Error! Filename Not Specified.: Kolehiyo NG Subic Wawandue, Subic, Zambales

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KOLEHIYO NG SUBIC
Wawandue, Subic, Zambales

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ii
Error! Filename not specified.RECONCILIATION OF FINANCIAL STATEMENTS
BUSINESS EDUCATION DEPARTMENT
___________________________
A Research Proposal to the Research Professor
Mr.Kristopher Dumpit
_____________________________
In Partial Fulfillment of the Requirements in the course FIN 3
Financial Management, Part 3

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Error! Filename not specified.GROUP 3
THE EXECUTIVES
GERALDINE

JHERTY
ANN

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CRISTINA

ROSALIE

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TABLE OF CONTENTS
TITLE
NAME OF GROUP
TABLE OF CONTENTS
ACKNOWLEDGEMENT
CRITERIA
CHAPTER
I. OVERVIEW
A. Needs for Research
B. Definition of Research
C. Nature of Research
D. Aims or Goals of Research
E. Types of Research

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F. Research Process
G. Qualities of Good Research

II. RESEARCH PROBLEM AND OTHER ELEMENTS
Define: Research Problem
1.a) Problem Identification Analysis
1.b) Characteristics of Research Problem
1.c) Solution and Stating the Problem
2. Variables
3. Hypotheses
4. Related Literature, Its Values and Source
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Wawandue, Subic, Zambale
vi
Error! Filename not specified.III. METHODS OF RESEARCH
a. Purpose
b. Characteristics
c. Basic Steps
d. Advantages
e. Disadvantages
f. Source
IV. RESEARCH TOOLS
V. DATA TREATMENT
VI. CONCLUSION & RECOMMENDATION
VII. RESEARCH PROPOSAL

vii
CRITERIA
A.ORAL REPORT (RECITATION) 100%
Intelligence or Oral Personality

Knowledge of the Presentation
NAMES Topic 20%
30%
50%
Geraldine Rosimo

Jherty Ann Lorenzo
Cristina Dimalanta

Rosalie Macaraeg

Noel Bagares

Bryan Baleros

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B. WRITTEN REPORT (ASSINGMENT) 100%
Completeness of Significance of Presentation of

Report Information Documented
NAMES Presented Report
30%
50% 20%
Geraldine Rosimo

Jherty Ann Lorenzo

Cristina Dimalanta

Rosalie Macaraeg

Noel Bagares

Bryan Baleros
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C. GROUP REPORT 100%

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Organization Intelligence/ Overall
NAMES 25% Knowledge 25%

50%
Geraldine Rosimo
Jherty Ann Lorenzo
Cristina Dimalanta
Rosalie Macaraeg
Noel Bagares

Bryan Baleros

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Error! Filename not specified.CHAPTER 1
NEED FOR RESEARCH IN AN ORGANIZATION
Research extends our vision and experience. It helps us understand how and why a
situation exists. It enables us to discover new things and ideas, validates information which
he/she can use as a basis for making decision. The description of the use of the function of
research helps us in developing and improving the quality of life he/she have.
Business firms faced a lot of problem and often manager already possess enough
information to make sound decisions to solve this problem. However, when they lack of
adequate information, research must be considered to reduce the uncertainty. Managers must ask
themselves if the research will provide the information needed to answer their basic question
because its values will depend on the nature of managerial decisions to be made. Conducting
research systematically takes time but it will help managers of the firm to gain familiarity with
the present status of the business, to reveal the trend and tendencies in the business and to assess
the growth or expansion potential of the business.
He/she needs to conduct a survey about Reconciliation of Financial Statements to be able
to know how accountants or auditors reconcile mistakes being done during transactions. It will
lead us to clear view of the topic wherein we will know more about it
This will prove if the different principles of accounting are being use or apply when
reconciling different items. This will let us know how important every details in entering
a transactions.

2
DEFINITION OF RESEARCH
The word research derives from the French word recherché, from recherchér, to search
closely where “chercher” means to “to search”; its literal meaning is “to investigate thoroughly”.
It is also used to describe an entire collection of information about a particular subject.
Although, given its literal meaning, still research has been defined differently by different
people. In most people’s minds, the word “research” conjures up to the image of a scholar,
laboratory work, university or other academic setting. But research is simply the process of
asking question and answering them by survey or experiment in an organized way. It should not
be confined to academicians alone. Every thinking person has the capacity and should do
research. The fundamental requirement for research is an inquiring mind in order to recognize
that there are questions that need answers. The quest for knowledge then is the basic idea behind
research.
Other definitions are presented below followed by the key characteristics.
1. Research is systematic, formal, rigorous and precise process employed to gain solutionto
problems or to discover and interpret new facts and relationships (Waltz and Bausell, 1981)
2. Research is systematic, controlled, empirical and critical investigation of hypothetical
propositions about the presumed relations among natural phenomena. (Kertinger, 1973)
3. Research is the process of looking for a specific answer to a specific question in an organized,
objective, reliably way. (Payton, 1979)

4. Research is the pursuit of truth with the help of study, observation, comparison and
experiment; the search for knowledge through objective and systematic method of finding
solutions to a problem, (Kothari, 2006).
When the definitions are consolidated, it can be said that research is the systematic
activity directed towards objectively investigating specific problems in order to discover the
relationships between and among variables. It seeks to answer specific questions and includes
collecting your data in an ordered manner, with a purpose in mind, and the following certain
rules about your mode of collection.
NATURE OF RESEARCH
The acquisition of knowledge is a continuous process from birth; an individual exploring
the environment and asking questions. Information is provided by parents, associates and
teachers. It is supplemented by books, magazines, newspaper, journals and the media. As
individuals knowledge increases questions become more complex and answers are sought from
experts, reference books and specialized journals. Research is the examination of these limits of
knowledge; assessing what is known up to the that point, defining unanswered questions and
devising ways of answering them in an organized and meaningful way.

