Accompanying a bank statement for Borden Company is a credit memo for $21,200 representing the principal ($20,000) and interest ($1,200) on a note that had been collected by the bank. The company had been notified by the bank at the time of the collection but had made no entries. Journalize the entry that should be made by the company to bring the accounting records up to date?

The journal entry should be:

Dr Cash 21,200

Cr Note Receivable 20,00

Cr Interest Income 1,200

(to record receivable collected by the bank)

Explanation:

The company is collected its interest income generating receivable through the bank, with the principal amount is $20,000 and the interest amount is $1,200.

So, its cash account - an asset account will increase (Dr) by the total amount collected which is $21,200. The Receivable account - an asset account will decrease (Cr) by $20,000 which is also the principal amount and Interest Income will be recorded $1,200 by crediting the amount into the Interest Income account.

Bank reconciliation is a statement carried out by a company to know the difference between cash balance per book and cash balance per bank.

A journal is needed by a company to keep day to day updates of records.

Explanation:

Banks prepares statement of account. the Borden company has updates its own records from their end. most times times the balance of cash per bank and per book rarely work well or agree.

Bank reconciliation is a statement that is prepared by a company to know the disagreement and dissimilarity of cash balance per book and cash balance per bank

A record journal entry must be made by the company to have a good update of their records.

An example of a journal is shown below

Date, Account and explanation, post reference, Debit ($), Credit ($)