The following data were accumulated for use in reconciling the bank account of Mathers Co. for July:

1. Cash balance according to the company's records at July 31 $22,600.
2. Cash balance according to the bank statement at July 31, $24,000.
3. Checks outstanding, $4,590.
4. Deposit in transit, not recorded by bank, $3,680.
5. A check for $170 in payment of an account was erroneously recorded in the check register as $710.
6. Bank debit memo for service charges, $50.

(a) Prepare a bank reconciliation, using the format shown below.

Mathers Co.
Bank Reconciliation
July 31
Cash balance according to bank statement $
Add deposit in transit, not recorded by bank
Deduct outstanding checks
Adjusted balance $
Cash balance according to company's records $
Adjusted balance $

(b) If the balance sheet is prepared for Mathers Co. on July 31, what amount should be reported for cash?
(c) Must a bank reconciliation always balance (reconcile)?

See explanation for all the requirements.

Explanation:

Requirement A

                                Mathers Co.

                        Bank Reconciliation

                                   July 31

Cash balance according to bank statement           $ 24,000

Add: deposit in transit                                                 $3,680

Deduct: outstanding checks                                        (4,590)

Adjusted balance                                                      $23,090

Cash balance according to company's records       $22,600

Add: Error in records payments (710-170)                       $540

Less: Bank charge                                                            ($50)

Adjusted balance                                                       $23,090

Requirement B and C

B. If the balance sheet is prepared for Mathers Co. on July 31, $23,090 should be reported for cash.

C. It is a necessary procedure for a bank and an individual or an organization to adjust the bank balance and book balance to avoid any kind of errors. Therefore, reconciliation is always significant. A bank must always do a reconciliation.

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