Cash management constitutes the operational lifeblood of Apex Logistics Solutions, and the bank reconciliation process functions as a critical internal control mechanism. Pursuant to Sarbanes-Oxley Act (SOX) Section 404, management must certify the effectiveness of internal controls over financial reporting (Public Company Accounting Oversight Board, 2007). Given that cash is the company's most liquid asset, it remains uniquely susceptible to misappropriation. Consequently, the monthly reconciliation between the bank statement and the general ledger transcends mere clerical duty; it is a strategic necessity for detecting discrepancies, preventing fraud, and ensuring financial accuracy (Weygandt et al., 2018). This report details the reconciliation for Apex Logistics Solutions as of October 31, 2024, followed by adjusting journal entries and a critical analysis of the current control environment.
The table below reconciles the bank statement balance of $14,580.00 and the book balance of $16,415.00 to a confirmed adjusted true cash balance of $16,020.00.
| Apex Logistics Solutions Bank Reconciliation Statement October 31, 2024 |
||
|---|---|---|
| Cash Balance per Bank Statement | $14,580.00 | |
| Add: Deposit in Transit | $2,500.00 | |
| Less: Outstanding Checks | ||
| Check #1043 | $850.00 | |
| Check #1045 | $210.00 | ($1,060.00) |
| Adjusted Cash Balance per Bank | $16,020.00 | |
| Cash Balance per Books | $16,415.00 | |
| Add: Error on Check #1039 (Recorded $540, Actual $450) | $90.00 | |
| Less: NSF Check (J. Doe) | ($450.00) | |
| Less: Bank Service Charge | ($35.00) | ($395.00) |
| Adjusted Cash Balance per Books | $16,020.00 | |
The following journal entries update the General Ledger Cash account to reflect the adjusted balance, resolving the identified timing differences and errors.
| Date | Account Titles and Explanation | Debit | Credit |
|---|---|---|---|
| Oct 31 | Cash | $90.00 | |
| Accounts Payable | $90.00 | ||
| (To correct error in recording check #1039) | |||
| Oct 31 | Accounts Receivable - J. Doe | $450.00 | |
| Cash | $450.00 | ||
| (To record NSF check returned by bank) | |||
| Oct 31 | Bank Service Expense | $35.00 | |
| Cash | $35.00 | ||
| (To record October bank service charges) |
The current reconciliation highlights specific control deficiencies. The NSF check from client J. Doe ($450) indicates potential liquidity risks within the accounts receivable portfolio, suggesting inadequate initial credit screening. More critically, the recording error of Check #1039—recorded as $540 instead of the actual $450—signals a lapse in verification procedures. While this $90 variance appears immaterial, it exposes a systemic weakness in the data entry verification process.
Apex Logistics Solutions must implement a rigorous segregation of duties to align with internal control standards. The individual authorizing payments cannot be the same person reconciling the bank statement (Association of Certified Fraud Examiners, 2024). Furthermore, implementing automated three-way matching for book and bank transactions would eliminate manual data entry errors such as the Check #1039 discrepancy. Adopting these measures ensures substantial compliance with SOX Section 404 and protects firm assets against both fraud and clerical error.
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A bank reconciliation statement is a critical financial document that compares a company's internal cash records (cash book) with the bank's records (bank statement). Its primary purpose is to identify and explain any discrepancies between the two balances, such as timing differences, errors, or unauthorized transactions, ensuring the accuracy of financial records and helping to prevent fraud.
Discrepancies typically arise from three main sources: 1) **Timing Differences:** Items like deposits in transit (recorded by the company but not yet by the bank) and outstanding checks (issued by the company but not yet cleared). 2) **Bank-Initiated Transactions:** Items like service charges, interest earned, or NSF checks that appear on the bank statement before the company records them. 3) **Errors:** Mistakes in data entry or recording by either the company or the bank.
Outstanding checks are checks that have been written and recorded by the company but have not yet been cashed or cleared by the bank. In a bank reconciliation, outstanding checks are **deducted from the bank statement balance** to arrive at the adjusted bank balance, as these funds will eventually leave the account.
A deposit in transit is money that has been received and recorded by the company but has not yet been processed and credited by the bank. In the reconciliation process, deposits in transit are **added to the bank statement balance** because the bank has not yet accounted for these funds.
An NSF (Non-Sufficient Funds) check is a check that was deposited by the company but essentially 'bounced' because the payer didn't have enough money. The bank deducts this amount from the company's account. To reconcile, you must **deduct the NSF check amount from the company's book balance** and often record a receivable from the customer.
Yes, any adjustments made to the **company's book balance** usually require adjusting journal entries. This includes recording bank service charges, interest earned, NSF checks, and correcting any company errors. Adjustments made to the *bank balance* (like outstanding checks) do not require journal entries because the bank will process them in time.
The standard formula is: **Adjusted Bank Balance = Ending Bank Statement Balance + Deposits in Transit - Outstanding Checks +/- Bank Errors.** This calculation provides the true cash balance that should match the company's adjusted book balance.
Yes, for bank reconciliation assignments, we provide the full solution in a structured format. If your assignment requires an Excel file submission, we can provide the editable spreadsheet with all formulas (Adjusted Balance, Outstanding Checks sum, etc.) intact so you can understand exactly how the numbers work.
Absolutely. ACCT 201 (Intro to Financial Accounting) is one of our most requested courses. Our accounting experts are familiar with the specific curriculum standards, including the emphasis on internal controls (SOX) and the specific formatting required for journal entries and reconciliation tables.
Yes. Our experts verify every calculation. We guarantee that the 'Adjusted Bank Balance' will perfectly match the 'Adjusted Book Balance' in our solution. If for any reason there is a discrepancy in our work, we will revise it immediately at no cost until it is 100% accurate.