Do it by yourself!!

How to prepare Bank Reconciliation

Bank Reconciliation is a statement which brings into agreement the cash balance per
book and cash balance per bank. It is usually prepared monthly because the bank provides the
depositor with the bank statement.
Things you must know...
1. First, know what the reconciling items are.
Reconciling items includes Credit Memos, Debit memos and Errors in Book Reconciling
items and Deposits in Transit, outstanding Checks and Errors in Bank Reconciling items.
2. Identify what method should be used.
We have 3 methods in bank reconciliation; (1) Adjusted Balance Method, (2) Book to
Bank Method and (3) Bank to Book Method.
3. You must know the right format and rules on each method you will use.

For the Adjusted Balance Method:

Book Balance

xx

Add: Credit memos

Total
Less: Debit memos
Adjusted book balance

xx
xx
xx

Bank Balance
Add: Deposits in transit
Total
Less: Outstanding checks
Adjusted bank balance

xx

xx
xx
xx
xx
xx

*Credit memos are always added to the book balance and Debit memos are always deducted.
* Deposits in Transit are always added to the bank balance and Outstanding Checks are always
deducted.

For the Book to Bank Method:

Book Balance
Add: Credit memos
Outstanding checks
Total
Less: Debit memos
Deposits in transit
Bank Balance

xx
xx
xx
xx
xx

xx
xx
xx
xx

*When the reconciliation starts with the book balance and ends with the bank balance, the usual
book reconciling items are treated in the same manner they are treated in the Adjusted Balance
Method, that is, credit memos are added and debit memos are deducted. However, with respect
to the bank reconciling items the treatment is simply reversed.

For the Bank to Book Method:

Book Balance
Add: Deposits in transit
Debit memos
Total
Less: Outstanding checks
Credit memos
Bank Balance

xx
xx
xx

xx
xx
xx
xx
xx
xx

*When the reconciliation starts with the bank balance and ends with the book balance, the usual
bank reconciling items are treated in the same manner they are treated in the Adjusted Balance
Method that is, deposits in transit are added and outstanding checks are deducted. However,
with respect to the book reconciling items the treatment is simply reversed.

General procedures in preparing the reconciliation

a. Determine the balance per book and the balance per bank.
As for example, the book balance was P50, 000 and for the bank balance was 84, 000.
b. Trace the cash receipts to the bank statement to ascertain whether there are deposits not yet
acknowledged by the bank.
Deposits in transit stated as 40, 000.
c. Trace the checks issued to the bank statement to ascertain whether there are checks not yet
presented for payment.
Check Nos. 725 for P37, 000 and 726 for P28, 000 do not appear in the bank statement.
These are outstanding checks.
d. The bank statement should be examined to determine whether there are bank credits or bank
debits not yet recorded by the depositor.
There is CM of 15, 000 and DM of 5, 000 and service charge of 1, 000.
e. Watch out for errors. Errors can be either included in bank or book reconciling items.

ADJUSTMENT BALANCE METHOD

Book Balance
Add: Note Collected by Bank
Total
Less: NSF Check
Service Charge
Adjusted book balance
Bank Balance
Add: Deposits in transit
Total
Less: Outstanding checks
Check No. 725
Check No. 726
Adjusted bank balance

50, 000
15, 000
65, 000
5, 000
1, 000

6, 000
59, 000
84, 000
40, 000
124, 000

37, 000
28, 000

65, 000
59, 000

BOOK TO BANK METHOD

Book Balance
Add: Note Collected by bank
Outstanding checks No. 725 37, 000
No. 726 28, 000
Total
Less: : NSF Check
Service Charge
Deposits in transit
Bank Balance

50, 000
15, 000
65, 000
5, 000
1, 000
40, 000

80, 000
130, 000
46, 000
84, 000

BANK TO BOOK METHOD

Book Balance
Add: Deposits in transit
NSF Check
Service Charge
Total
Less: Outstanding checks No. 725 37, 000
No. 726 28, 000
Note Collected by bank
Bank Balance

84, 000
40, 000
5, 000
1, 000
65, 000
15, 000

46, 000
130, 000
80, 000
50, 000

Thanks for your time in reading this. I hope it may help you in preparing bank
reconciliation on your own.