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Chapter 3
Bank Reconciliation

PROBLEM 1: TRUE OR FALSE

1. FALSE
2. FALSE
3. FALSE – debit memo
4. TRUE - bank memorandums (debit memos and credit memos)
require reconciling entries in the depositor’s books
5. TRUE
6. FALSE – 100 + 20 CM – 5 NSF = 115
7. TRUE
8. FALSE – 30 + 5 -3 = 32
9. FALSE – as a deduction
10. TRUE

PROBLEM 2: MULTIPLE CHOICE – THEORY

1. D
2. B
3. D
4. D
5. D
6. C
7. D
8. B – choice (d) is incorrect – “payee” not “drawee”
9. C
10. C
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PROBLEM 3: EXERCISES
1. Solutions:
Requirement (a): Bank reconciliation
The bank reconciliation is prepared as follows:
ABC Co.
Bank reconciliation - Bank XYZ (Checking account # 10009087)
September 30, 20x1
Balance per books, Sept. 30 5,313 Bal. per bank statement, Sept. 30 6,200
Credit memo : Deposits in transit 2,418
Collection on note by bank 3,565
Debit memos: Outstanding checks (3,100 - 310) (2,790)
NSF check (1,860)
Bank service charge (62)
Book error: Bank error:
Overstatement of
collection (198) Erroneous debit to ABC account 930
(1,593 – 1,395)
Adjusted balance 6,758 Adjusted balance 6,758

Requirement (b): Adjusting entry

Oct. 3, Cash in bank 1,445
20x1
Accounts receivable (1,860 + 198) 2,058
Bank service charge 62
Note receivable (3,565 + 155) 3,410
Interest income 155

2. Solution:

Bal. per books, end. 280,000 Bal. per bank, end. 320,000
Add: CM 20,000 Add: DIT 75,000
(15,000 (25,000
Less: DM Less: OC
) )
Add/Less: Book
Add/Less: Bank errors:
errors:
(40,000
Understatement 45,000 Overstatement
)
Adjusted balance 330,000 Adjusted balance 330,000
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3. Solution:
Requirement (a): Bank reconciliation

₱260,00 ₱205,00
Bal. per books, end. Bal. per bank, end.
0 0
Add: CM 30,000 Add: DIT 102,500
Less: DM (5,000) Less: OC (22,500)
Add/Less: Book Add/Less: Bank
errors errors
₱285,00 ₱285,00
Adjusted balance Adjusted balance
0 0

Requirement (b): Adjusting (Reconciling) entries

AJE Cash 30,000

(a) Accounts receivable 30,000
to record the collection of accounts receivable
AJE Accounts receivable 5,000
(d) Cash 5,000
to revert the NSF check back to accounts
receivable

4. Solution:
Receipt Disbursement 31-
30-Jul
s s Aug
132,20 180,00
Per books 60,000 12,200
0 0
ADD: CM
July 10,000 (10,000)
August 35,000 35,000
LESS: DM
July (7,800) (7,800)
August 8,900 (8,900)
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Book errors:
August 2,800 2,800
134,40 208,90
Adjusted bal. 87,800 13,300
0 0

Receipt Disbursement
30-Jul 31-Aug
s s
Per bank 100,600 89,000 20,600 169,000
ADD: DIT
July 45,000 (45,000)
August 43,800 43,800
LESS: OC
(11,200
July (11,200)
)
August 3,900 (3,900)

Adjusted bal. 134,400 87,800 13,300 208,900

5. Solution:
31- Receipt Disbursement
30-Apr
Mar s s
Per books 400,000 180,000 40,000 540,000
ADD: CM
March 36,000 (36,000)
April 23,000 23,000
LESS: DM
(10,000
March (10,000)
)
(16,000
April 16,000
)
Book errors:
April (9,000) 9,000
Adjusted bal. 426,000 167,000 37,000 556,000
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Disbursement
31-Mar Receipts 30-Apr
s
Per bank 280,000 190,000 30,000 440,000
ADD: DIT
March 169,000 (169,000)
April 136,000 136,000
LESS: OC
March (23,000) (23,000)
April 30,000 (30,000)
Bank errors:
April 10,000 10,000
Adjusted bal. 426,000 167,000 37,000 556,000