Research can be the basis for many important decisions in our lives. Without it, we are
deluged with information, subjected to the claims of the advertiser, or influence by hearsay in
making sense of the world around us. This informal, experimental research helps us decipher the
information flood we encounter daily.
Formal academic research differs from experimental research and may be more
investigate in nature. For example, it may require us to learn about an area where we have little
knowledge or inclination to learn. It may be library-oriented or field-oriented, depending on the
nature of research.
AIMS OR GOALS OF RESEARCH
Research expands and augments your experience and knowledge, providing a broader
base of thinking and working. It enables you to become an expert in areas no t directly related to
your everyday life. When you engage in research, you built valuable critical skills that serve you
in other areas of life. You learn to ask thoughtful questions, gather and interpret data, read
critically, form intelligent opinions and manage and understand conflicting information. As you
do research in your chosen specialization, you become an expert in that area. In addition, when
you write about your discoveries, others come to respect your knowledge and value your
opinion.
Research, a cognitively complex activity, requires some discipline and sophisticated
skills. It plays a role in creating knowledge about a subject, managing conflicting information,
and thinking about a field of study. Research helps us understand why asking a question is
important to our education.
TYPES OF RESEARCH
Descriptive Research
Descriptive research does not fit neatly into the definition of either quantitative or
qualitative research methodologies, but instead it can utilize elements of both, often within the
same study. The term descriptive research refers to the type of research question, design, and
data analysis that will be applied to a given topic. Descriptive statistics tell what is, while
inferential statistics try to determine cause and effect.

According to Aquino (1993), the descriptive method is something more and beyond than
just data gathering. The true meaning of the data collected should be reported from point of view
of the objectives and the basic assumptions of the study. Facts obtained maybe accurate
expressions of central tendency or deviation or correlation; but the report is not research unless
discussion of data is carried out up to the level of adequate interpretation. The data must be
subjected to the thinking process by means of ordered reasoning. Thus, description is often
combined with comparison and contrast involving measurement classification, interpretation and
evaluation.
The descriptive research approach can be used at the initial stage of investigation to
identify the variable that exists in a given situation and to describe the relationship that exists
between these variables. Descriptive research does not fit neatly into the definition of either
quantitative or qualitative research methodologies, but instead it can utilize elements of both,
often within the same study. The term descriptive research refers to the
KOLEHIYO NG SUBIC
Error! Filename not specified. type of research question, design, and data analysis that will be
applied to a given topic. Descriptive statistics tell what is, while inferential statistics try to
determine cause and effect.
Descriptive research can be either quantitative or qualitative. It can involve collections of
quantitative information that can be tabulated along a continuum in numerical form, such as
scores on a test or the number of times a person chooses to use a-certain feature of a multimedia
program, or it can describe categories of information such as gender or patterns of interaction
when using technology in a group situation. Descriptive research involves gathering data that
describe events and then organizes, tabulates, depicts, and describes the data collection (Glass &
Hopkins, 1984). It often uses visual aids such as graphs and charts to aid the reader in
understanding the data distribution. Because the human mind cannot extract the full import of a
large mass of raw data, descriptive statistics are very important in reducing the data to
manageable form. When in-depth, narrative descriptions of small numbers of cases are involved,
the research uses description as a tool to organize data into patterns that emerge during analysis
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Identification and Definition of Research Problem

THE RESEARCH PROCESS
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Identification of Target Population Sampling

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Data Processing
(Statistical Analysis, Interpretation, Generalization)

KOLEHIYO NG SUBIC
Error! Filename not specified.QUALITIES OF A GOOD RESEARCH
1. Good research is a systematic; it means that research is structured with specified sequence in
accordance with the well defined set of rules. Systematic characteristic of the research does not
rule out creative thinking but it certainly does reject the use of guessing and intuition arriving to
conclusion.
2. Good research is logical; this implies that research is guided by the rule of logical reasoning
and logical process of induction and deduction are of great carrying out research. Induction is the
process of reasoning from a part to the whole, whereas deduction is the process of reasoning
from the premise, in fact, logical reasoning makes research more meaningful in the context of
decision making.
3. Good research is empirical; it implies that research is related basically to one or more aspects
of a real situation and deals with concrete data that provides a basis for external validity to
research result.
4. Good research is replicable; this characteristic allows research to be verified by replicating the
study and thereby building a sound basis for decision.
5. A good researcher will be able to extract relevant information from large amounts of
information. Complete research will have a) the core information, or sets of core information,
which together answers the question (problem) directly, and b) the contextual information, which
determines whether or not the core research is applicable to given circumstances. That is, the
research must be relevant.
6. Good research is that which paints a complete picture, but not so bogged down with
detail asks to detract from the overall picture - i.e. the solution to given problem.
7. The researcher should also be able to convey the research in an accessible format, which is the
research, must be easy to make use of. This might mean illustrating hundreds and hundred of
numbers, for e.g. the ages of women working in childcare, into categories of relevance such as
the region they live in or their ethnic background, depending on the question being asked.

