Bank Reconciliation:
Bank reconciliation is prepared periodically to explain the difference between cash reported on the bank
statement and the cash balance on company’s books.
‫مذكره تسويه البنك يتم عملها لتوضيح وشرح االختالف بين الرصيد الموجود فى البنك والرصيد الموجود بدفاتر الشركه‬
Bank
Bank Statement
Statement Balance
Balance

Deduct:
Outstanding
 Deduct: Outstanding
checks.
checks.

Add:
 Add: Deposits
Deposits in
in
transit.
transit.

 Add
Add or
or Deduct:
Deduct: Bank
Bank
errors.
errors.
Book
Book Balance
Balance

Deduct:
 Deduct:
Nonsufficient
Nonsufficient funds
funds
check
check (NSF).
(NSF).

 Deduct:
Deduct: Bank
Bank
service
service charge.
charge.

 Add:
Add: Interest
Interest earned
earned
on
on checking
checking account.
account.

 Add:
Add: Collections
Collections
made
made by
by the
the bank.
bank.

 Add
Add or
or Deduct:
Deduct:
Book
Book errors.
errors.
Example:
prepare a July 31 bank reconciliation statement for the Tarek Company. The July 31 bank statement
indicated a balance of $9,610, while the cash general ledger account on that date shows a balance of
$7,430.
Additional information necessary for the reconciliation is as follows: Outstanding checks totaled $2,417.
 A $500 check mailed to the bank for deposit had not reached the bank at the statement date.
 The bank returned a customer’s NSF check for $225 received as payment on account receivable.
 The bank statement showed $30 interest earned during July.
 Check No. 781 for supplies expense cleared the bank for $268 but was erroneously recorded in our
books as $240.
 A $486 deposit by Acme Company was erroneously credited to our account by the bank.
Tarek Company
Bank Reconciliation
July 31, 2002
Bank Balance, July 31
Add: Deposit in Transit
Less: Bank Error
Outstanding Checks
Adjusted Balance, July 31
Book Balance, July 31
Add: Interest
Less: Recording Error
NSF Check
Adjusted Balance, July 31
$ 9,610
 500
$  486
 2,417
$
 28
 225
(2,903)
$ 7,207
$ 7,430
 30
(253)
$ 7,207
On January 1, a machine costing $230,000 with a 4-year useful life and an estimated
$3,000 salvage value was purchased. It was also estimated that the machine would
produce 500,000 units during its life. The actual units produced during its first year of
operation were 90,000. Determine the amount of depreciation expense for the first year
under each of the following assumptions:
1. The company uses the straight-line method of depreciation.
($230,000 - $3,000) / 4 = $56,750
2. The company uses the units-of-production method of depreciation.
($230,000 - $3,000) / 500,000 = $0.454/unit
90,000 x $0.454 = $40,860
3. The company uses the double-declining-balance method of depreciation.
100% / 4 = 25% x 2 = 50% = Double-declining-balance rate
$230,000 x 50% = $115,000