6. Solution:
Receipt Disbursement
30-Jun 31-Jul
s s
382,50
Per books 180,900 36,400 527,000
0
ADD: CM
June 74,200 (74,200)
July 262,800 262,800
LESS: DM
June (2,000) (2,000)
July 6,000 (6,000)
Book errors:
June 36,340 (36,340)
(54,280
July
54,280 )
491,04
Adjusted bal. 333,160 94,680 729,520
0

Receipt Disbursement
30-Jun 31-Jul
s s
Per bank 365,380 396,340 108,020 653,700
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ADD: DIT
(169,000
June 169,000
)
July 136,000 136,000
LESS: OC
(23,000
June (23,000)
)
(30,000
July 30,000
)
Bank errors:
(20,340
June
) (20,340)
(30,180
July (30,180)
)
Adjusted bal. 491,040 333,160 94,680 729,520

7. Solution:
31- Receipt Disbursement
30-Apr
Mar s s
Per books 396,600 180,000 36,600 540,000
ADD: CM
March 36,000 (36,000)
April 42,000 42,000
LESS: DM
(10,920
March (10,920)
)
(16,020
April 16,020
)
Book errors:
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(27,000
March
) (27,000)
April 9,000 (9,000)
Adjusted bal. 394,680 186,000 23,700 556,980

Receipt Disbursement
31-Mar 30-Apr
s s
Per bank 280,900 191,380 26,900 445,380
ADD: DIT
March 46,780 (46,780)
April 131,400 131,400
LESS: OC
(23,000
March (23,000)
)
(19,800
April 19,800
)
Bank errors:
March 90,000 (90,000)
April
Adjusted bal. 394,680 186,000 23,700 556,980
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PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL

1. A (25,650 + 5,900 – 750 – 2,000) = 28,800

2. C
Solution:
Per books, June 30 68,757 Per bank, June 30 54,780
(i) Credit memo (4,500 + 165 -
36) 4,629 (h) Deposits in transit 13,425
(14,265 (d) Outstanding
(b) Dishonored check ) checks (9,885)
(e) Bank charges (210) (g) Bank error 600
(1,296
(f) NSF checks )
(a) Book error (4,500 - 3,000) 1,500
(c) Book error (2,895 - 2,700) (195)
Adjusted balance 58,920 Adjusted balance 58,920

3. B (28,000 – 12,000 + 4,000 + 500) = 20,500

4. B (30,140 + 4,000 – 5,200) = 28,940

5. C (27,200 + 450 – 700 + 1,450) = 28,400

6. B (38,000 + 940 – 220 - 90 + 18) = 38,648

7. D (40,000 – 2,000 + 8,000 + 400) = 46,400

8. C (54,075 + 9,375 – 8,625 – 375) = 54,450

9. A (113,000 + 17,200 – 10,800) = 119,400 adjusted balance + 2,400

NSF = 121,800 unadjusted balance of cash per book (squeezed
upwards)
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10. A
Solution:
OC
12,600 31-Mar
Disbursements 49,700 42,100 Checks drawn (squeeze)
30-Apr 5,000

CIB - per books

31-Mar 34,900
Collections* 32,400 42,100 Checks drawn
25,200 30-Apr (squeeze)

* (Deposits per bank in April of ₱42,700 less ₱10,300 DIT from last month that
cleared in April) = 32,400

OR

Per bank statement

37,200 31-Mar
Disbursements 49,700 42,700 Deposits
30-Apr 30,200

 30,200 per bank - 5,000 outstanding checks recorded in books

but not yet presented for payment with the bank = 25,200
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PROBLEM 5: CLASSROOM ACTIVITIES

ACTIVITY #1: BANK RECONCILIATION

Requirement (A):
ABC Co. PIGGY Bank
(a) Cash in bank 1,000,000 (a) Cash on hand 1,000,000
Cash on hand 1,000,000 Deposit liability 1,000,000

