ACC 106: Intermediate Accounting 1

Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Lesson Title: Materials:

Bank Reconciliation Calculator, Reviewer Notebook, Textbook

Learning Targets: References:

At the end of the learning session, I should be able to:
1. Understand the nature of Deposit in transits and
outstanding checks .credit memos, debit memos and
book/bank errors.
2. Prepare a Bank reconciliation and Proof of cash.
-Millan, Zeus Vernon B.; Intermediate
Accounting 1
-https://corporatefinanceinstitute.com/resources
/knowledge/accounting/bank-reconciliation/

Productivity Tip:
Set Yourself Deadlines. Now that you’ve already broken down your study into individual tasks, it will help to
set yourself a competitive deadline. You may have determined that your first activity will take three hours and
should aim to finish that section of the project at least a week before it is due. ☺

A. LESSON PREVIEW/REVIEW
1) Activity 1 : Pretest (2 mins)
Hello there! Before you begin the topic let us have a quick review from the previous module.

1. All of the following may be included under the heading of "cash" except
a. currency.
b. money market funds.
c. checking account balance.
d. savings account balance

2. In which accounts are post-dated checks received classified?

a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.

3. In which account are postage stamps classified?

a. Cash.
b. Office supplies.
c. Receivables.
d. Inventory.

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2) Activity 2 (LO1, LO2, & LO3): What I Know Chart, part 1 (3 mins)
Alright! Let’s see what you already know, answer the first column (What I know). Leave the
third column (What I Learned) blank at this time.

What I Know Questions What I Learned (Activity 5)

1. What is the importance of bank
reconciliation?

2. Give at least two examples of

book errors?

3. What is proof of cash?

B. MAIN LESSON
1) Activity 3 (LO1, LO2, & LO3): Content Notes (15 mins)
Make sure to highlight or underline the important parts!

LO1: Understand the nature of Deposit in Transits and Outstanding Checks Credit Memos,
Debit Memos and Book/Bank Errors.

Bank reconciliation statement is a document that compares the cash balance on a company’s
balance sheet to the corresponding amount on its bank statement. Reconciling the two accounts
helps identify whether accounting changes are needed. Bank reconciliations are completed at
regular intervals to ensure that the company’s cash records are correct. They also help detect fraud
and any cash manipulations.

When banks send companies a bank statement that contains the company’s beginning cash
balance, transactions during the period, and ending cash balance, the bank’s ending cash balance
and the company’s ending cash balance are almost always different. Some reasons for the
difference are:

● Deposits in transit: Cash and checks that have been received and recorded by the company but
have not yet been recorded on the bank statement.

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

● Outstanding checks: Checks that have been issued by the company to creditors but the
payments have not yet been processed.

● Bank service fees: Banks deduct charges for services they provide to customers but these
amounts are usually relatively small.

● Interest income: Banks pay interest on some bank accounts.

● Not sufficient funds (NSF) checks: When a customer deposits a check into an account but the
account of the issuer of the check has an insufficient amount to pay the check, the bank deducts
from the customer’s account the check that was previously credited. The check is then returned to
the depositor as an NSF check.

LO2: Prepare a Bank Reconciliation and Proof of cash.

Book Errors Treatment of Book Bank Errors Treatment of Bank

Errors (Adjusted Balance Errors (Adjusted
Method) Balance Method)

Credit Memo Added to book balance Deposit in transit Added to bank balance

Debit Memo Deducted from book Outstanding check Deducted from bank
balance balance

Book Errors Add/Deduct to/from the Bank Errors Add/Deduct to/from

book balance depending the book balance
on the nature of the error depending on the
nature of the error

Book Reconciliation:

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Bank Reconciliation Procedure

1. On the bank statement, compare the company’s list of issued checks

and deposits to the checks shown on the statement to identify
uncleared checks and deposits in transit.

2. Using the cash balance shown on the bank statement, add back any
deposits in transit.

3. Deduct any outstanding checks.

4. This will provide the adjusted bank cash balance.

5. Next, use the company’s ending cash balance, add any interest
earned and notes receivable amount.

6. Deduct any bank service fees, penalties, and NSF checks. This will
arrive at the adjusted company cash balance.

7. After reconciliation, the adjusted bank balance should match with the
company’s ending adjusted cash balance.

Proof of Cash - Per Books:

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

The Proof of Cash is Similar to a T-account.

PROOF OF CASH

T – ACCOUNT

The “Nov. 30” and “Dec. 31” columns follow the regular bank reconciliation format.

