Newman Smith is having trouble with the bank reconciliation at March 31. His reconciliation is as follows:
Cash balance per bank ........ $ 7,578.65
Add NSF check ........... 305.00
Less bank service charge ....... 31.00
Adjusted balance per bank ...... $8,824.25
Cash balance per books ........ $9,362.65
Less deposits in transit ......... 1,875.00
Add outstanding checks ........ 427.00
Adjusted balance per books ..... $7,959.65
1. Identify the errors Newman made in the preparation of the bank reconciliation.
2. What is the correct cash balance?
3. Enter adjustments into the accounting equation needed to update the company’s cash balance.