You Are The Newly Hired Accountant For The Gift Shop

You Are The Newly Hired Accountant For The Gift Shop The Owner Has Ju

You are the newly hired accountant for The Gift Shop. The owner has just received the December 31, 2008 bank statement and has asked you to prepare the monthly bank reconciliation. Write the procedure documentation for the monthly bank reconciliation process in a professional manner. It will be the desktop guide used by others in the event of your absence to prepare the financial statements for The Gift Shop. It may be in the form of a memorandum or as a numbered listing of items, depending on your individual preference.

Prepare the monthly bank reconciliation for The Gift Shop based on the information provided. Additional information needed for bank reconciliation preparation follows: Cash per the unadjusted trial balance is $12,675. Cash balance per the bank statement is $12,780. Check #115 has not cleared the bank. It was written for $645.

A deposit of $1,000 cleared the bank but was not recorded in the general ledger. A check for $250 was found in the owner's desk drawer. A deposit of $1,250 was taken to the bank after 2 p.m. on December 31, 2008, and was not posted by the bank until January 1, 2009. Errors were noted in the following checks: Check #121 was recorded for $325 but cleared the bank as $320. Check #125 was recorded for $585 but cleared the bank as $600.

Paper For Above instruction

Procedural Documentation for Monthly Bank Reconciliation at The Gift Shop

Effective financial management relies heavily on accurate and timely bank reconciliations. The purpose of this procedural documentation is to establish a standardized process for preparing the monthly bank reconciliation at The Gift Shop. This process ensures that the company’s cash records are accurate, discrepancies are identified and addressed promptly, and financial statements reflect the true financial position of the business. The following step-by-step procedure is designed to be clear, comprehensive, and easy to follow in the absence of the primary accountant.

Step 1: Gather Necessary Documents

Begin by collecting all relevant documents required for reconciliation, including the bank statement for December 31, 2008, the unadjusted general ledger cash account, and all supporting transaction records, such as check registers, deposit slips, and prior reconciliation statements.

Step 2: Verify the Beginning Cash Balance

Confirm that the opening cash balance from the previous period’s reconciliation matches the current period's starting balance. This ensures consistency and accuracy in tracking cash flows.

Step 3: Reconcile the Bank Statement Balance

Start with the bank statement ending balance of $12,780. Adjust this balance for items not yet reflected in the bank statement or recorded in the ledger:

• Subtract checks that have been recorded but not cleared, such as Check #115 for $645.
• Add deposits that have been recorded in the ledger but not yet posted by the bank, for example, the deposit of $1,250 made after 2 p.m. on December 31, 2008.
• Add deposits that cleared the bank but were not recorded in the ledger, such as the $1,000 deposit.
• Subtract any errors identified in checks, like Check #121 (recorded for $325, cleared as $320) and Check #125 (recorded for $585, cleared as $600).

Step 4: Reconcile the Ledger Cash Balance

Adjust the general ledger cash balance of $12,675 by accounting for unrecorded transactions and errors:

• Record the unposted deposit of $1,250.
• Subtract the outstanding check #115 for $645.
• Record the $250 check found in the owner’s drawer that was not previously recorded.
• Correct check recording errors for Check #121 and Check #125 based on bank clearing amounts.

Step 5: Prepare the Reconciliation Schedule

Construct a reconciliation schedule that clearly shows:

• The adjusted bank statement balance after adding and subtracting the above items.
• The adjusted ledger cash balance after accounting for unrecorded transactions and errors.
• The difference between the two adjusted balances, which should be zero if the reconciliation is complete and accurate.

Step 6: Investigate Discrepancies

If discrepancies persist after adjustments, review all supporting documents and transaction records for errors or omissions. Resolve any outstanding differences by correcting record entries or obtaining clarification from the bank or owner as needed.

Step 7: Finalize and Document the Reconciliation

Once the balances match, prepare a formal reconciliation statement for documentation purposes. Sign and date the statement. File the reconciliation report along with supporting documents for future audits and reference.

Step 8: Communicate and Record Adjustments

Notify relevant personnel, such as the owner or bookkeeper, of any adjustments made during reconciliation. Record any necessary journal entries in the accounting system to reflect corrections identified during the process.

Conclusion

Adhering to this standardized procedure ensures the integrity and accuracy of The Gift Shop’s financial records. Regular monthly reconciliation minimizes errors, detects fraud or theft promptly, and maintains reliable financial data for management decision-making. The process enhances overall financial control and compliance with accounting best practices, contributing to the shop's financial stability and transparency.

References

• Gibson, C. (2017). Financial Accounting (3rd ed.). McGraw-Hill Education.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2014). Introduction to Financial accounting (16th ed.). Pearson.
• Knapp, L. G. (2012). Financial Accounting for Management. Cengage Learning.
• Kaplan, R., & Norton, D. (2004). Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business Review.
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Financial Accounting: IFRS Edition. Wiley.
• Revsine, L., Collins, D., Johnson, W., & Mittelstaedt, F. (2015). Financial Reporting & Analysis. Pearson.
• Financial Accounting Standards Board (FASB). (2021). Accounting Standards Codification (ASC). FASB.
• American Institute of CPAs (AICPA). (2022). Audit and Accounting Guides. AICPA.
• Peterson, P. P., & Fabozzi, F. J. (2012). Analysis of Financial Statements. Wiley.
• Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management. Cengage Learning.