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

The “Receipts” and “Disbursements” columns pertain to the current month only - in this
illustration, the month of December.

CREDIT MEMO: LAST MONTH (November)

- The November credit memo is a collection from last month. However, it is only recorded this
month (i.e., December).
- Therefore, it is deducted from the “Receipts” column because

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

CREDIT MEMO: THIS MONTH (December)

- The December credit memo is a collection this month. However, it is not yet recorded this month
(it will only be recorded next month).
- Therefore, it is added in the “Receipts” column because it is an unrecorded receipt in December.

The proof of cash is completed as follows:

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2) Activity 4: Skill-building Activities (8 mins + 2 mins checking) Score: ________________

Let’s try to practice what you have learned! Check your answers against the Key to Corrections found
at the end of this SAS. Write your score on the space provided.

MULTIPLE CHOICE. ENCIRCLE THE LETTER OF YOUR CHOICE.

1. It is a report that is prepared for the purpose of bringing the balances of cash per records and per bank
statement into agreement.
A. Bank statement
B. Check Disbursement Voucher
C. Bank reconciliation
D. Bank deposit slip
2. These are deposits made but not yet credited by the bank to the depositor’s bank account.
A. Credit memos (CM)
B. Debit memos (DM)
C. Outstanding checks (OC)
D. Deposits in transit (DIT)
3. These are deductions made by the bank to the depositor’s bank account but not yet recorded by the
depositor.
A. Credit memos (CM)
B. Debit memos (DM)
C. Outstanding checks (OC)
D. Deposits in transit (DIT)
4. These are additions made by the bank to the depositor’s bank account but not yet recorded by the
depositor.
A. Credit memos (CM)
B. Debit memos (DM)
C. Outstanding checks (OC)
D. Deposits in transit (DIT)
5. These are checks drawn and released to payees but are not yet encashed with the bank.
A. Credit memos (CM)
B. Debit memos (DM)
C. Outstanding checks (OC)
D. Deposits in transit (DIT)
6. Which of the following is added to the cash balance per books when preparing a bank reconciliation
statement?
A. Credit memo
B. Debit memo
C. Outstanding check
D. Deposit in transit
7. Which of the following is added to the cash balance per bank statement when preparing a bank
reconciliation statement?
A. Credit memo
B. Debit memo

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

C. Outstanding check
D. Deposit in transit
8. Which of the following represents a debit memo?
A. Collections made by the bank on behalf of the depositor.
B. Interest income earned by the deposit.
C. Loan proceeds directly credited or added by the bank to the depositor’s account.
D. Interest expense on a loan that is directly deducted from the depositor’s account.
9. Which of the following is not a debit memo?
A. Bank service charges
B. No sufficient funds checks (NSF)
C. Automatic debits representing payments of bills by the bank on behalf of the depositor
D. Direct deposits of customers to the depositor’s account
10. As an internal control, bank reconciliation statements are usually prepared
A. on a daily basis.
B. on a monthly basis.
C. annually every year-end.
D. whenever the accountant feels like it.

3) Activity 5: What I Know Chart, part 2 (5 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in the
“What I Learned” column. Let’s see your improvement!

4) Activity 6 (LO1, LO2, & LO3): Check for Understanding (20 mins)
To better test your knowledge on the topic, write in the space provided in each item the best answer
without looking in your content notes. Be honest at all times. Your teacher will provide you the key answer in
this activity.

PART 1. Encircle the letter of your choice for nos. 1 to 3 and write your final answer in the blank provided for
nos. 4 and 5.
1. In preparing its bank reconciliation for the month of December 2018, Promotion Company has the
following information:

Balance per bank statement, December 31 P 396,550

Deposit in transit, December 31 68,750
Outstanding checks, December 31 63,250
Promotion’s account erroneously credited by bank on
December 19 2,750
Bank service charges for December 550

What should be the balance of cash on December 31?

A. P387,750 C. P399,300
B. P398,750 D. P402,050

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2. Entity A is preparing its February 28, 20x1 bank reconciliation statement. The following information was
determined:
Cash balance per accounting books, Feb. 28, 20x1 ₱260,000
Cash balance per bank statement, Feb. 28, 20x1 ₱205,000

When investigating the difference, the accountant determined the following:

● A customer deposited ₱30,000 to Entity A’s bank account as payment for an account receivable.
This is not yet recorded in the books of accounts.
● A ₱102,500 check deposited by Entity A during the month is not yet credited to Entity A’s account.
● A check drawn in the amount of ₱22,500 is not yet presented to the bank for payment.
● The bank returned a check deposit amounting to ₱5,000 because of insufficiency in the funds of the
drawer. The check was received from a customer as payment for accounts receivable.