(b) Accounts payable 254,321 (b) No entry

Cash in bank 254,321

(c) No entry (c) Deposit liability 220,320

Cash on hand 220,320

(d) No entry (d) Cash on hand 2,460,660

Deposit liability 2,460,660

(e) Cash on hand 1,952,012 (e) Cash on hand 1,592,012

Accounts receivable 1,952,012 Deposit liability 1,592,012

Cash in bank 1,952,012

Cash on hand 1,952,012
(f) No entry (f) Deposit liability 25,000
Cash on hand 25,000

(g) No entry (g) Deposit liability 1,602

Cash on hand 1,602
(i) Cash in bank 40,000 (i) No entry
Cash on hand 40,000

Requirement (B):
Cash in bank Deposit liability
1,000,00 1,000,00
(a) 0 0 (a)
254,321 (b) (c) 220,320
1,952,01 2,460,66
(e) 2 0 (d)
1,592,01
(f) 25,000 2 (e)
(i) 40,000 (g) 1,602
2,737,69 4,805,75
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1 0

The net difference is ₱2,068,059 (₱4,805,750 – ₱2,737,691).

Requirement (C):
Per books 2,737,691 Per bank 4,805,750
Credit memo (d) 2,460,660 DIT (i) 40,000
Debit memos: OC (b) & (c) (34,001)
NSF check (f) (25,000)
Direct debits (g) (1,602)
Book error (e) (360,000)
Adjusted balance 4,811,749 Adjusted balance 4,811,749

Requirement (D):

Simple entries:
ABC Co.
Cash in bank 2,460,660
Accounts receivable 2,460,660
to record the CM in (d)

Accounts receivable 360,000

Cash in bank 360,000
to correct the book error in (e)

Accounts receivable 25,000

Cash in bank 25,000
to record the dishonored check in (f)

Utilities expense 1,602

Cash in bank 1,602
to record the DM in (g)

Compound entry:
Cash in bank (squeeze) 2,074,058
Utilities expense (g) 1,602
Accounts receivable (d) - (e) - (f) 2,075,660*

* (2,460,660 – 25,000 – 360,000) = 2,074,058

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ACTIVITY #2: BANK RECONCILIATION

Check
Date Debits Credits Balance
No.
10,000.0
Nov. 1
0
44,000.0
Nov. 4 0339 34,000.00
0
17,000.0 27,000.0
Nov. 9 134
0 0
14,000.0
Nov. 12 135 13,000.00
0
30,000.0
Nov. 13 Cash 16,000.00
0
22,000.0
Nov. 16 136 8,000.00
0
52,000.0 74,000.0
Nov. 21 234
0 0
93,000.0
Nov. 22 0784 19,000.00
0
85,400.0
Nov. 29 137 7,600.00
0
23,500.0 108,900.0
Nov. 30 0846
0 0
144,500.00 45,600.00

Bank statement
Period covered: Nov. 1, 20x1 to Nov. 30, 20x1
Date Check No. Debits Credits Balance
Nov. 1 10,000.00
Nov. 5 0339 34,000.00 44,000.00
78,000.0
Nov. 6 0389 122,000.00
0
Nov. 13 Cash 16,000.00 138,000.00
Nov. 16 135 13,000.00 125,000.00
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Nov. 18 984 33,000.00 158,000.00

Nov. 19 136 8,000.00 150,000.00
Nov. 21 234 25,000.00 175,000.00
Nov. 22 0784 19,000.00 194,000.00
19,000.0
Nov. 25 0784 (NSF) 175,000.00
0
2,000.0
Nov. 28 (DM) 173,000.00
0
Nov. 30 137 7,600.00 165,400.00

Bank reconciliation:
Per book 108,900.00 Per bank 165,400.00
DIT - Nov. 30
23,500.00
CM - Nov. 6 (#0389) 78,000.00 (#0846)
CM - Nov. 18 (#984) 33,000.00 OC - Nov. 9 (#134) (17,000.00)
NSF - Nov. 25 (#0784) (19,000.00)
DM - Nov. 28 (2,000.00)
Book error -
overstated collection
(#234) (52K - 25K) (27,000.00)
Adjusted balance 171,900.00 Adjusted balance 171,900.00
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PROBLEM 6: FOR CLASSROOM DISCUSSION