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Error! Filename not specified.CHAPTER II
RESEARCH PROBLEM AND OTHER ELEMENTS
Research Problem
Research problem is the fuel that drives the scientific process and is the foundation of any
research method and experimental design from true experiment to case study. This study showed
the essential use of reconciliation in financial statement.
Problem Identification and Analysis
1. Relevant information
2. Validity of information
3. Comparable information
4. Manner of Presentation
Characteristics of Research Problem

a) Fairly Presented — The research must be presented fairly in which it will not affect the
firm or other business. There should not be a bias intention.
b) Relevant — The information gathered must based on facts and that is only relevant to
the study.
c) More expansive and encompassing than any other methods of investigation.
d) Its contribution to science in supplying the necessary information in a new situation.
e) The data gathered in this study are considered very useful in helping us adjust or meet
the existing daily common problems in life.
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Error! Filename not specified.Solution and Stating the Problem
1) What is the profile of respondents in terms of;
a. Sex
b. Kind of Business
c. Position
2) What are the most reconciling items?

a. Credit Memos
b. Debit Memos
1. No Sufficient Fund
2. Bank Service Charges
c. Deposit in Transit
d. Outstanding Checks
e. Others
3) Do you reconcile your financial statements regularly?
4) Do you the accounting policy when reconciling your financial statements?
5) Is it really necessary in preparing a financial statement?
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Error! Filename not specified.Variables and Types
INPUT PROCESS OUTPUT
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A. Respondent’s
Variable Data
Collection
a. Sex

b. Kind of
Business Questionnaire
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c. Position

B.
Interview
1. Reconciling
Items
2. Accounting Observation
Policy/Standard
s
3. Presentation Data Analysis

of Report
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Information

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Error! Filename not specified.Hypothesis
There is no significant relationship between the respondent’s variable and the reconciling
items, accounting policy, presentation of report and importance of information.

Related Literature
Foreign Literature
Reconciliation or verification of financial transactions is a key element of Duke’s internal
controls and is fundamental to sound business practices. A verification of all charges against a
cost object, accompanied by any necessary corrections, ensures the fundamental transactions,
which result in financial reports, are correct.
This procedure details responsibilities, documentation required, and specific procedures
for ensuring that proper verification is taking place.
The business manager, other person who has financial responsibility, or individual to
whom authority has been delegated, must verify all financial transactions on a timely basis
(monthly or on an ongoing basis during the month). They must verify that the charges are
accurate and charged to the appropriate account. Erroneous transactions noted during the
verification process are to be corrected before the close of the next accounting period.
The business manager or owner of the code is ultimately responsible for ensuring that the
verifications are being completed. They must review the reconciliation and document their
review. The business manager or owner may delegate the review process;
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however; they should ensure that the individual reviewing the reconciliation is not the Error!
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Documentation that the verification and review have taken place can take several forms.
Some documentation options are:
1. Sign or initial the financial report
2. Sign or initial the Financial Transaction Reconciliation Log
3. Sign or initial a reconciliation cover sheet
4. Sign or initial a monthly log of reconciliations
This signature certifies that the account was reconciled (verified) and reviewed for the
accounting period. The documentation of the review must be maintained in an accessible
location for current year plus 2 years.
If the department has original documentation (such as corporate card receipts and
statements) that supports the reconciliation then it must be kept, in an accessible location for 7
years. If the department only has copies and the originals are maintained centrally (such as
vendor invoices, Travel Expense Forms, Miscellaneous Reimbursement Form, phone bills, etc.)
then the decision to keep copies is a matter of departmental procedure.
The Duke University Internal Audit Department will verify that timely reconciliations are
being performed as part of their audits of University and Health System departments. Perform
transaction verification by reviewing via SAP (either on-line or by printing an SAP report) the
documentation for items such as Journal Vouchers,
Purchase Orders, payroll charges, vendor invoices, and Accounts Payable Check Request.
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When paper copies have been received or kept they should also be matched received or kept they
should also be matched Error! Filename not specified. against the transactions posted to the
cost object. Examples of paper copies, which may be received or kept, are Miscellaneous
Reimbursement Form, Travel Expense Form, Accounts Payable Check Request, Bursar Receipt,
Experimental Subject Payment Form, vendor invoices, telephone bills, etc.
Through the verification process, all charges posted to a cost object are reviewed to
determine that they are appropriately charged to the cost object and the proper G/L account was
used. Any errors found are to be corrected before the close of the accounting period following
the period the charge was processed.
The reconciliation or verification procedure is done to ensure that all transactions/charges
to a cost object are appropriate and that the correct G/L account is used for the transaction. This
is accomplished for each transaction by reviewing the SAP online document via drilling down
from a report or by comparing the charge to paper documentation (backup).

Foreign Private Issuers Preparing Financial Statements in Accordance with IFRS are No
Longer Required to Reconcile to U.S. GAAP
April 17, 2008
On March 4, 2008, final rules adopted by the Securities and Exchange Commission
(SEC) went into effect that eliminate the need for foreign private issuers who prepare financial
statements in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB) to
16
reconcile their financial statements to U.S. generally accepted accounting principles (U.S.
GAAP).This significant change to foreign private issuer financial reporting requirements is a
major step towards the SEC’s goal of having a single, global accounting standard.
Prior to March 4, 2008, the SEC required reporting foreign private issuers to provide a
reconciliation of their financial statements to U.S. GAAP, regardless of the accounting standards
on which the foreign private issuer statements were based. The rationale for the reconciliation
requirement was that there did not exist a set of widely accepted, high-level, international
accounting principles on which both issuers and investors could rely. Progressive globalization
of the capital markets has stimulated the

