Week 9 — One True Balance: Reconciling the Bicycle Shop's Cash — Traditional alternative (no AI)

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Assignment 8 of the term — reconcile the bicycle shop's bank statement with its Cash account, record only the entries the reconciliation requires, test a swapped-digit error, and set a founder straight about which balance to trust.

This week you met six of the Green Book's categories of control activities, segregation of duties and its limit, the controls over cash receipts and payments, the petty cash fund, the bank statement, the bank reconciliation, the transposition error, and cash and cash equivalents. In this assignment you work four short problems on the bicycle shop's end-of-Month 3 records, interpret each one, and explain this week's ideas to someone who has them wrong. This week's lecture tutorial, quiz, discussion, and Accounting Workshop practise the same ideas from other angles. It builds on Week 3, where you journalized and posted entries with debits and credits, and on Week 8, where you met internal control and its five components.

The task

This week's material is pinned. A bank reconciliation explains the difference between the bank statement balance and the company's cash balance: deposits in transit and outstanding checks adjust the bank side; bank service charges, NSF (not sufficient funds) checks, interest the bank pays, and the company's own errors adjust the book side; both adjusted balances must be equal, and only the book-side items require journal entries. When two digits are swapped in recording a number (a transposition error), the difference between the correct and recorded amounts is evenly divisible by 9. Segregation of duties keeps any one person from both handling an asset and keeping its records, and internal control gives reasonable, not absolute, assurance.

The running case is an illustrative, unnamed bicycle repair and sales shop, organized as a corporation by two founders; it describes no real business. At the end of Month 3 its bank statement and its Cash account disagree, and the shop's control set (Dataset E) calls for a monthly bank reconciliation prepared by someone who does not handle cash. Check No. 209 paid a supplier on account (an illustrative detail).

One of the founders (an illustrative person) sends you this message: "The bank says $8,450 and our books say $8,851. Banks don't make mistakes, so let's set our Cash account to the bank's number and move on. And since I'm the one who makes the deposits, I'll do the reconciliation myself from now on." Your job is to answer the way this course would, starting from four small calculations on the shop's records.

Work these four problems, showing your arithmetic:

1. The bicycle shop's bank statement at the end of Month 3 shows $8,450. A $1,200 deposit is in transit, and check No. 211 for $400 and check No. 214 for $750 are outstanding. What is the adjusted bank balance?
2. The bicycle shop's Cash account at the end of Month 3 shows $8,851. The bank statement shows a $25 service charge, a $300 NSF check from a customer, and $10 of interest earned, and check No. 209 was written for $95 but recorded as $59. What is the adjusted book balance?
3. Check No. 209 was written for $95 but recorded as $59. Divide the difference between the two amounts by 9. What whole number do you get?
4. The bicycle shop's four book-side items are a $25 service charge, a $300 NSF check, $10 of interest earned, and a $36 error on check No. 209 that took too little out of Cash. By how many dollars, net, do the four journal entries lower the Cash account?

Beside each answer, add one brief interpretation:

• Problem 1: name each bank-side item and say why it is added or subtracted; then say why none of them needs a journal entry.
• Problem 2: write the four book-side journal entries, each with the debit first, the credit second, and equal amounts; then say which account the NSF check goes back into and why.
• Problem 3: say what the result suggests about the error on check No. 209 and which side of the reconciliation corrects it; then name the limit of the divide-by-9 test.
• Problem 4: show that the Cash account after posting equals both adjusted balances; explain why these four entries touch Cash even though Week 4's accrual and deferral adjustments never do; and name the Green Book category the monthly reconciliation belongs to, plus one other of the six categories that would protect the shop's cash.

Explain it to a non-expert

The founder means well and has two things wrong. Write a 3–5 sentence message that explains why neither starting balance is the shop's true cash until both are adjusted, why the bank-side items need no entry, and why the person who makes the deposits should not be the one who reconciles the account. Name one limit, such as that a reconciliation shows the two records agree at one moment but does not prove every sale was recorded, or that controls give reasonable, not absolute, assurance. Explain any technical term in everyday words. More than one good answer is possible.

For a different, ungraded example, imagine a housemate who keeps the shared grocery jar and says, "I spent it all on groceries, so there's nothing to check." Model answer: "If the receipts in the drawer plus the cash left in the jar add up to what we put in, then every dollar is accounted for, and we can refill the jar by the amount of the receipts. Counting it together once a month protects you as much as us: if something is short, we will know it was a lost receipt and not a mystery. One caveat: a matching count shows the money adds up, not that every purchase was something we agreed to buy."

Use that pattern for the founder, with your own wording and evidence.

Show your arithmetic. A reader should be able to reproduce every number you report from the figures in the problems without guessing which figures or steps you used.

Deliverables

Submit a single report containing:

• the four results, each with the additions, subtractions, or division shown and the brief interpretation the task names for that problem;
• the four journal entries for the book-side items, each with the debit first, the credit second, and equal amounts;
• the two control categories named in Problem 4;
• your message to the founder, explaining why neither starting balance is the true cash, why the bank-side items need no entry, and why the person who makes the deposits should not reconcile the account, with one limit; and
• a one-line restatement of the figures you used, so your results are reproducible.

Keep it to roughly one page. Clear and correct beats long.

Choose how you show it. Present your report as written text, or as a recorded audio or video explanation of about three minutes with a transcript, or as a labelled spreadsheet of the reconciliation with a short explanation. Every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

This version is designed to be completed without AI: do the arithmetic, the entries, the interpretations, and the writing yourself. You may use a calculator or a spreadsheet for the arithmetic. State the Green Book's categories only as this week's materials state them, check every entry so that its debits equal its credits, and give no tax, legal, or investment advice. Submitting work you did not write as your own, or copying another student's work, is an integrity violation under the course policy.

Built with The Course Maker · samples.thecoursemaker.com