Question

A bank reconciliation with the headings "Balance per Books" and "Balance per Bank" lists three adjustments under the former and four adjustments under the latter. The company makes separate adjusting entries for each item in the reconciliation that requires an adjustment. How many adjusting entries are recorded?
a. 3
b. 4
c. 7
d. 0

Answer 1

Answer:

a. 3

Explanation:

Bank Reconciliation: The Bank reconciliation works with the balance of the bank statement and the balance of the cash statement. The aim is to compare those two statements to allow the company to run smoothly.  

There are different transactions because of which the balance of the bank statement and the balance of the cash statement do not match. We adjust the transactions accordingly to match those statements.

Based on the cash balance, there would be three adjusting entries which are given below:

a. Bank service charges

b. Notes collected

c. Interest earned

These adjusting entries are required so that the cash balance should balance with the valid cash balance.