records require journal entries in the company’s records. Additions and deductions to the cash balance according to the bank’s records do not require the company to record journal entries.