[startupcfo]

Hilltop Co.’s monthly bank statement shows a balance of $54,200. Reconciliation of the statement with company books reveals the following information:

Bank service charge: $10
Insufficient funds check: $650
Checks outstanding: $1,500
Deposits in transit: $350
Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop as $152
What is the net cash balance after the reconciliation?

A.
$52,363

B.
$53,023

Correct C.
$53,050

D.
$53,077

So why isn’t the answer B? If my books state 152 dollars, but the bank shows 125, and 125 is the right amount, that means my cash should be overstated by 27 more dollars, right?

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[Anonymous]

This is starting with the bank statement amount, not the books amount.

So, for each of these items:

Bank service charge: $10 – already reflected in bank statement, no adjustment
Insufficient funds check: $650 – already reflected in bank statement, no adjustment
Checks outstanding: $1,500 – not reflected in bank statement, adjust bank balance for these
Deposits in transit: $350 – not reflected in bank statement, adjust bank balance for these
Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop as $152 – already reflected in bank statement, no adjustment

Bank balance $54,200 minus outstanding checks $1,500 plus deposits in transit $350 = 54200-1500+350 = $53,050

…

If you were going the other way – if the starting figure they gave you was the balance shown on the books – then it would be:

Bank service charge: $10 – presumed not on books, adjust books
Insufficient funds check: $650 – presumed not on books, adjust books (could mean check issued by company and returned, so essentially deposited back, or could mean deposited check return by client's bank; I'm presuming the 2nd option in my discussion below)
Checks outstanding: $1,500 – already on books, no adjustment
Deposits in transit: $350 – already on books, no adjustment
Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop as $152 – presumed not (correctly) on books, adjust books

So, then it would be [figure given as books balance] minus returned check minus $10 service charge minus $27 deposit error = [given books balance]-10-27 = answer

[Missy]

Because you'd correct your books to $125 during the reconciliation and that wouldn't be a discrepancy after the reconciliation.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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