Answer :
Certainly! Let's go through the reconciliation process step by step for Abc company’s cash and bank balances as of October 31, 2021.
### Information Provided:
1. Book Cash Balance (Abc company's records): [tex]\( \text{Birr} \, 20,502 \)[/tex]
2. Bank Statement Balance: [tex]\( \text{Birr} \, 22,190 \)[/tex]
3. Deposits not appearing in the bank statement: [tex]\( \text{Birr} \, 3,680 \)[/tex]
4. Cheques written but not yet cleared:
- Cheque 7347: [tex]\( \text{Birr} \, 150 \)[/tex]
- Cheque 7348: [tex]\( \text{Birr} \, 4,820 \)[/tex]
- Cheque 7349: [tex]\( \text{Birr} \, 31 \)[/tex]
5. Interest collected by bank not recorded by Abc: [tex]\( \text{Birr} \, 600 \)[/tex]
6. Bank service charge not yet recorded by Abc: [tex]\( \text{Birr} \, 18 \)[/tex]
7. Customer cheque returned by bank: [tex]\( \text{Birr} \, 220 \)[/tex]
8. Incorrect recorded cheque:
- Incorrectly recorded amount: [tex]\( \text{Birr} \, 311 \)[/tex]
- Correct amount: [tex]\( \text{Birr} \, 131 \)[/tex]
- Difference (correction): [tex]\( \text{Birr} \, 311 - \text{Birr} \, 131 = \text{Birr} \, 180 \)[/tex]
9. Incorrect charge by the bank: [tex]\( \text{Birr} \, 175 \)[/tex]
### Steps for Reconciliation:
#### Bank Reconciliation:
Start by adjusting the bank statement balance to account for items not yet reflected on the bank statement:
1. Bank Statement Balance: [tex]\( \text{Birr} \, 22,190 \)[/tex]
2. Add: Deposits not yet recorded by the bank: [tex]\( \text{Birr} \, 3,680 \)[/tex]
3. Less: Cheques written but not yet cleared:
- [tex]\( \text{Birr} \, 150 + \text{Birr} \, 4,820 + \text{Birr} \, 31 = \text{Birr} \, 5,001 \)[/tex]
4. Less: Incorrectly charged cheque by bank: [tex]\( \text{Birr} \, 175 \)[/tex]
Adjusted Bank Balance:
[tex]\[ \text{Birr} \, 22,190 + \text{Birr} \, 3,680 - \text{Birr} \, 5,001 - \text{Birr} \, 175 = \text{Birr} \, 20,694 \][/tex]
#### Book Reconciliation:
Next, adjust the book balance to account for items not yet reflected in Abc’s records:
1. Book Balance: [tex]\( \text{Birr} \, 20,502 \)[/tex]
2. Add: Interest collected by bank: [tex]\( \text{Birr} \, 600 \)[/tex]
3. Less: Bank service charge: [tex]\( \text{Birr} \, 18 \)[/tex]
4. Less: Customer cheque returned by bank: [tex]\( \text{Birr} \, 220 \)[/tex]
5. Add: Correction for incorrectly recorded cheque: [tex]\( \text{Birr} \, 180 \)[/tex]
Adjusted Book Balance:
[tex]\[ \text{Birr} \, 20,502 + \text{Birr} \, 600 - \text{Birr} \, 18 - \text{Birr} \, 220 + \text{Birr} \, 180 = \text{Birr} \, 21,044 \][/tex]
### Summary of Adjustments:
- Adjusted Bank Balance: [tex]\(\text{Birr} \, 20,694\)[/tex]
- Adjusted Book Balance: [tex]\(\text{Birr} \, 21,044\)[/tex]
These adjusted balances reflect all outstanding transactions and errors identified in the reconciliation process. Both should ideally match, indicating a proper reconciliation, although some further investigation might be warranted if discrepancies exist.
### Information Provided:
1. Book Cash Balance (Abc company's records): [tex]\( \text{Birr} \, 20,502 \)[/tex]
2. Bank Statement Balance: [tex]\( \text{Birr} \, 22,190 \)[/tex]
3. Deposits not appearing in the bank statement: [tex]\( \text{Birr} \, 3,680 \)[/tex]
4. Cheques written but not yet cleared:
- Cheque 7347: [tex]\( \text{Birr} \, 150 \)[/tex]
- Cheque 7348: [tex]\( \text{Birr} \, 4,820 \)[/tex]
- Cheque 7349: [tex]\( \text{Birr} \, 31 \)[/tex]
5. Interest collected by bank not recorded by Abc: [tex]\( \text{Birr} \, 600 \)[/tex]
6. Bank service charge not yet recorded by Abc: [tex]\( \text{Birr} \, 18 \)[/tex]
7. Customer cheque returned by bank: [tex]\( \text{Birr} \, 220 \)[/tex]
8. Incorrect recorded cheque:
- Incorrectly recorded amount: [tex]\( \text{Birr} \, 311 \)[/tex]
- Correct amount: [tex]\( \text{Birr} \, 131 \)[/tex]
- Difference (correction): [tex]\( \text{Birr} \, 311 - \text{Birr} \, 131 = \text{Birr} \, 180 \)[/tex]
9. Incorrect charge by the bank: [tex]\( \text{Birr} \, 175 \)[/tex]
### Steps for Reconciliation:
#### Bank Reconciliation:
Start by adjusting the bank statement balance to account for items not yet reflected on the bank statement:
1. Bank Statement Balance: [tex]\( \text{Birr} \, 22,190 \)[/tex]
2. Add: Deposits not yet recorded by the bank: [tex]\( \text{Birr} \, 3,680 \)[/tex]
3. Less: Cheques written but not yet cleared:
- [tex]\( \text{Birr} \, 150 + \text{Birr} \, 4,820 + \text{Birr} \, 31 = \text{Birr} \, 5,001 \)[/tex]
4. Less: Incorrectly charged cheque by bank: [tex]\( \text{Birr} \, 175 \)[/tex]
Adjusted Bank Balance:
[tex]\[ \text{Birr} \, 22,190 + \text{Birr} \, 3,680 - \text{Birr} \, 5,001 - \text{Birr} \, 175 = \text{Birr} \, 20,694 \][/tex]
#### Book Reconciliation:
Next, adjust the book balance to account for items not yet reflected in Abc’s records:
1. Book Balance: [tex]\( \text{Birr} \, 20,502 \)[/tex]
2. Add: Interest collected by bank: [tex]\( \text{Birr} \, 600 \)[/tex]
3. Less: Bank service charge: [tex]\( \text{Birr} \, 18 \)[/tex]
4. Less: Customer cheque returned by bank: [tex]\( \text{Birr} \, 220 \)[/tex]
5. Add: Correction for incorrectly recorded cheque: [tex]\( \text{Birr} \, 180 \)[/tex]
Adjusted Book Balance:
[tex]\[ \text{Birr} \, 20,502 + \text{Birr} \, 600 - \text{Birr} \, 18 - \text{Birr} \, 220 + \text{Birr} \, 180 = \text{Birr} \, 21,044 \][/tex]
### Summary of Adjustments:
- Adjusted Bank Balance: [tex]\(\text{Birr} \, 20,694\)[/tex]
- Adjusted Book Balance: [tex]\(\text{Birr} \, 21,044\)[/tex]
These adjusted balances reflect all outstanding transactions and errors identified in the reconciliation process. Both should ideally match, indicating a proper reconciliation, although some further investigation might be warranted if discrepancies exist.