How much is the adjusted bank balance?

A. 582,000 B. 280,000 C. 852,000 D. 285,000

3. Assume the following facts for Lay Co: The month-end bank statement shows a balance of 40,000;
outstanding checks total 2,000; a deposit in transit of 8,000; and a check of 400 was erroneously charged
against the account by the bank. What is the correct cash balance at the end of the month?
A. 33, 600 B. 34,400 C. 45,600 D. 46,400

4. The following data are gathered from the records of Stephen Company for the month of Dec. 2017.

Balance per book 500,000

Balance per bank 445,000
Deposit in transit 300,000
Outstanding check 85,000
Bank service charge for the month of December 5,000
Customer’s check returned by bank marked “NSF” 50,000
Customer’s note collected by bank face: 200,000
Interest 20,000; collection fee 5,000 215,000
How much is the adjusted cash balance? _____________

5. Globe Co. provided the following data for the purpose of reconciling the cash balance per book with the
balance per bank statement on December 31, 2017

Balance per bank statement 200,000

Balance per book 85,000
Outstanding checks (including certified check of P10,000) 50,000
Deposit in transit 20,000
December NSF checks (of which P5,000 had been redeposited
and cleared by December 27) 15,000

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Erroneous credit to Globe’s account, representing proceeds of

granted to another company 30,000
Proceeds of note collected by bank for Globe, net of service charge of 2,000 75,000

The cash in bank to be reported is at _______________

PART II. Prepare the requirements being asked for each problem:

Problem 1

Data concerning the cash records of Arones Company for the months of November and December
20x1 are shown below:
November 30 December 31
Book balance 11,200 ?
Book debits 63,800
Book credits 56,400
Bank balance 30,000 40,800
Bank debits ?
Bank credits 54,600
Notes collected by bank 4,500 6,000
Bank service charge 40 200
NSF checks 1,760 2,800
Overstatement of check in payment
of salaries 3,800 2,400
Deposit in transit 12,000 22,500
Outstanding checks 19,500 35,700
Deposit of 123 Corporation erroneously
credited to ABC Co.’s account 4,800 3,600

Requirement:
● Prepare the proof of cash.

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Problem 2

Entity A is preparing its February 28, 20x1 bank reconciliation statement. The following information
was determined:
Cash balance per accounting books, Feb. 28, 20x1 ₱260,000
Cash balance per bank statement, Feb. 28, 20x1 ₱205,000

When investigating the difference, the accountant determined the following:

1. A customer deposited ₱30,000 to Entity A’s bank account as payment for an account receivable.
This is not yet recorded in the books of accounts.
2. A ₱102,500 check deposited by Entity A during the month is not yet credited to Entity A’s account.
3. A check drawn in the amount of ₱22,500 is not yet presented to the bank for payment.
4. The bank returned a check deposit amounting to ₱5,000 because of insufficiency in the funds of the
drawer. The check was received from a customer as payment for accounts receivable.

Requirements:
● Prepare the bank reconciliation.
● Prepare the adjusting (reconciling) entries.

C. LESSON WRAP-UP
1) Activity 7: Thinking about Learning (5 mins)
1. Work Tracker

You are done with this session! Let’s track your progress. Shade the session number you just
completed.

ACC 106- Intermediate Accounting 1

SAS Day 5
 ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 5

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2. Think about your Learning

From a rating of 1-10, determine if you have learned all the learning objectives. What is the reason
for your rating?
________________________________________________________________________________
________________________________________________________________________________

What part of the module gave you a hard time to comprehend?

________________________________________________________________________________
________________________________________________________________________________

Any other questions or concerns you want to raise?

________________________________________________________________________________
________________________________________________________________________________

2) Assignment
To enhance your knowledge regarding the topic, answer Problems 1, 2, and 3 in your book. Your
teacher will provide the key answers later on.

FAQs
What other reasons are there to do a bank reconciliation?

-Bank reconciliations are a good way to identify fraudulent transactions that might have slipped through on
the bank feed when adding/matching multiple entries. For example, if ABC Company writes a check for $100
that is intercepted by Mr. Bad Guy who then alters the check to be $1,000, a bank reconciliation would
identify this discrepancy. (Reference: menaentrepreneur.org)

-Nothing Follows-
ACC 106- Intermediate Accounting 1
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