P7-8B Elite Service Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep cleri- cal and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Steve Evans handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. The balance per the bank statement on March 31, 2014, was $5,931.51. Outstanding checks were: No. 206 for $358.53, No. 441 for $292, No. 590 for $283.00, No. 781 for $286.00, No. 782 for $319.47, and No. 783 for $303.14. Included with the statement was a credit mem- orandum of $175 indicating the collection of a note receivable for Elite Service Company by the bank on March 21. This memorandum has not been recorded by Elite Service. The company's ledger showed one cash account with a balance of $6,889.53. The bal- ance included undeposited cash on hand. Because of the lack of internal controls, Steve took for personal use all of the undeposited receipts in excess of $1,591.63. He then pre- pared the following bank reconciliation in an effort to conceal his theft of cash. ive ith trol Cash balance per books, March 31 Add: Outstanding checks No. 781 $6,889.53 $286.00 319.47 No. 782 No. 783 303.14 808.61 7,698.14 Less: Undeposited receipts Unadjusted balance per bank, March 31 Less: Bank credit memorandum 1,591.63 6,106.51 175.00 Cash balance per bank statement, March 31 $5,931.51 Instructions $5,681.00 (a) Prepare a correct bank reconciliation. (Hint: Deduct the amount of the theft from the adjusted balance per books.)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Hello, please I want the solution for this problem part a... knowing that the final adjusted cash balance should be $5,681
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