In preparing the monthly bank reconciliation, Jon Ltd ascertains that there is a direct credit from a customer for $500 and an interest on overdraft charge of $760. Outstanding cheques total $9 400 and there is a deposit in transit for $2 900. It will be necessary to make journal entries for:

Question

Quizplus · Accepted Answer

Outstanding cheques and deposits in transit are reconciling items that do not require journal entries as they are timing differences between the company's records and the bank statement. However, direct credits from customers increase the company's bank balance and should be recorded as an increase in cash. Similarly, interest charges on overdrafts decrease the company's bank balance and should be recorded as an interest expense. Therefore, journal entries are necessary for the direct credit and the interest charge.

In Preparing the Monthly Bank Reconciliation, Jon Ltd Ascertains That