The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes 1. A cheque for $200 to pay the electric bill was recorded on the books as $20.
2) Included on the bank statement was a note collected by the bank for $300 plus interest of $30.
3) Cheques outstanding totaled $360.
4) Bank service charges were $50.
5) Deposits in transit were $2,140.
Which item(s) will require a journal entry to update the balance in the Cash account?

Question

Quizplus · Accepted Answer

Cheques outstanding and deposits in transit are reconciling items that explain the difference between the bank statement and the book balance but do not require a journal entry to update the Cash account. Bank service charges and the note collected by the bank (including interest) are transactions that the company may not have recorded yet, so they require a journal entry to update the Cash account. The error made by Accounting Services in recording the electric bill payment (recorded as $20 instead of the actual $200) also requires a correction via a journal entry.

The May Bank Statement for Accounting Services Shows a Balance