1. Solution:
Requirement (a):
Per books Per bank
Cash on hand 500,000 Cash on hand 480,000
Accounts receivable 500,000 Deposit liability 480,000

Cash in bank 500,000

Cash on hand 500,000

Accounts payable 200,000 Deposit liability 140,000

Cash in bank 200,000 Cash on hand 140,000

No entry Cash on hand 360,000

Deposit liability 360,000

No entry Deposit liability 40,000

Cash on hand 40,000

Requirement (b):
(1) Deposits in transit: (500,00 – 480,000) = 20,000
(2) Outstanding checks: (200,000 – 140,000) = 60,000
(3) Credit memo = 360,000
(4) Debit memo = 40,000

Requirement (c):
The unadjusted balances are determined as follows:
Cash in bank
June 30, 20x1 100,000
(a) Deposits 500,000 200,000 (b) Checks drawn
400,000 July 31, 20x1

Deposit liability
100,000 June 30, 20x1
(b) Checks encashed 140,000 480,000 (a) Deposits
(d) Payments for bills 40,000 360,000 (c) Customer remittances
July 31, 20x1 760,000
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Per books, July 31 400,000 Per bank, July 31 760,000

Credit memo 360,000 Deposits in transit 20,000

Debit memo (40,000) Outstanding checks (60,000)

Adjusted balance 720,000 Adjusted balance 720,000

Requirement (d):

Cash in bank 320,000

Telecommunications expense 40,000
Accounts receivable 360,000

2. Solutions:

Requirement (a):
Bal. per books, end. 7,540 Bal. per bank, end. 8,510
Add: CM (collection of N/R &
780 Add: DIT 1,900
int.)
Less: OC (1,125
Less: DM (bank service charge) (25)
(325+100+700) )
+/-: Book errors +/-: Bank errors -
Overstated disb. (410 - 140) 270
Understated coll’n. (910 - 190) 720
Adjusted balance 9,285 Adjusted balance 9,285

Requirement (b):
Cash in bank 1,745
Bank service charge 25
Note receivable 700
Interest income 80
Accounts payable (410 – 140) 270
Accounts receivable (910 – 190) 720
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3. Solution:
Per books 10,460 (squeeze) Per bank, June 30 11,164 (start)

Credit memo 1,120 Deposits in transit 1,340

Debit memo Outstanding (1,100)

(16 + 160) (176) checks

Adjusted balance 11,404 Adjusted balance 11,404

4. Solutions:
Requirement (a):
Deposits in transit
beg. 2,100
April deposits per
April deposits per books 12,889 10,784 bank
4,205 end.

Requirement (b):
Outstanding checks

3,800 beg.

April checks per bank 11,100 13,080 April checks per books

end. 5,780

Requirement (c):
Per books, Mar. 31 24,355 Per bank, Mar. 31 27,995
April note collected 3,000 Deposits in transit 4,205
April bank service charge (35) Outstanding checks (5,780)
April NSF check (900)
Adjusted balance 26,420 Adjusted balance 26,420
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5. Solution:
Receipt Disbursement
31-Jan 28-Feb
s s
Per books 264,400 120,000 24,400 360,000
ADD: CM
January 30,000 (30,000)
February 52,500 52,500
LESS: DM
(15,600
January (15,600)
)
(10,680
February 10,680
)
Book errors:
January 4,000 (4,000)
February (2,800) (2,800)
Adjusted bal. 282,800 135,700 19,480 399,020

Receipt Disbursement
31-Jan 28-Feb
s s
Per bank 201,200 186,940 17,320 370,820
ADD: DIT
January 95,040 (95,040)
February 43,800 43,800
LESS: OC
(13,440
January (13,440)
)
(15,600
February 15,600
)
Adjusted bal. 282,800 135,700 19,480 399,020
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