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1. ABC Company's books show a cash balance at a commercial bank on October 31, 2021, of birr 20,502.

2. The bank statement for October shows a balance of birr 22,190.

3. A deposit of birr 3,680 does not appear on the bank statement.

4. A cheque written in October but not yet charged on the bank statement:

- Cheque Number: 7347, birr 150
- Cheque Number: 7348, birr 4,820
- Cheque Number: 7349, birr 31

5. ABC has not recorded the birr 600 interest collected by the bank.

6. Bank service charges of birr 18 are not yet recorded by ABC.

7. The bank returned one of ABC's customer cheques of birr 220.

8. ABC discovered an incorrect recorded cheque #7382, written in October for birr 131, was recorded as birr 311 in payment of accounts payable.

9. A cheque for ABC Company, amounting to birr 175, was incorrectly charged to ABC's account by the bank.



Answer :

GinnyAnswer
Certainly, let's break down the reconciliation process for ABC Company's cash balance with detailed steps.

1. Initial Balances:
- Book balance as per ABC Company’s ledgers: 20,502 birr
- Bank statement balance as per the bank: 22,190 birr

2. Deposits and Cheques:
- A deposit of 3,680 birr was made but is not yet reflected in the bank statement.
- Cheques written:
- Cheque #7347 for 150 birr
- Cheque #7348 for 4,820 birr
- Cheque #7349 for 31 birr

3. Adjusting the Bank Statement Balance:
First, let’s adjust the bank statement balance by accounting for transactions that the company knows about, but the bank hasn't reflected yet:

Bank Statement Balance: 22,190 birr

Add: Deposit not yet appeared: +3,680 birr
Subtract: Cheque #7347: -150 birr
Subtract: Cheque #7348: -4,820 birr
Subtract: Cheque #7349: -31 birr

Adjusted Bank Balance:
[tex]\( 22,190 + 3,680 - 150 - 4,820 - 31 = 20,869 \text{ birr} \)[/tex]

4. Other Adjustments:
- Interest collected by the bank: 600 birr (not yet recorded in books)
- Bank service charge: 18 birr (not yet recorded in books)
- Customer cheque returned: 220 birr
- Incorrectly recorded cheque #7382: originally recorded as 311 birr, should have been 131 birr.

- Difference: [tex]\( 311 \text{ birr} - 131 \text{ birr} = 180 \text{ birr} \)[/tex]
- An incorrect charge by the bank for ABC Company’s cheque: 175 birr

5. Adjusting the Book Balance:
Next, let’s adjust the book balance by accounting for transactions that the bank has processed, but ABC Company hasn’t recorded yet:

Book Balance: 20,502 birr

Add: Interest collected: +600 birr
Subtract: Bank service charge: -18 birr
Subtract: Customer cheque returned: -220 birr
Subtract: Incorrect recorded cheque difference: -180 birr
Add: Incorrect bank charge: +175 birr

Adjusted Book Balance:
[tex]\( 20,502 + 600 - 18 - 220 - 180 + 175 = 20,859 \text{ birr} \)[/tex]

So, after making all the necessary adjustments, the reconciled balances are:
- Adjusted Bank Balance: 20,869 birr
- Adjusted Cash Balance in Books: 20,859 birr

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