Review Module 2

Bank Reconcilation

P.M.G. Clamor
August 24, 2011

3 Types of Bank Deposits

Demand deposit checking account where funds are

withdrawal by means of checks.

Savings deposit account where a passbook is required in

making deposits and withdrawals

Time deposit interest-bearing savings account evidenced by

a certificate of deposit
o Maybe pre-terminated or withdrawn on demand, or
after a certain period of time agreed upon.
Bank reconciliation statement which brings agreement the cash
balance per book and per bank
Bank statement monthly report of bank to the depositor showing the
cash balance per bank, deposits acknowledged, checks paid, and other
charges and credits to the company.

+
=
-

Reconciling items (pro-forma for adjusted balance method)

+
=

Balance per book

Credit memos

Notes collected by
bank

Proceeds of bank
loan

Matured time
deposits
Debit memos

NSF checks

Defective checks

Service charges

Reduction of loan
Book errors
Adjusted balance

+
=

Balance per bank

Deposit in transit

Collections
forwarded to bank

Collections on hand

Outstanding checks

Checks not
presented for
payment

Certified checks
Bank errors
Adjusted balance

Reconciling items (pro-forma for book to bank balance method)

+
=
-

+
=

Balance per book

Credit memos

Notes collected by bank

Proceeds of bank loan

Matured time deposits

Debit memos

NSF checks

Defective checks

Service charges

Reduction of loan
Book errors
Adjusted balance
Deposit in transit

Collections forwarded to bank

Collections on hand
Outstanding checks

Checks not presented for payment

Certified checks
Bank errors
Balance per bank

Reconciling items (pro-forma for bank to book balance method)

Balance per bank

Deposit in transit

+
=

Collections forwarded to bank

Collections on hand
Outstanding checks

Checks not presented for payment

Certified checks
Bank errors
Adjusted balance
Credit memos

Notes collected by bank

Proceeds of bank loan

Matured time deposits

Debit memos

NSF checks

Defective checks

Service charges

Reduction of loan
Book errors
Balance per book

Examples of errors and their pro-forma entries

1. Misstatement of cash receipts on books of depositor
a. Understatement add book balance
Cash in bank
xxx
Accounts receivable
xxx
b. Overstatement deduct book balance
Accounts receivable
xxx
Cash in bank
xxx
2. Misstatement of checks drawn by depositor
a. Understatement deduct book balance
Accounts payable
xxx
Cash
xxx
b. Overstatement add book balance
Cash
xxx
Accounts payable
xxx
3. Deposit of another entity credited to deposit
Deduct bank balance, no entry required
4. Check of another entity charged to account
Add bank balance, no entry required
Two-date bank reconciliation (pro-forma computation)

Book balance, beginning

Cash receipts per book
Cash disbursements per book
Book balance, end
Credit memos

Notes collected by
bank

Proceeds of bank
loan

Matured time
deposits
Debit memos

NSF checks

Defective checks

Service charges

Reduction of loan
Book errors

Adjusted balance

+
=
+

+
=
+

Bank balance, beginning

Bank credits
Bank debits
Bank balance, end
Deposit in transit, beginning

Cash receipts deposited

Deposits acknowledged

Outstanding checks,
beginning
Checks drawn by depositor

Checks paid by bank

Bank errors

Adjusted balance