In your own words, explain what a bank reconciliation is. For just this part, imagine the person to whom you are explaining this has never taken an accounting class before and that his or her banking experience is strictly limited to managing a personal checking account. Feel free to discuss or summarize the different sections of a bank reconciliation if you feel this would be helpful. Try to capture the essence of why bank reconciliations are important and how they are done.

(1) Why dont we make journal entries for bank errors?

(2) Why do we bother including deposits in transit and outstanding checks? Wont they just work themselves out the following month?

(3) Why is Adjusted balance on the bank reconciliation twice?

---------------------------------------------------------------

The cash account for American Medical Co. at April 30 indicated a balance of $82,726. The bank statement indicated a balance of $128,040 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $34,090.

b. A deposit of $18,430, representing receipts of April 30, had been made too late to appear on the bank statement.

c. The bank collected $31,779 on a $29,700 note, including interest of $2,079.

d. A check for $1,900 returned with the statement had been incorrectly recorded by American Medical Co. as $190. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.

e. A check drawn for $370 had been erroneously charged by the bank as $730.

f. Bank service charges for April amounted to $55.

Required: Using the information above, prepare a bank reconciliation for American Medical Co. as of April 30.