6) When a check is issued, the party who is paying the cash is referred to as:
A) payee.
B) maker.
C) bank signatory.
D) depositor.
Learning Objective 7-6
1) The cash balance in a company's general ledger and the bank's balance on the bank statement will generally be different because of the time lag in recording transactions.
2) On a bank reconciliation, deposits in transit are subtracted on the book side of the reconciliation.
3) Journal entries must be made to record the reconciling items on the bank side of the reconciliation.
4) An outstanding check is a check issued by the company and recorded on its books, but not yet paid by its bank.
5) Please refer to the following information needed to reconcile the cash balance for Woods Paper Products.
•A deposit of $5,794.62 is in transit.
•Outstanding checks total $1,533.25.
•The book balance is $5,695.62.
•The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month's rent.
•The bank balance at February 28, 2012 was $16,500.25.
•A deposit of $300 was credited by the bank for $3,000.
•A customer's check for $1,280 was returned for nonsufficient funds.
•The bank service charge is $70.
Woods Paper will have to record a journal entry to correct the bank error.
6) If the bank reconciliation includes a bank service charge, a journal entry is required which debits Cash and credits Miscellaneous expense.
7) If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to Cash.
8) If the bank reconciliation includes outstanding checks, no journal entries are required.
9) If the bank reconciliation includes a book error, no journal entries are required.