Development of IFRS as issued by the IASB such that the SEC now feels comfortable relying on
financial statements prepared in accordance with IFRS without the need for U.S. GAAP
reconciliation. IFRS has achieved global acceptance outside of the U.S., with approximately 100
countries currently requiring or allowing the use of IFRS, with many more expected to do so in
the coming years. Illustrating this trend, the European Union (EU) issued a directive to require
all companies incorporated in an EU member state and whose securities are listed on an EU
regulated market to use IFRS beginning with their 2005 financial year.
Rationale for Eliminating the U.S. GAAP Reconciliation Requirement
The SEC had a two-fold rationale for eliminating the U.S. GAAP reconciliation
requirement. On one hand, the SEC was confident that the accounting principles of IFRS
as issued by the IASB were robust enough to provide investors with salient financial data
17
from foreign private issuers. On the other, the SEC believed that accepting IFRS - based
financial statements without U.S. GAAP reconciliation would expand capital market access by:
• encouraging more foreign private issuers to enter the U.S. public markets;
• causing more foreign private issuers to adopt IFRS; and

• promoting the gradual convergence of U.S. GAAP and IFRS.
The ability of foreign private issuers to omit U.S. GAAP reconciliation of their financial
statements is limited to those issuers that (i) file on Form 20-F and (ii) prepare their financial
statements in accordance with IFRS as issued by the IASB. Under amended Form 20-F, a foreign
private issuer “is eligible to omit the reconciliation to U.S. GAAP if it states, unreservedly and
explicitly in an appropriate note to the financial statements, that its financial statements are in
compliance with IFRS as issued by the IASB. Also, the independent auditor must opine in its
report that the financial statements comply with IFRS as issued by the IASB”. A foreign private
issuer may also take advantage of the new reconciliation exemption if it uses a jurisdictional
variation of IFRS but is also in compliance with IFRS as issued by the IASB (and it so states,
and its auditor so opines).
A foreign private issuer that submits financial statements in accordance with IFRS as
issued by the IASB will be able to omit the reconciliation to U.S. GAAP for both its
annual audited financial statements and its unaudited interim financial statements if the
interim financial statements if the interim financial statements comply with IAS 34.
18
General Instruction G to Form 20-F provides for an accommodation which allows
foreign private issuers in their first year of reporting under IFRS as issued by the IASB to
file two years rather than three years of statements of income, changes in shareholders’ equity
and cash flows. Although this accommodation was available to any foreign private issuer, it was
originally intended for the benefit of EU-based companies transitioning to IFRS in accordance
with the EU directive discussed above. As such, it was scheduled to expire after the first
financial year starting on or after January 1, 2007, having expended its utility for such EU-based
issuers, who had to adopt IFRS starting in financial year 2005. However, the SEC has now
extended this accommodation indefinitely to accommodate the expected rise in filers who will
use IFRS in the coming years as a result of reconciliation omission and the push for globalization
of IFRS.
The SEC estimates that as of the effective date of these amendments, approximately 140 foreign
private issuers were able to omit the U.S. GAAP reconciliation.7 The SEC’s analysis also
indicates that significant cost savings will inure benefits are expected from
the increase in capital formation by foreign companies in the U.S. capital markets.
What is Account Reconciliation?
The business activity in most organizations today is multilayered and complex. However,
despite sophisticated accounting systems in use to cater to these needs, account reconciliation
continues to be that one indispensable step to ensure that all the figures add up right.
Account reconciliation is the procedure of verifying that all accounting records of

19
an organization are consistent with the bank statements. It also ensures that the various
components of the company's financial statements agree with each other. Account reconciliation
thus entails a detailed check of an organization's financial records, bank statements, client and
vendor bills and all supporting documents to detect discrepancies, address them and reconcile the
final balance. It accounts for checks outstanding, deposits in transit and reveals errors in the
records.
Account reconciliation is an integral part of a company's internal financial controls.
Accurate account reconciliation reports are an indication of effective tracking and interim
controls. Accounting reconciliation is a vital tool for company auditors to determine the veracity
of a company's financial statements and its internal reporting.
Importance of Bank and Treasury Account Reconciliation
1. The integrity of all existing cash record is proven.
2. Actual balance of agency/ treasury account is determined.
3. Errors committed by either the Agency, Bureau of Treasury, Bank are detected.
4. Any shortage/ overage of accountability of accountable officer is detected.
5. Any tampering of record and checks/warrants drawn is detected.
6. Errors are immediately adjusted detecting errors and tampering of the amounts of
issued checks.
7. Daily collections are proven.
20
Causes of Discrepancies in the Records
1. Deposits made by the Agency are not yet taken up by the Bureau of the Treasury/Bank
represents outstanding deposit/ deposit in transit.
2. Outstanding warrants/checks
3. Debit adjustments
4. Credit adjustments
5. Charges
Local Literature
What Does Bank Reconciliation Statement Mean?

A form that allows individuals to compare their personal bank account records to the bank's
records of the individual's account balance in order to uncover any possible discrepancies.
Since there are timing differences between when data is entered in the banks systems and
when data is entered in the individual's system, there is sometimes a normal discrepancy between
account balances. The goal of reconciliation is to determine if the discrepancy is due to error
rather than timing.
21
How to Prepare Bank Reconciliations
Bank reconciliation is a significant part of the monthly cash flow concerning your
business and should be done as soon as the statement arrives from your financial institution.
When you prepare bank reconciliations, you check the sum of money available in your business
checking account. The amount shown on the statement will rarely be the same as your business
records. The bank reconciliation will find any delayed deposits and checks, any automatic debits
or credits not in your records and any mathematical errors.
Reconciling Items
1. Items recorded by the entity but not yet recorded by the bank:
a. Deposits in Transit. Cash receipts already recorded in the cash receipts journal
that reached the bank too late to be credited in the current statement.
b. Outstanding Checks. These checks are already issued by the entity but not yet
cleared or paid by the bank. It is listed in the cash payments journal or check register for the
month but not included in the bank statement for that month.
2. Items recorded by the bank but not yet recorded by the entity.
a. Bank Collections. The bank at times serves as the depositor’s collecting agent.
Business with widely dispersed customer origins may avail of this.
b. Retuned Items. Banks return checks when drawn against unclear deposits
(DAUD) or drawn against insufficient funds (DAIF). These checks are received by the depositor
as payment for accounts; these are deposited and accepted by the bank
22
on the assumption that the checks are good or have sufficient funds to cover the amounts
specified in the checks.
c. Service Charge. This is the amount charged by the bank for servicing specific
transactions on behalf of the depositor.
3. Errors by either the entity or the bank.
Credit Memos
It refers to items not representing deposits credited by the bank to the account of
the depositor but not yet recorded by the depositor as cash receipts. They have the effect
of increasing the bank balance.
a. Notes receivable collected by bank in favor of the depositor and credited to the account
of the depositor.
b. Proceeds of bank loan credited to the account of the depositor.
c. Matured time deposits transferred by the bank to the current account of the depositor.
Debit Memos
Debit memos refer to items not representing checks paid by bank which are charged or
debited by the bank to the account of the depositor as cash disbursements. They have the effect
of decreasing the bank balance.

