The Cash account in the ledger of Big Sweep Co. showed a balance of $8,200 at September 30. The bank statement, however, showed a balance of $10,600 at the same date. The only reconciling items consisted of a $4,600 deposit in transit, a bank service charge of $25, and a large number of outstanding checks.

Prepare bank reconciliation date September 30, 2020 proceeding to correct cash balance.

Sweep Co.

Bank Reconciliation statement as at 30 September 2020

Amount in $

Balance per bank statement 10,600

Add;

Deposit in transit 4,600

Bank service charge 25

Less;

Outstanding checks (7025)

Balance per ledger 8,200

Adjusted cash book balance = $8200 - $25

= $8,175

Explanation:

The bank reconciliation is one done between the balance per the books and balance per the bank statement. This is usually as a result of transactions known as reconciling items. These are items that have either been recognized in books but yet to be recorded by the bank or vice versa, transactions recorded wrongly by one of the parties etc.

To reconcile the two balance moving from the bank statement balance to the cash account balance;

Add deposits in transit and bank charge to the bank balance and deduct; outstanding checks. To determine the outstanding checks amount

= 10600 + 4600 + 25 - 8200

= $7,025

To adjust the book balance, deduct the bank charge as this is the only valid reconciling item yet to be reflected in the books balance.