The cash account for All American Sports Co. on April 1, 20Y5, indicated a balance of $23,600. During April, the total cash deposited was $80,150, and checks written totaled $72,800. The bank statement indicated a balance of $40,360 on April 30, 20Y5. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: - Checks outstanding totaled $14,300.
- A deposit of $9,275, representing receipts of April 30, had been made too late to appear on the bank statement.
- A check for $720 had been incorrectly charged by the bank as $270.
- A check for $110 returned with the statement had been recorded by All American Sports Co. as $1,100. The check was for the payment of an obligation to Garber Co. on account.
- The bank had collected for All American Sports Co. $4,320 on a note left for collection. The face of the note was $4,000.
- Bank service charges for April amounted to $75.
- A check for $1,300 from Bishop Co. was returned by the bank because of insufficient funds.
Instructions:
1. Prepare a bank reconciliation as of April 30.
2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.

All American Sports Co.

1. Bank Reconciliation Statement as at April 30, 20Y5:

Balance as per bank statement     $40,360

add deposit                                           9,275

less outstanding checks                    -14,300

       Incorrectly charged check               450

Balance as per adjusted cash book $34,885

Explanation:

a) Adjusted Cash Book

Opening balance                 $23,600

Cash Deposit                          80,150

Checks                                 - 72,800

Balance as per cash book  $30,950

add Check reversal                   1,100

      Note collected                   4,320

less Bank charges                        -75

       Check Returned                   -110

      NSF                                     -1,300

Adjusted cash book balance$34,885

B) Bank Reconciliation Statements are prepared periodically, monthly for instance, to agree the balance of the cash maintained by the entity with the balance of the statement presented by the bank.  The reconciliation process also helps in detecting errors.

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