a. NSF or no sufficient fund checks. These are checks deposited but returned by the
bank because of insufficiency of fund.
23
b. Technically defective checks. These are checks deposited but returned by the bank because of
technical defects such as absence of signature or countersignature, erasures not countersigned,
mutilated checks, conflict between amount in words and amount in figures.
c. Reduction of loan. This pertains to amount deducted from the current account of the depositor
in payment for loan which the depositor owes to the bank and which has already matured.
Forms of Bank Reconciliation
a. Adjusted Balance Method. Under this method, the book balance and the bank balance
are brought to a correct cash balance that must appear on the balance sheet.
b. Book to Bank Method. Under this method, the book balance is reconciled with the
bank balance or the book balance is adjusted to equal the bank balance.
c. Bank to Book Method. Under this method, the bank balance is reconciled with the
book balance or the bank balance is adjusted to equal the bank balance.
Transaction. An event or condition that is entered in asset, liability, expense, revenue, or equity
accounts. Checks and withdrawals are two types of transactions.
Last reconciled balance. It is the balance of a checkbook on the bank statement. This is the
amount to reconcile to.
Posting. A procedure to make temporary transactions a part of a business’s permanent records;
to update the checkbook and the General Ledger accounts.
Posting account. It is a financial account that tracks assets, liabilities, revenue, or
24
expenses. These accounts will appear on financial statements and on other reports created in the
financial series.
Posting journal. A report printed following the posting process that shows the detail for each
transaction that’s been posted. Posting journals also include the audit trail code, which is a
precise record of where each transaction has been posted.
Sun Star Company, Cagayan de Oro
An audit team from the Commission on Audit (COA) said they were having problems
reconciling P83 million in account items of the City Government of Cagayan de Oro in their
conduct of city's annual audit report.

The team also noted that for the last five years the "reliability and validity of cash
advances were in question" because City Hall's accounting department "failed to prepare
the required bank reconciliation statements."
COA Cluster Director Mariano Kintanar in his 72-page audit report said they doubt the
"accuracy, validity and reliability" of bank reconciliation statements of City Hall for the past five
years.
Kintanar explained that these bank reconciliation statements (BRS) are very essential to
reconcile the cash balance per book and the cash balance per bank in order to ensure the
accuracy, reliability and/or validity of the depository account balances in the accounting records
and in the monthly trial balance and the year-end financial statements.
COA officials who requested anonymity told Sun.Star Friday that the report referred to
those prepared annually by COA from 1999 to 2003, the same period when
25
Mayor Vicente Emano took over the city as the city mayor of Cagayan de Oro.
Emano through City Accountant Wilma Rugay sent a letter dated Feb. 4, 2005 to the
audit office stating that they have partially complied with the COA findings. She said, "The
findings are noted. However, it is to be informed that the City Accounting Department has
partially complied on the previous findings made. It has initiated and
complied with the suggested resolution on the problem concerning the volume of transactions,
the number of period covered and the deficiency of reports earlier accepted by COA."
"Hence, the completion of the submission of the Bank Reconciliation Statement
including prior years in included in the compliance activity of the Office. The City Accounting
Department shall be instructed and ordered by the City Mayor to fast track
compliance to this finding in CY 2005."
But Kintanar's letter still voiced dissatisfaction des"The accuracy, validity, and reliability
of the Cash in Bank-Local Currency, Current Account could not be fully ascertained due to non-
reconciliation of prior years reconciling items totaling P83,173,867.12," he said in his Audit
Certificate dated Feb. 24, 2005,
He added "due to the status of the agency's records, we were unable to satisfy ourselves
as to the veracity of the amounts of the aforementioned accounts by means of
other auditing procedures.

KOLEHIYO NG SUBIC

26
Error! Filename not specified.Its Values
Most organizations keep a record of their cash and bank transactions in a cash book .The
cash book contains a record of both the cash account and the bank account and shows the
balance in each account at the end of a period. Once the cash book has been balanced off it is
usual to check the details with the records of the firm’s bank transactions as recorded by the
bank.
To enable this check to be made the cashier will need to ensure that the cash book is
completely up-to-date and a recent bank statement has been obtained from the bank. Often, when
a comparison is made between the bank balances as shown in the firm’s cash book with that
shown on the bank statement, the two balances will be different. It is for this reason that a bank
reconciliation statement is prepared to reconcile (‘tally up’) the two balances. The reconciliation
may identify errors that may have been made in either the firm’s cash book or in the bank’s
records. Any corrections can then be made. The information to be reliable, relevant and
comparable, it should pass through the process of reconciliation so that the result will become
valid.

