No entries are necessary on the company’s records as a result of the information
included in the bank section of the reconciliation. This section begins with the cash
balance according to the bank statement. However, the bank should be notified of any
errors that need to be corrected on its records.
Any items in the company’s section of the bank reconciliation must be recorded in
the company’s accounts. For example, journal entries should be made for any un-
recorded bank memorandums and any company errors. The journal entries for Power
Networking, based on the preceding bank reconciliation, are as follows:324 Chapter 7 Sarbanes-Oxley, Internal Control, and Cash
Exhibit 7
Bank Reconciliation for
Power NetworkingPower Networking
Bank Reconciliation
July 31, 2007After the entries above have been posted, the cash account will have a debit bal-
ance of $2,630.99. This balance agrees with the adjusted cash balance shown on the
bank reconciliation. This is the amount of cash available as of July 31 and the amount
that would be reported on Power Networking’s July 31 balance sheet.
Although businesses may reconcile their bank accounts in a slightly different format
from what we described above, the objective is the same: to control cash by reconcil-
ing the company’s records to the records of an independent outside source, the bank.
In doing so, any errors or misuse of cash may be detected.Cash balance according to bank statement $3,359.78
Add deposit of July 31, not recorded by bank 816.20
$4,175.98
Deduct outstanding checks:
No. 812 $1,061.00
No. 878 435.39
No. 883 48.60 1,544.99
Adjusted balance $2,630.99Cash balance according to Power Networking records $2,549.99
Add note and interest collected by bank 408.00
$2,957.99
Deduct: Check returned because of insufficient funds $ 300.00
Bank service charge 18.00
Error in recording Check No. 879 9.00 327.00
Adjusted balance $2,630.99SCF BS IS
Oc AcTSEc RcOT AcTLTSET EcJuly 31 Cash 408
Notes Receivable 400
Interest Income 8
31 Accounts Receivable—Thomas Ivey 300
Miscellaneous Expense 18
Accounts Payable—Taylor Co. 9
Cash 327