Beginning balances

They're simply the current balances of the Cash account from the Bank vs. Company POV!

Bank's Cash Balance

Per Bank Statement???
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Bank Balance per Reconciliation???

Company's Cash Balance

Per General Ledger???
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Company Balance per Reconciliation???

We're looking for the current balances of the Cash account...

  • Per Bank Statement = Bank's POV (Since they store their Cash balance (for the company) in their bank statements!)
  • Per General Ledger = Company's POV (Since they store their Cash balance in their general ledger!)

Scenario: On April 31st, 2022, your lemonade stand has a Cash balance of $800. Over the course of the month, they wrote $10,000 in checks, but $200 of those checks haven’t been processed by your local bank. In addition, $170 out of their $20,000 in cash receipts still needs to be deposited in the local bank.

However, on their bank statement, it shows a Cash Balance of $850 and includes the following items not yet recorded by the company: a note receivable collected by the bank for $200, interest earned on that note of $20, and a bank service fee of $50. In addition, the bank accidentally charged your lemonade stand $50 for a service fee that was meant to be on another customer’s account. Lastly, one of your lemonade stand's customer’s checks for $100 returned back with non-sufficient funds.

Prepare the bank reconciliation to correct the ending Cash Balance on April 31st, 2022.

The blue underlined text signals...

  • When it says your lemonade stand has a Cash balance of $800... ➡️ That's from the POV of the company... so Per General Ledger.
  • When it says on their bank statement, it shows a Cash Balance of $850... ➡️ That's from the POV of the bank... so Per Bank Statement.

Per General Ledger = $800
Per Bank Statement = $850

Bank's Cash Balance

Per Bank Statement$800
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Bank Balance per Reconciliation???

Company's Cash Balance

Per General Ledger$850
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Company Balance per Reconciliation???
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