KOLEHIYO NG SUBIC
27
Error! Filename not specified.Sources
Books
Conrado T. Valix, Jose F. Peralta., Financial Accounting, Part 1, 2008 Edition, pages 178-180
Win Ballada, Susan Ballada., Basic Accounting, 2006 11th Edition, pages 12-8
Diane Dilov-Schultheis., How Contributing Writing
GASB’s User Guide Series, The User’s Perspective, November 2007
Carlos T. Albarracín, J. Allen Miller, Eric J. Rothman., Proposed Changes to Foreign Private
Issuer Reporting Requirements
GAP History- Issued: April 2002, Revised 2008
F.S. Tantuico, Jr., H.P. Pobre, A.B. Magno., Government Accounting, A Self Instructional
Approach, ABA Publication, Metro Manila, 1992

Electronic Sources
Websites:
http://www.sunstar.com.ph/static/cag/2005/09/16/news/city.s.finance.records.a.mess.audit.html
http://www.finsvc.duke.edu/gap/m200-012.php
http://www.complinet.com/dfsa/display/display.html?rbid=1547&element_id=10373
www.google.com
www.yahoo.com
KOLEHIYO NG SUBIC

Table 1
Frequency Distribution According to Sex

Frequency Percentage
Respondents

Male 4 27%

Female 11 73%

Total 15 100%

Table 2

28
Error! Filename not specified.Sampling

Frequency Distribution According to Kind of Business

Kind of Business Frequency Percentage

Bank 9 60%
Position
Frequency
Percentage

Enterprise 6 40%
Auditor
2 13%

Total 15 100%
Accountant 8 53%

Employee 5 34%

Total 15 100%
Table 3
Frequency Distribution According to Position
KOLEHIYO NG SUBIC
29
Table 4
Frequency Distribution of the Respondents
Frequency
Yes No
No. of Questions Total

1 6 9 15

2 13 2 15

3 15 0 15

4 15 0 15

5 15 0 15

Total 64 11 75

KOLEHIYO NG SUBIC
30
Error! Filename not specified.Data Collection

The researchers gather the all needed information of their study. References such as
books, dictionaries and internet were used to acquire the needed data for the study.
The researchers visited different firm whereas they do the financial statement
reconciliation. The researchers also ask and gave the letter of permission to the manager of each
firm to let them allow us to conduct a study. Through this, the researchers acquired the
information and to used in this study.

31
CHAPTER III
METHOD OF RESEARCH
Descriptive research is the type of research that explores and describes the data or
characteristics needed for the research. It involves collecting numerical data to test hypotheses or
answer questions concerning current status. Conducted either through self-reports collected
through questionnaires or interviews (person or phone), or through observations. The term
descriptive research refers to the type of research question, design, and data analysis that will be
applied to a given topic. Descriptive statistics tell what is, while inferential statistics try to
determine cause and effect.
Purpose
To describe the nature of situation as it exist at the time of the study and to explore the
causes of particular phenomena (Travers, 1978).
It aims to define descriptive method as involving collection of data in order to test
hypothesis or to answer questions concerning the current status of the subject of the study (Gay
1976). Three main purposes of research are to describe, explain, and validate findings.
Description emerges following creative exploration, and serves to organize the
findings in order to fit them with explanations, and then test or validate those explanations
KOLEHIYO NG SUBIC

32
Error! Filename not specified.Characteristics
1. Reliable information that deals with the progress or stages of development of an individual
2. Participants can be a homogenous or a heterogeneous group
3. Evaluation of success of a specific topic.
4. Study designed to help you determine the extent to which different variables are related to
each other.
5. The effort to estimate a relationship, as distinguished from simple description.
Basic Steps
1. Recognizing and identifying a topic to be studied
2. Selecting an appropriate sample of participants
3 Collecting valid and reliable data
4. Reporting conclusions
Advantages
1. All the information is gathered in this method.
2. Data will be validated and proves its reliability.

3. Aim toward information dissemination.
4. The people being studied are unaware so they act naturally or as they normally do in everyday
situation.
5. It is less expensive and time consuming than quantitative experiments.
6. Collects a large amount of data for detailed studying.
33
7. As it is used to describe and not make any conclusions it is easier to start the research with it.
8. It can identify further area of study.
Disadvantages
1. Any method is taken into account, you should also be aware of the two particular aspects:
a. Faults of your methods per se
b. The faults of your method when you poorly use it.
2. You tend to avoid statistical analysis and your study will no longer qualify as a research. It is
merely information gathering.
3. There is limited information about the effects of the variables under study
4. Be aware of the delicate and inconsistent actuation of the participants in your study. It may
affect the validity of one’s investigation.
KOLEHIYO NG SUBIC
Error! Filename not specified.34
CHAPTER IV
RESEARCH TOOLS

The researchers used the following instruments in conducting the study.
Questionnaire
Questionnaire is a process of gathering data or information.
According to Oxford, questionnaire is a test of questions for obtaining information
especially for statistical analysis. It is a written or printed form comprising a series of questions
submitted to a number of persons in order to obtain data for a survey or a report. It is the most
effective and useful in gathering data.
Interview
Interviews are another type of self-reported studies.
An advantage over questionnaires is that they produce more in-depth data due to follow-
up questions.
Disadvantages include that questionnaire:
* Need a written guide for interviewers
* Must follow same procedures each time (such as what prompting is allowed)
* Are slow and expensive; therefore smaller sample size will be used
* Start with structured questions, and then move to unstructured
Phone calls can be used for interviews for quicker data collection and expanded sample

35
Observation
Observations are the second major division of collecting data for descriptive method,
normally done in a naturalistic setting, or through role playing in a simulation.
Sequence of events in setting up an observation includes:
* Define what specific behaviors match the intended behavior
* Establish code or set of symbols and recording device (checklist)
* Train observers on what to observe, how to record, and how often to record. Check for
reliability (80% agreement)
* Specify observational period selecting different days or times
* Best to observe and record only one behavior at a time
Biases may appear due to:

