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I feel embarrassed even asking this, but I am just stumped on why the answer is what it is.
Company ABC’s bank statement shows a balance of $54,200. Reconciliation of the statement with company books reveals the following information:
Bank service charge $10
Insufficient funds check $650
Checks outstanding $1,500
Deposits in transit $350
What is the net cash balance after the reconciliation?
First off, this question is asking what our cash amount should be on our books after reconciling, right? We don’t reconcile our bank account, we reconcile our books to our bank account right?
This is the answer and the calculations:
54,200 + 350 – 1,500 = $53,050
Why are we subtracting the $1500 of outstanding checks? We are reconciling our books right? We write our checks out of our books, right? For example, at work, we write out checks out of Quicken. So, even though the checks are outstanding, our books reflect the reduction in our money in quicken. So, why are we reducing that balance again? If anything, we should be adding them to reflect our current money. The checks have not been deposited/cashed by the recipients, so our balance in our books is actually $1,500 less than what it really is.
Can’t believe I am stumped on accounting 101 stuff.
edit: sorry, forgot to add this post to the correction subforum.
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