What is a bank reconciliation? Tefore we answer the question, let us have a background on the matter of opening a demand depositor cheeking account, Incidentally, ofthe three kinds of deposit, a bank reconciliation is necessary only for a demand deposit or checking account. ‘When an account is opened at the bank, the person authorized to draw checks against the account will be required to sign cards furnished by tho bank, to show the specimen signatures to be used on the cheeks. ‘These specimen signatures will be filed hy the bank so that any teller who may he unfamiliar with @ deposior’s signature can test the authenticity of check by comparing the depositors signature on the eard with the signature on the chee If the depositor isa corporation, the bank will request that the directors pass a resolution authorizing eextain officers of the corporation as signatories of checks and that a copy of this rosalution he filed with the bank, et us now illustrate some fundamental transactions affecting the doperitor and the hank, Assume that Company X (the depositor) collected P100,000 from a customer in settlement of an account, ‘The collection is deposited at the First, Bank, ‘The journal entry to record the collection and the suhsenuent epésit is ‘Cash (oreash in bank) 100,000 ‘enunts receivable 100,000 On the books of the bank, the journal entry is Cast 100,000 Company X 100,000 ‘The journal entry on the books of the bank shows the eredit is Company X aecount, This is made, for our purpose, 10 ‘aclitate the illustration 226 In practice, however, the account credited hy the bank is demand deposit account bat the sameis posted to the subsidiary Tedger of Company X. ‘ten the bank eredits the aocount of the depositor, Company X, it reoogmizes is liability to the depositor. Legally, when deposit is made, thor exis a blo eedtor rekuciipptweot thank andthe depotor,thebaricbsing eho andthe dept being to eee, once, when the account of the depositor is increased the samo i credited. y asued Let us assume further that Company X subsequent heck for P30,000 in pasment of an account payable. On the ‘books of Company’ X, the journal entry is. a 2000 eae tre 20.00 ‘The journal entry on the books af the bask is cs 0040 Sent 20,0 ‘When a check is issued, the payee will present the same to the bank for payment, ‘The depositor is actually ordering the bank to pay the paye ‘out ofits deposit in the bank. ‘This in cho reason the bank debits tho account ofthe depositor thereby reducing ite liability to the depositor. ‘Thus, when the depositor's account is decreased, the same is debited. [At thi oin, when blancos are extracted, the eas Sn bank Aen the depositor book has balance of 70,000, and {RSCampany assunten the bokof the bac hus lv sans of 70 00 227