* An observer rating a majority of observees as above, average, or below regardless of
actual behavior
* The initial impressions concerning an observee affecting subsequent observations (halo
effect)
* Observee reacts atypically because they are being observed (observer effect)
36
Chapter V
Data Treatment
The data gathered were tallied, scored, interpreted, analyzed and were treated
statistically, to determine the relationship between the respondents variable and the reconciling
items.
Table 4 shows the frequency distribution of respondents from whom the data necessary to
complete this study. The gathered data will be computed, interpreted and analyzed using the Z-
test, T- test and Correlation Analysis to test the null hypothesis.
Table 4
Frequency Distribution of the Respondents
Frequency
Yes No
No. of Total
Questions

1 6 9 15

2 13 2 15

3 15 0 15

4 15 0 15

5 15 0 15

Total 64 11 75
37
In measuring the percentage of the respondents the formula below will be use:
Formula:
Percentage = f/N x 100%
Where:
f = frequency N = total number of respondents
In computing for the following test, the researchers used the Mean formula and the
Standard Deviation formula that will be useful in the proceeding computation.
The formula for the Mean is:
Error! Filename not specified. X = Error! Filename not specified.
n

Where: X = mean
Error! Filename not specified. = sum of cases
n = number of cases

a) Mean for the frequency ratio who answer YES = X1

b) Mean for the frequency who answer NO = X2
38
The formula for standard deviation is:
Error! Filename not specified. ²

Where:
δ = standard deviation ΣX² = sum of squared of X scores
N = number of case ΣX = sum of test
a) Standard deviation for the frequency who answer Yes
b) Standard deviation for the frequency who answer No
The formula for Z – test is:
Where:
X1 = mean of the first sample
X2 = mean of the second sample

39
δ = standard deviation
n1 = number of item in the first sample
n2 = number of item in the second sample
The researchers use the 5% significance level for the test. Based on the table of critical
values of Z, the tabular value of Z for two-tailed test at 5% significance level is 1.96.
Substituting the given values in the formula:
Error! Filename not specified. = Error! Filename not specified. = 4.82
Interpretation:
The null hypothesis is rejected because the z-value is greater than the tabular value, 1.96.
The formula for t- test is:

Where:
X1 = mean of the first sample S1 = standard deviation of the first sample
X2 = mean of the second sample S2 = standard deviation of the second sample
n1 = number of item in the first sample n2 = number of item in the second sample

40
The degree of freedom for two samples is computed below.
df = n1 + n2 – 2 = 5 + 5 – 2 = 8
The researchers use the 5% significance level for the test. Based on the students t-
distribution table, the tabular value of the test at 5% significance level and 8 df is 1.860.
Substituting the given values in the formula:
= Error! Filename not specified.

= Error! Filename not specified. = Error! Filename not specified. =

Error! Filename not specified. = 7.07
Interpretation: The null hypothesis is rejected because the t-value is greater than the tabular
value 1.860.
There is a significant relationship between the respondents’ variable and the reconciling
items, accounting policy, presentation of report and importance of information.
The researchers also use correlation analysis to test the hypothesis. Correlation analysis is
concerned with the relationship in the changes of two or more variables.
41
Error! Filename not specified. The formula for computing the correlation analysis is
presented below:
Where:
r = correlation coefficient ΣXY = sum of the product x and y
N = number of case ΣX2 = sum of the squared of X score
ΣX= sum of X score ΣY2 = sum of the squared of Y score
ΣY = sum of Y score
A correlation coefficient distribution take (Table 2) of the respondents is also provided.
Table 2
Correlation Coefficient Distribution
Frequency
Yes (X) No (Y)
XY X2 Y2
Question

1 6 9 54 36 81

2 13 2 26 169 4

3 15 0 0 225 0

4 15 0 0 225 0

5 15 0 0 225 0

Total Σx = 64 Σy = 11 Σxy = 80 Σx2 = 880 Σy2 = 85

42
Substituting the given values to the formula:
Error! Filename not specified. = Error! Filename not specified. = Error! Filename not specified. =
-1
A diagram showing the different types or degrees of correlation between the variables is also
provided below.
43
Interpretation: The correlation is negative since the value false on -1. Since all the points on the
diagram lie on the straight-line, we can conclude that there is a perfect negative correlation
between the two variables where as one variable increases, the other variables decreases.
According to the test, reconciling items, accounting policy, presentation of report and
importance of information is dependent on the respondent’s variable.

