Prepared by Pawan Kumar Jha,PhD (Assistant Professor-Finance & Account, KU-SOM)

Cash and Internal Control

(Learning Unit-2)

Problem-1
Vinay Motor Company
Bank Reconciliation Statement as on 30st June, 20XX
Particulars Details Amount
Balance as per Bank, June 30 10,240
Add: (a) Cheque under collection 1,900
Less: (b)Outstanding cheques
Cheque No. Date
2108 25/05 1291
2110 29/05 617
2113 01/06 407
2116 04/06 96
1098 (3,509)
2118 11/06

Adjusted Bank Balance, June 30 8,631

Balance as per Book, June 30 7,699
Add: (c) Proceeds from bill collected with interest (900+12) 912
(d) Errors in recording cheque no. 2112 63
(e) Interest on term deposit 87 1,062
Less: (f) Bank service charge debited (130)
Adjusted Book Balance, June 30 8,631

W. Note:
S. No. Cash Book Pass Book
a) + -
b) - + b) Adjusting Entries:
c) - + June 30: Cash A/C………………Dr. Rs912
d) - + To B/R A/C………………….Rs900
e) - + To Interest income a/c……....Rs12
f) + - (To record bills receivable with interest)

June 30: Cash a/c………………Dr. Rs63

To Creditors a/c…………… Rs63
(To record the payment for the purchase of merchandise incorrectly overstated in
the company’s book)

June 30: Cash a/c………………Dr. Rs87

To Interest income A/C………… Rs87
(To record interest earned on term deposit)
June 30: Bank Charges a/c………………Dr. Rs130
To Cash a/c………………………..Rs130
(To record bank service charge)

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 Prepared by Pawan Kumar Jha,PhD (Assistant Professor-Finance & Account, KU-SOM)

Problem-2
Julian Maintenance Company
Bank Reconciliation Statement as on 31st August, 2011
Particulars Details Amount
Balance as per Bank, August 31 1,735.53
Add: (a) Deposit in transit 138
Less: (b) Outstanding cheques:
Cheque No. Date
551 July 14 75
576 Aug. 30 20.34
578 Aug. 31 250
579 Aug.31 185
65.25 (595.59)
580 Aug. 31
Adjusted Bank Balance, August 31 $1,277.94
Balance as per Book, August 31 1,207.95
Add: (d)Notes receivable collected by bank 140
(d) Interest income on Note 10
(h) Interest income 7.81 157.81
1,365.76
Less: (c) Overstatement of deposit 15
(e) Collection fee 2.50
(f) NSF Cheque of Austin Chase 64.07
(g) Service charge 6.25 (87.82)
Adjusted Book Balance, June 30 $1277.94

W. Note:
S. No. Cash Book Pass Book
a) + -
b) - +
c) + -
d) - +
e) + -
f) + -
g) + -
h) - +

Adjusting Entries:
August 31: Sales a/c………………….Dr. $15
To Cash a/c………………………………..$15
(To record an error in recording deposit)
August 31: Cash A/C………………Dr. $150
To Notes receivable a/c …… $140
To Interest income a/c……....$10
(To record notes receivable with interest on note)

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 Prepared by Pawan Kumar Jha,PhD (Assistant Professor-Finance & Account, KU-SOM)

August 31: Collection fees expense a/c Dr $2.50

To Cash a/c $2.50
(To record collection fee on note)
August 31: Regular Monthly charges a/c Dr $6.25
To Cash a/c $6.25
(To record monthly charges)
August 31: Accounts Receivable a/c…………….Dr $64.07
To Cash a/c…………………………….$64.07
(To record customer’s NSF cheque)
August 31: Cash a/c…………….Dr $7.81
To Interest revenue a/c…………………………….$7.81
(To record interest earned on average bank balance)

Problem-3
Mickey’s Marathon Spots Company
Bank Reconciliation Statement as on 30st June, 2007
Particulars Details Amount
Balance as per Bank Statement, June 30 $3,308.59
Add: (a) Deposit in transit 642.30
Less: (b) Outstanding Cheques:
Cheque No.
496 79.89
501 213.20
502 424.75 717.84
Adjusted Bank Balance, June 30 $3,233.05
Balance as per Book, June 30 $2,895.82
Add: (c) Customer’s note collected with interest 550
(d) Interest earned on bank account 15.45
(e) Error in recording cheque 498 54 619.45
3,515.27
Less: (f) NSF cheques and various service charges 245.72
(i.e., debit memoranda)
(f) Fee charged by the bank to collect the customer’s note 16.50
(f) Service fee charged by the bank for rental of a lockbox 20 282.22
Adjusted Book Balance, June 30 3233.05

W. Note:

S. No. Cash Book Pass Book

a) + -
b) - +
c) - +
d) - +
e) - +

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 Prepared by Pawan Kumar Jha,PhD (Assistant Professor-Finance & Account, KU-SOM)

f) + -
+ -
+ -

Adjusting Entries:

June 30: Cash A/C………………Dr. $550

To Notes receivable a/c …… $500
To Interest income a/c……....$50
(Notes receivable of $550 and interest on note $50 collected by bank)

Assets= Liabilities + Owners’ Equity

+550 +50
-500

June 30: Cash a/c…………….Dr $15.45

To Interest revenue a/c…………………………….$15.45
(To record interest earned on bank balance)

Assets = Liabilities + Owners’ Equity

+15.45 +15.45

June 30: Cash a/c………………Dr. $54

To supplies a/c……………$54
(To correct for error in recording purchase of supplies)
Assets= Liabilities + Owners’ Equity
+54
-54

June 30: Accounts Receivable a/c…………….Dr $245.72

To Cash a/c…………………………….$245.72
(To record customer’s NSF chechque)

Assets = Liabilities + Owners’ Equity

+ 245.72
-245.72

June 30: Collection fees expense a/c Dr $16.50

To Cash a/c $16.50
(To record collection fee on note)
Assets = Liabilities + Owners’ Equity
-16.50 -16.50

June 30: Rent expense-Lockbox a/c Dr $20

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Prepared by Pawan Kumar Jha,PhD (Assistant Professor-Finance & Account, KU-SOM)

To Cash a/c $20

(To record rental charge on lockbox)

Assets = Liabilities + Owners’ Equity

-20 -20