Question
Use the following information for the Quick Studies
[The following information applies to the questions displayed below.]
Organic Food Company’s Cash account shows a
at the close of business on August 31 .
a. August 31 cash receipts of
recorded on the August 31 bank statement.
b. The bank statement shows a
c. Outstanding checks as of August 31 total
d. In reviewing the bank statement, an
Food’s account.
e. The August 31 bank statement lists
services.
[The following information applies to the questions displayed below.]
Organic Food Company’s Cash account shows a
at the close of business on August 31 .
a. August 31 cash receipts of
recorded on the August 31 bank statement.
b. The bank statement shows a
c. Outstanding checks as of August 31 total
d. In reviewing the bank statement, an
Food’s account.
e. The August 31 bank statement lists
services.
Ask by Guerrero Elliott. in the United States
Mar 24,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
After adjusting for deposits in transit, outstanding checks, bank errors, NSF checks, and bank service charges, both the adjusted bank balance and the adjusted book balance are $5,920.
Solution
-
Determine the adjusted bank statement balanceThe bank statement shows a balance of
. We need to adjust this balance for items not yet recorded on the bank statement: -
Deposits in transit:
These are cash receipts ofdeposited after banking hours. -
Outstanding checks:
These totaland have not yet cleared the bank. -
Bank error:
A check ofwritten by Organic Fruits was mistakenly drawn against this account. The error means the bank deducted erroneously. To correct this, add back .
Now, perform the calculations step-by-step:Thus, the adjusted bank balance is. -
-
Determine the adjusted book (cash account) balanceThe company’s Cash account shows a balance of
. We need to adjust this balance for items not yet recorded in the books: -
NSF check:
The bank statement shows an NSF check forthat the company has not recorded. Subtract this amount: -
Bank service charges:
The bank statement listsin bank service charges that have not yet been recorded. Subtract this amount:
Now, perform the calculations step-by-step:Thus, the adjusted book balance is. -
-
ConclusionAfter making the necessary adjustments:
- The adjusted bank balance is
. - The adjusted book balance is
.
These two adjusted balances agree, completing the reconciliation. - The adjusted bank balance is
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Did you know that the concept of cash management dates all the way back to ancient civilizations? The Mesopotamians used clay tokens to represent trade goods, which helped in tracking their transactions. Fast forward a few thousand years, and here we are with sophisticated banking systems—imagine how they’d react to our electronic transfers today!
In real-world applications, accurate cash reconciliations are crucial for businesses to maintain financial health. Just as a detective gathers clues, accountants must identify discrepancies like outstanding checks or NSF items to ensure accurate records. These reconciliations help businesses plan their budgets, avoid overdrafts, and make informed financial decisions—essentially keeping the financial gears oiled and running smoothly!
