ACCO 20053 Lecture 4

2020-10-15

My questions for bank reconciliation:

1. Bank service charges shown from last month and this month.
2. NSF Check is silent.

Bank reconciliation = part of the internal control where all collections during the period are collected in
the bank. We need to know that what is recorded in the book is recorded in the bank (the goal is to let
the balance per book = balance per bank).

Causes for Bank Reconciliations:

a. Timing differences, which should be updated
b. Errors: Book errors are adjusted in the book while bank errors are not adjusted in the book
(book reconciling items are only adjusted in the book)

Book reconciling items:

a. Unadjusted Balance per Book (increased by credit memos)
Credit memos = amounts already credited by the bank (added by the bank) but not yet in the
book.
i. Notes collected by the bank, which may include interest on notes collected with
the entry: Dr. Cash, Cr. NR (face amount) and Cr. Interest Revenue (Interest
Collected)
ii. Interest earned on bank deposits (20%) (Dr. Cash Cr. Interest Income)
iii. Proceeds of loan gained from the bank (Dr. Cash Cr. Loans Payable)
Debit memos = deductions (disbursements made by the bank but not in the book)
i. Bank Service Charge (Dr. BSC or Misc. Exp. Cr. Cash)
ii. NSF Check (DAUD or DAIF) = Check deposited in the bank and should be
reverted to A.R. (Dr. A.R. Cr. Cash)
The only way to correct the NSF check is to record it as a disbursement.
iii. Payment of notes payable and interest by the bank (Dr. Notes Payable principal
amount, Dr. Interest Expense and Cr. Cash)
iv. Payment of Loans = Auto debit arrangement (Dr. Loans Payable and Dr. Cash)

作成した: 2020-10-15
Alcera, Vincent Luigil C.
Book Errors (where cash may be added or deducted) (cash is either added or deducted from the
unadjusted bank balance)
a. Check disbursed (Check disbursements = payments to suppliers assumed for 50000 was
recorded at 5000: Dr. A.P. 45000 Cr. Cash 45000
b. Customer collections for 15000 was credited at 1500, so Dr. Cash 16500 and Ar. 16500

Bank Side: (No adjusting entries)

1. Reconciling items: Deposits in Transit (added to the unadjusted bank balance)
DIT beg. + Deposits per book – Deposits reflected per Bank = DIT end.
2. Undeposited receipts (either in form of check or cash) = collections made and recorded in the
book but not deposited in the bank (added to the unadjusted bank balance) (Intac collection
system = all receipts are deposited in the bank)
3. Outstanding Checks = checks issued by the company to the payee (dated), but the payee as of
year-end has not yet encashed the check (deduction)
OC beg. + check disbursements per book – Check disbursements per bank = OC, end.
Bank errors
a. Deposits of 15000 was debited at 5000 in the bank (Go to the balance per bank and
credit 20000 in the bank)
b. Check disbursements for 16200 was disbursed at 162000 in the bank, so credit 145800
in the bank (add)
c. Customer Deposits of 50000 was credited at 500000 = 450000 should be debited

Ideally, after reconciliation, the balance per book = balance per bank. In certain circumstances, if they do
not equal, a shortage or overage will occur. Usually, we follow the bank as a correct balance.
The shortage is recorded in the book as: Dr. Cash Shortage and Dr. Cash (if bank balance<cash balance)
The overage is recorded as: Dr. Cash and Cr. Misc. Income (if bank balance>cash balance)

作成した: 2020-10-15
Alcera, Vincent Luigil C.