The accountant who usually does bank reconciliations is on vacation, and the bank statement just came in the mail. Your boss wants you to do the bank reconciliation. You’re happy to do so, since things are slow, you’re bored, and there’s a rumor that they’ll be laying off more employees soon.
The bank statement shows that there is $72.50 in the company’s checking account. (That there is so little money is a clue why there may be layoffs soon.) However, the bank has deducted $26.50 in service charges from the account, and added $1.50 in interest that we have not recorded. They’ve also deducted $50 for a check that a customer wrote that had insufficient funds (i.e., it bounced.) And, they’ve added $70 for a check that a customer wrote and mailed to the company’s lockbox. The accountant who is responsible for keeping track of these things has been slacking off, so they were never recorded. This is good news for you, as this means that he’ll likely be the next one let go if more layoffs occur.
Our trial balance shows that there is $142.50 in the checking account. As you do the reconciliation, you find that there is a total of $350.00 of outstanding checks, and a deposit for $410.00 that your boss made on the last day of the month but that does not yet show on the bank statement.
Required:
1. Prepare the bank reconciliation, so your boss will have one more reason to make sure that your job is safe. Please note: You might have an unreconciled difference between the “true” bank balance and the “true” book balance.
2. Explain why your boss decided to have you do the bank reconciliation instead of the cashier who deposits all of the checks that the company receives. (There is an additional reason to your being smarter and a harder worker than the cashier, who will likely be gone after the next round of layoffs.)