Question: You are auditing general cash for Trail Supply Corp. for the fiscal year ended July 31. The client has not prepared the July 31 bank

You are auditing general cash for Trail Supply Corp. for the fiscal year ended July 31. The client has not prepared the July 31 bank reconciliation. After a brief discussion with the owner, you agree to prepare the reconciliation with assistance from one of Trail Supply€™s clerks. You obtain the following

Information in General Ledger and Bank Statement
Balance per bank€¦€¦€¦€¦$5,753
Deposits in transit€¦€¦€¦€¦ 600
Outstanding cheques€¦€¦€¦€¦ 1,742
Balance per books€¦€¦€¦€¦ 4,611
In addition, the following information is obtained:
1. The total of outstanding cheques on June 30 was $1,692.
2. The total for cheques that were recorded in the July disbursements journal was $20,467.
3. A cheque for $1,060 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. Trail Supply uses the periodic inventory method.
4. A cheque for $396 was charged to Trail Supply but had been written on an associated company€™s bank account.
5. Deposits included $600 from June and $24,456 for July.
6. The bank withdrew from Trail Supply€™s account a nonsufficient funds (NSF) customer cheque totaling $311. The credit manager concluded that the customer intentionally closed its account and that the owner had left the city. The account was turned over to a collection agency.
7. The bank deducted $5,800 plus interest from Trail Supply€™s account for a loan made by the bank under an agreement signed four months ago. The note payable was recorded at $5,800 on Trail Supply€™s books.
REQUIRED
a. Prepare a bank reconciliation that shows both the unadjusted and adjusted balances per the general ledger.
b. Identify the nature of adjustments required.
c. What audit procedures would you use to verify each item in the bank reconciliation?

General Ledger $ 4,611 Bank Statement $5,753 25,056 Beginning balance Deposits Cash receipts jounal Cheques cleared Ca 25,456 (23,615) sh disbursements joumal July bank service charge Note paid directly NSF cheque Ending balance (21,811) (87) (6,100) (311) 696 $ 8,256

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