Tutorial 3 FAQ Page
This page contains instructors' responses to your common questions. If you want the answer to a question not discussed here, click on the Instructors box on the left at any time to send an email.
3.1 Question:
Why isn't the $430.35 deposit in the bank statement (exhibit 1) for April 1 accounted for in our new bank reconciliation statement? After all, it is not showing in the company’s deposit records.
3.1 Answer:
If you look at Exhibit 4, the deposit is included in the $2,552.74 opening Balance per Depositor’s records on March 31, 2005. On March 31, the $430.35 deposit was received by the company and was included in MMM’s deposit slips list. However, as of March 31, the bank had not yet received the deposit and thus an adjustment had to be made. Therefore, the $430.35 is already included in the April bank reconciliation under the Balance per Depositor's Records, March 31, 2005 of $2,550.42.
3.2 Question:
The outstanding cheques (#160, 175 and 176) highlighted in exhibit 4 still appear to be outstanding. Why are they not accounted for in the new bank reconciliation statement?
3.2 Answer:
These 3 cheques have already been accounted for by MMM in the $2,550.42 Adjusted Balance for March 31, 2005 (exhibit 4). MMM deducted the amount from their bank balance in March when they wrote the cheques. At the end of March, the bank still did not know about these cheques since they had not been cashed and thus an adjustment had to be made. In April, the Bank has accounted for the cheques having been received in the bank statement balance on April 30, 2005 of 3,258.41 (from exhibit 1).
3.3 Question:
In exhibit 1, why is it that on the bank statement there is a deposit of $430.35 right beside the first entry of cheque #160 of $45.56?
3.3 Answer:
It means that on April 1, there was a deposit for $430.35 into the account, and on the same day, cheque #160 was processed, therefore $45.56 was taken out of the account. If you look at the Balance column, $2,462.64 (March 30 balance) + $430.35 (April 1 Deposit) - $45.56 (April 1 Cheque cashed) = $2,847.43 (end of April 1 Balance).
3.4 Question:
The error for cheque #185 which resulted in a $4.50 increase in cash (therefore a debit to cash) had a matching credit entry in accounts payable. Why was accounts payable credited for this amount?
3.4 Answer:
The $4.50 error should be a credit to accounts payable. When the cheque was written, the company was paying some of their accounts payable. As we know, the cheque was written for too much money ($4.50). Therefore, the DEBIT that was made to the accounts payable when the cheque was first written was too high. To rectify the mistake, we must CREDIT the accounts payable.
3.5 Question:
When doing the adjusting entries, is it necessary to have opening balances or do we just make the changes?
3.5 Answer:
When you perform the adjusting entries, you just have to make the changes. Don’t worry about opening balances. As long as you make it clear which account you debit, and which account you credit, that is all that is required.