44
CHAPTER VI
CONCLUSION AND RECOMMENDATION
Conclusion
Reconciliation or verification of financial transaction is the key element that ensures
financial reports are correct.
However reliability of the information can be affected by certain factors like availability
of documents, knowledge and personality of the individual to whom authority of reconciliation
has been delegated. Therefore, the reconciliation is needed from time to time so that all the error
entry made is treated immediately.
Every transaction undergone by an entity must be supported by documents like vouchers,
ledgers, bank statements, check and others to easily notice what the items to be reconciled are.
Knowledge of the person doing the reconciliation process can also affect the reliability of
the information because he should know how to treat reconciling items the way it should be, and
know what accounts created by the entity in that particular period. Also, he should know how to
treat and relate those accounts according to accounting policy of the entity.
Personality is also a factor, because the individual to whom the authority of reconciliation
has been delegated is expected to deliver information that is free from bias and other hidden
agendas. The credibility of the person doing the reconciliation process
should maintain a good reputation and integrity to be able to convince others that the
45
reports are valid.
Recommendations
High–quality accounting control means knowing what’s in your financial statements.
Reconciliation or verification of transaction on a regular basis helps to identify errors before
reporting period in order to report the true amount of cash.
1. Read your company accounting policy for the account. The first step in reconciling
your financial statement is to know what should be in it. You can’t verify that the balance is
correct unless you know the rules. Read your company accounting policy manual and clarify any
issues with your supervisor/manager.
2. Gather supporting documents. This will differ on the type of account you are
reconciling. They could be copies of invoices, agreement or contacts, statements from outside
parties (like bank statements) or copies of supporting reports from other systems-like accounts
receivable.
3. Ask yourself the investigative questions about items in the account- what are they?
When they were created? How do they relate to the company’s accounting policies? Why are
they in this account balance?
4. Document your explanations and conclusions clearly completely.
5. The business manager or owner may delegate the reviewer process; however, he
should ensure that the individual reviewing the reconciliations is not the same individual who is
performing the verification.
46
CHAPTER VII
RESEARCH PROPOSAL
The researchers propose to the firms or bank the continuous use of reconciliation in
preparing financial statements for you to have reliable, relevant, comparable and understandable
information. Actually, IASB even recommend more entities to use a single or uniform principle
in reconciling their financial statements.
The one who would do the reconciliation of one’s company or business should not one of
your employees to avoid the manipulation of data. So that, the report being presented has a true
value and is validated.
According to accounting policy, there must be a consistency of method being used in
order for the report to be comparable to the previous one.
Reconciliation should still include in the financial statement because this approach are
useful in discovering possible discrepancies that occurs during a transaction.
Without bank reconciliation, you also expose yourself to risk. People may be stealing
from your account. If you never look through each transaction, you’ll never know about it. If you
don’t notify the bank quickly enough, you may be out of luck.

47
BIBLIOGRAPHY
Books
Martyn Shuttleworth.,Defining Research Problem (2008).
Justin Pritchard., Why Bank Reconciliation Is Important
Compilation of Research Study, Kolehiyo ng Subic
George Garcia, Cynthia Guerrero de Leon and Cristobal Pagoso.,Fundamental of Statistics for
College,Sinangtala Publishers
Slide Show Presentation
Erwin S. Manuel.,Razzel Marie L. Masinda., Descriptive Method

Electronic Sources
http://www.experiment-resources.com/defining-a-research-problem.html#ixzz0TioFnhGk
http://www.aect.org/edtech/ed1/41/41-01.html

48
September 23, 2009
Anabelle N. Ng
Branch Manager
Zambank, Barreto Branch
Subic, Zambales
MADAM:
Greetings!
We the students of Kolehiyo ng Subic hereby asked permission in your good office to conduct
our research and survey interview for the partial fulfillment of the requirements for the Degree of
Bachelor of Science in Business Administration and Bachelor of Science in Accountancy. The
researchers would consist of six (6) members names are stated below:
Geraldine Rosimo Cristina Dimalanta
Jherty Ann Lorenzo Bryan Baleros
Rosalie Macaraeg Noel Bagares

This study will benefit the other students which regard to this subject Financial Management 3
and could be used as a reference and guide in making other research easy.
Hope for your kind consideration.
Very truly yours,
The Researchers
49
Survey Questionnaire
Reconciliation on Financial Statements
Name of Respondents: Position:
Age:

Direction: Please support your answer with the question Why below after answering the
following:
1) Does reconciliation of financial statement is time consuming? (Yes) (No)
2) Do you reconcile your financial statements regularly? (Yes) (No)
3) Do you use the accounting policy when reconciling your financial statements?
(Yes) (No)
4) Is there any specific process you usually follow when reconciling? (Yes) (No)
5) Is it really necessary in preparing a financial statement? (Yes) (No)

Executive Summary
Banks and other business firm prepare their monthly or annual report. In their report, the
reconciliation process is included whereas the researchers are focuses. The researchers gather
information how these bank or business firm treat or apply the accounting standards and policy
in reconciling their financial statements.
Through the gathered information based on survey, interviews, observation and data
analysis, he/she concluded that reconciliation process is merely an essential element to the
preparation of financial statement. It is a key element to have reliable, relevant, comparable and
useful information. The results in the statistical treatment shows the significant relationship
between respondents variable and reconciling items, accounting policy, presentation of reports
and information.
Firms or banks should still continue to apply the process to have a high quality
accounting control. It is because reconciliation process is also a way to easily determine what the
errors are being done during the transaction. The one who would do the reconciliation should
have enough knowledge about accounting standards and policy in order to present a valid and
free from bias information. The one would do this, must not be one of the employee of bank or
enterprise so that you are secured from the result given.
Anyone who practice or assigned to do reconciliation should always remember to apply
or use the same method when reconciling to have a consistency for the benefit of
xi
the owner of the business to have a comparison on the previous one. Reconciliation should
include in the financial statement because this approach are useful in discovering possible
discrepancies that occurs during a transaction.
Without bank reconciliation, you also expose yourself to risk. People may be stealing
from your account. If you never look through each transaction, you’ll never know about it. If you
don’t notify the bank quickly enough, you may be out of luck.


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Wawandue, Subic, Zambales

Wawandue, Subic, Zambales

Error! Filename not specified.RECONCILIATION OF FINANCIAL STATEMENTS

BUSINESS EDUCATION DEPARTMENT

A Research Proposal to the Research Professor

In Partial Fulfillment of the Requirements in the course FIN 3

Financial Management, Part 3

Wawandue, Subic, Zambales

Error! Filename not specified.GROUP 3

Error! Filename not specified.Error! Filename not specified.

Error! Filename not specified.Error! Filename not specified.