Answer to Question #263322 in Accounting for Another you

Question

1. What are the three approaches in preparing bank statement?
2. Write the proforma entry of bank reconcilation using the adjusted balance method.

Answer 1

The three approaches in preparing bank statement:

• Firstly we have to see the balance as on date as per bank statement and as per cash book.
• We adjust the balances that are done in bank statement. Deposits that are yet not done are to be added back and outstanding checks are to be reduced from balance as per bank.
• Bank service charges that are deducted in bank statement. This must be deducted in cash book. Any non sufficient funds that are returned by bank are to be reduced as it is not recognized in bank statement.

The cost of bonds issued is attractive. The payment of interest is paid at regular times.

Bondholders are paid interest regardless of whether the company makes a profit or loses money throughout the fiscal year. High-interest payments, on the other hand, raise the risk of bankruptcy.

The interest rate and price of a coupon bond have an inverse relationship. A fixed coupon bond's price drops as the interest rate rises. This occurs because investors will feel less enticed to acquire the bonds, and ultimately their values would decline.

• When interest rates fall, on the other hand, bonds become more appealing to investors, and a vast number of individuals buy and sell bonds at different prices.
• This drives the prices of bonds to soar higher.

As a result, the interest rate and the price of a bond have an inverse relationship.