Question

For each of the items indicate whether its amount affects the bank or book side of a bank reconciliation and is an addition or a subtraction in a bank reconciliation and whether an adjusting journal entry is required: Bank or Book Addition or Subtraction Adjusting entry required Items a. Interest on cash balance b. Bank service charges c. Minimum balance bank fee d. Outstanding checks e. Collection of note by bank f. NSF checks g. Outstanding deposits

Answer 1

Items a-g and their impact on bank or book side, addition or subtraction in a bank reconciliation, and need for adjusting entry.

Step-by-step explanation:

The bank or book side of a bank reconciliation is determined by whether the item affects the bank statement or the company's books. An addition in the bank reconciliation refers to an increase in the balance, while a subtraction refers to a decrease in the balance.

1. a. Interest on cash balance: Bank side, addition, no adjusting entry required.
2. b. Bank service charges: Book side, subtraction, adjusting entry required.
3. c. Minimum balance bank fee: Book side, subtraction, adjusting entry required.
4. d. Outstanding checks: Book side, subtraction, no adjusting entry required.
5. e. Collection of note by bank: Bank side, addition, adjusting entry required.
6. f. NSF checks: Book side, subtraction, adjusting entry required.
7. g. Outstanding deposits: Bank side, addition, no adjusting entry required.

Answer 2

In bank reconciliations, interest earned is an addition on the books, while bank service charges and NSF checks are subtractions, all requiring adjusting entries. Outstanding checks decrease the bank balance with no adjusting entry required, while outstanding deposits increase bank balance, also without an adjusting entry.

Step-by-step explanation:

The process of completing a bank reconciliation involves comparing the bank statement with the company's records (books) and adjusting any discrepancies to ensure the cash balances match. Each item can affect the bank or book side of a reconciliation and may require an adjusting journal entry. Here's how each item is treated: