Create the journal entries from the information in the bank re...

Question

Create the journal entries from the information in the bank reconciliation:

Table showing bank reconciliation details for journal entries in financial accounting.

Accepted Answer

Alright, so let's create the journal entries from our bank reconciliation. So if you notice, this is the bank reconciliation that we had made previously when we first learned bank recs. So now what we're going to do is we're going to take this reconciliation and make the journal entries. First thing you want to know is that this when we make the journal entries, this column doesn't matter. We do not care about the bank side. Remember, we want to take our book balance so right now, our cash on our books says that we have $34100. That's our balance in cash right now. But it should be 45.90. So what we're gonna do is we're gonna adjust for all of these things. Each of these is gonna have a journal entry. Each one has its own separate journal entry. Okay, so every time that you do a bank rec, you look on the book side and you look at the items that change in between and each one gets a journal entry. So let's go ahead and do each of them. I'm gonna label them here 1, 2, 3, and 4 and let's make each of the journal entries. So the first one, EFT receipt of dividend revenue. So in this situation, the bank received revenue on our behalf, right? So we received EFT receipt, right? There was money that was received, so we're going to debit cash to increase our cash by 900 but what's the credit in this situation? Notice when I talked about EFT receipts above, we assumed it was from a customer, but here it tells us that it was dividend revenue, right. So if it's dividend revenue, well, we got to credit our dividend revenue, right. We earned dividend revenue. So this is a revenue account and we credit it. It goes up with a credit. So we're good there. So that is our first entry. Notice that brought our cash balance up by $900. Let's make our second entry. The book error check number 333. Okay. So in this case, I believe it was a situation where we had paid a check. So there's not enough information really right there. But if we go back to the previous example, you'll notice that this was a situation where we had paid a check to our supplier but we had recorded it incorrectly. We had paid the correct amount of $150 but we had recorded that we had paid $510. Okay, so this $360 difference, we need to increase our cash back up from that. Okay, so our cash goes up by 3.60 and in that case, it was a payment to a supplier. So what we're doing is partially reversing the entry. Okay. So we're gonna credit accounts payable to signify that we had overly reduced it before. So, that would be our second entry there where we're increasing the cash. Notice it's very easy to tell which side of the entry cash is going to be because of the direction of cash in the reconciliation. If it was an addition to cash, well we know we're going to debit cash in that journal entry. If it was a subtraction to cash, like in our next two, we know we're gonna be crediting cash to reduce cash. So let's go ahead and do the next two entries. So 3, what did we have? We had a service charge. The bank charged us a fee, so we're gonna have something like bank fee expense, whatever it might be. It could be named any number of things for $20. So that goes up with a debit $20 and we're decreasing our cash. Right? We paid cash $20 so we get rid of that. And last but not least is the not sufficient funds check. So remember, this one's a little tricky. This is a situation where a customer had paid us mailed us a check. We're like great, we received this check. We recorded it in our books But now we have to reverse that. We didn't actually get that money. The bank statement is now showing that that check bounced. So what we're gonna do is debit our accounts receivable because we're still owed that money. Right? That the customer, we thought they had paid us. So we had decreased accounts receivable, but in essence, they still owe us that money because the check bounced. So our accounts receivable goes up by 50 and our cash goes down by 50, right? Because we had previously increased our cash by 50, when we thought we were going to when we thought we had gotten that money. Alright. So last thing I want to show you, we've now made all the journal entries. Last thing I wanna show you is that we did get to our adjusted balance. So I'm gonna do a t account over here. Yep. And we've got our cash account. So notice, we started with 34100. Right? And our unadjusted book balance was 34100. So we had a debit balance of 34100 in the account and then what happened? Then we made these 4 journal entries. So journal entry 1 journal entry 1, I'll do it in green, we added 900. Journal entry 2, we added 360. Journal entry 3, we lost 20 there and journal entry 4, we lost 50. So when we look at all the effects of these transactions, well then we should end up with the correct ending balance 34100, another debit of 900, another debit of 360. So we add all those and then subtract the credits minus 20, minus 50, and there we have it. We've got an ending balance in cash of 45.90 after those journal entries. So our cash balance matches all of these adjustments, right? We've now adjusted our cash balance based on this bank reconciliation. So that's about it here. That's the journal entries for bank reconciliations. Let's go ahead and move on to the next video.

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Create the journal entries from the information in the bank reconciliation:

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Journal Entries for Bank Reconciliation practice set