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BANK RECONCILIATION
STATEMENT
CLASS MODE REVISION

Completed

EXAM WEEK 2

SLIDES

BANK RECONCILIATION STATEMENT

What is a bank reconciliation statement?

Bank reconciliations statement is a report that brings the balance of cash

per books and per banks into agreement

Why are bank reconciliation prepared? 3

Explain the difference between the balance in the cash per books and per
banks

Provide information with regards to reconciling journal entries

Helps determined the adjusted cash balance to be presented in the

financial statements

When is a bank reconciliation prepared?

It is prepared monthly, immediately after the issuance of the bank

statement by the bank

What is a bank statement?

Bank statement is a report issued by the bank which shows the deposits,
withdrawals as well as the cumulative balance of the depositor's bank

BANK RECONCILIATION STATEMENT 1

 account

What if the business has more than one bank accounts, what is the deal with
the reconciliation?

Separate bank reconciliations are prepared for each bank accounts

Bank reconciliations are normally required only for?

Required only for checking account

Why is bank reconciliation not required for savings account? 3

It is not required for savings accounts since checks cannot be

withdrawn. If ever that there is a withdrawal, the cash records and the
bank passbook is automatically updated

Also, interest income earned by the deposit is the only reconciling

item

What is the exception?

Exception if there is a difference between the cash records and the

bank passbook which could actually be because of unrecorded
withdrawals. But for accountants they may actually be a fraud

PRO-FORMA BANK RECONCILIATION STATEMENT

What is the difference between the balance per books, end and balance per
bank statement, end?

BALANCE PER BOOKS, END = the cash balance in the books of the
depositor at the end of the current month

BALANCE PER BANK, END = the cash balance in the bank statement or
record at the end of the current month

What are the book reconciling items?

CREDIT MEMO

This has already been credited to the bank account but has not yet
been recorded in the depositor's account

What are the example of credit memos? CIPU

BANK RECONCILIATION STATEMENT 2

 Collections which have already been credited by the bank on
behalf of the depositor

Interest income earned by the deposit

Proceeds from the loan directly credited by the bank or added to

the depositor's account

Unrolled over - matured time deposit already been transferred by

the bank to the entity's account

DEBIT MEMO

This has already been debited to the bank account but has not yet
been recorded or deducted in the depositor's account

What are the examples of debit memo? BNAP

Bank service charges = charges by the bank such as fees, interest,

penalty, surcharge

NSF / DAIF = this consists of checks already been deposited to

the bank but subsequently returned by the bank since the funds in
the depositor's account is not enough to cover the checks

Automatic Debits = the bank automatically debits the amount in

the bank account of the depositor, especially if the bank and the
depositor have an agreement

Payment for loans = the bank automatically pays for the loans of
the depositor especially if both of them have an agreement that
the payment for the loans will just be debited in the depositor's
account in the bank

BOOK ERRORS

Erroneous recordings in the books committed by the depositor

What are the bank reconciling items?

DEPOSIT IN TRANSIT

Deposit in transit are checks that have already been deposited by the
depositor but has not yet been credited by the bank

BANK RECONCILIATION STATEMENT 3

 Deposits in transit normally occurs when: MOCA

Mailed in the bank

Placed in an overnight depository

It is in the forms of checks and the checks has not yet been
cleared

Deposited at the banks cut-off

Deposit in Transit represents the difference in:

Difference between the checks or deposits already deposited and

to the checks or deposits actually credited by the bank

OUTSTANDING CHECKS

Outstanding checks are checks that have already been drawn and
release by the depositor to the payee but has not yet been cleared or
encashed in the bank

Outstanding checks excluded:

CERTIFIED CHECKS = this are automatically debited by the bank

since the bank has the direct liability to the payee

STALE CHECKS = checks that has not been cleared for a long
period of time more than 6 months or more than 108 days. It is
excluded in the outstanding checks but are added back to cash

Outstanding Checks represents the difference in:

Checks already drawn by the depositor to those that are actually

encashed by the bank

BANK ERRORS

Erroneous recordings or errors committed by the bank

PROOF OF CASH
What is a proof of cash?

Proof of cash is an expanded bank reconciliation that actually shows the

proof of cash receipts and disbursement

BANK RECONCILIATION STATEMENT 4

 When is proof of cash prepared?

Unlike the bank reconciliation that is prepared monthly, proof of cash is

only prepared when needed

BANK RECONCILIATION STATEMENT 5