 Hello with this lecture, we're gonna work some smaller test type problems that will be the size that could be in multiple choice type questions First one says if a check correctly written and paid by the bank for 452 is Incorrectly recorded in the company's books for 389. How should this error be treated on the bank reconciliation? So obviously what we will see in the bank reconciliation We'll see the bank statement has something different than what our books say and obviously if we take these two numbers We have the bank says that we have a 450 452 on the bank statement and our books say that we have 389 then we have a difference of the 452 minus the 389 and that's going to be 63 now our books are the thing that is wrong. So on our books side of things We wrote it on there at 389 and that's too low. Therefore We're gonna have to take this money the 63 out of our account We're gonna have to reduce our check in account side of it on the on our books side of things when we do the bank Reconciliation and then of course what'll really happen and real, you know after we do that is we'll make the adjustment to it Meaning we'll actually credit cash and then we'll have to debit whatever account needed to be debit Debited when we wrote the check in the first place Next one says if a check is correctly written and paid by the bank for 541 is Incorrectly recorded in the company's books for 514 So we switched to those two numbers obviously the 4 and the 1 how should this error be treated on the bank reconciliation? So this is another one that will be caught by the bank reconciliation That's why we're doing the bank reconciliation and of course the bank got it right because they actually had the check and We on our books when we entered the data into the book It's probably because of course our books were writing the checks outside of the system And then just entering it in and that would mean that we'd have a data entry error here by transposing those two numbers and it should have been the 541, but we're gonna subtract 541 minus the 514 what we Accidentally put in there. There's a twenty seven dollar difference and if we're doing the bank Reconciliation we'd have to fix our books So we'd have to go to our side of the books and say okay. It should have been 541 we put in 514 Therefore we're gonna have to decrease because it was a check going out our book balance by 27 Again, what will happen after that in real life? Well, we would have to make a journal entry for that We'd have to credit cash reduce cash in some way and record the debit to something else Whatever we wrote that check for if it was the utility bill or whatever We'd have to put it into the utility expense or something like that We have the following information is taken from the company's balance sheet and to skip down to the bottom before we read off The balance sheet amounts here and it says if net credit sales for the current year was 606,000 that the company's day sales Uncollected for the year is what and I'm gonna use a 365 days in a year We're gonna assume it's a 365 day a year not a leap year or anything And so we have the following information So what we're gonna need to do this is gonna be a ratio that we are going to be calculation and it's gonna be the day's sales Uncollectible I collected Collected All right, and what we're trying to do is figure out how long it takes between a sale on account To I make the sale and then to receive the money from the sale and the way we are going to calculate that is we're gonna take the AR accounts receivable. I'm gonna select alt enter so to go underneath an AR divided by credit sales So these are sales that we made just on account that went into accounts receivable I'm gonna go ahead and merge these cells So it'll be a little bit larger and I'm gonna underline this home tab font underline There's our ratio that we're gonna have and now we just need to plug the numbers in there Oh, and then we need to multiply that. Sorry. We need to multiply that times 365 so we multiply that times 365 So if we plug this in there then we're gonna say this equals and the accounts receivable is this 75 922 75 922 divided by the credit sales. We have to take the credit sales. We can't take the cash sales We gotta kind of take those out. That's why they gave us the credit sales down here And that's gonna be the 606 Thousand and if I if I make the decimals here, I go to the home tab Numbers and I'm gonna add decimals like this. Notice. It's it's a long number here now We could round it to point one three and then multiply it out and we could be off by a little bit by rounding So note, if we do it in Excel, it will not Reduce it due to rounding it'll it'll use the actual ratio that has been input Even though we can only see the ratio up to these amounts the actual ratio being this ratio So keep that in mind if you're if you're working a problem and you're off by rounding That's the reason so we're gonna say this equals this number times 365 days in the year so we've got 46 and again We could see if there's any rounding here and we're gonna go to add decimals 45.7 3 is what we got next one says that in the process of reconciling its bank statement for April Company compiles the following information gonna skip to the bottom look at what we want to do and then go through with that Information so it says that the adjusted cash balance per the books at April 30th is and I'm assuming what is what that's what we want So what we're doing is a bank reconciliation We're looking at our side the stuff that we got wrong or the stuff that we need to correct our cash accounts by and that's the purpose Generally of doing the bank reconciliation so that we can Find things that the that cleared the bank that we probably didn't record correctly and that's usually what we're going to pick up So what we have here is we got a cash balance for April That's what we're gonna start with we're gonna have to adjust that for anything that we found out about from the bank statement That we had not accounted for so we're gonna start off. This is what we have before the bank Reconciliationing process and then we have a deposit in transit at the end of the month So what we need to think about is is that the banks fault or that's our fault? That this difference is there and in this case it's that's the core thing that's always gonna be in the bank reconciliation It's the banks fault. That's there and it's really nobody's fault. Obviously the thing didn't clear that the Deposits were made they haven't yet cleared the bank, but our books are correct We have that information now therefore. We're not gonna fix our cash balance Our cash balance is right the cash balance on the bank statement is wrong due to the fact that the information is not there yet Then the next one says outstanding checks at the month-end. Well, that's the same thing on the other side Meaning we're right. We know we wrote the checks and they went and got sent out It's just the fact that the bank doesn't know about it yet and therefore the bank balance is what needs to be adjusted Not our balance. We're not gonna fix our balance for that and then we have the bank checking for print new checks So now we have the $75 that the bank automatically took out of our account because we purchased New checks or got checks printed or some kind of service they provided and we're gonna have to say I didn't know about that, but that's true. We didn't have that service and therefore we're gonna have to reduce our balance It's not included in our balance. We didn't know about it now. We do now will include it Then we have a note receivable and interest collected by bank on company's behalf Now depending on what type of company you are looking at this may not happen all the time But what we're saying here is that there's an investment that's that's generating interest that's automatically putting that interest into the checking account as it accrues as it as they earn it and We're not tracking that until we get the bank statement when we get the bank statement We go, okay. Yeah, we got this interest from this investment that happened now. We know about it. That's good We're gonna say interest That we got income and so that's good It's going up our balance is too slow by this interest because we didn't know about it So we need to increase our interest at the time we get the bank statement which indicates that that has then happened So I check paid to company during the month by a customer's returned by the bank as NSF not sufficient funds. So we don't like to see that So what happened is we got we got money We deposited it and then it bounced it got they came back So that means that we're gonna have to reduce our check we put that in our bank balance But it's not a good check. It wasn't clear didn't clear so not sufficient fund Check that bounce that we're gonna say we're gonna to reduce our balance by that then if we add these up I'm gonna equals the sum of these and That should be our bank balance at this time And of course if we did that with a calculator We're doing six two four five minus seven five plus seven one zero minus five four zero and there We have this six three four zero also note that these would be adjustments that we would need to make meaning We would have to credit cash and debit something like bank expense or or You know miscellaneous expense for checks or something like that or office supplies possibly We would have to debit cash here and credit interest income and the not sufficient funds We'd have to credit cash and then debit possibly accounts receivable or something like that And then see if we can get that money from the customer