INTERMEDIATE AACCOUNTING Ex: Nabigay mo na yung cash nung Nov 12 tapos
1 yung nakalagay sa check is Nov 18. So hindi mo
MIDTERMS
 for payment of operating expense,
current liabilities and current assets
Definition of Cash
 Cash includes money and other negotiable
instrument that is payable in money and
acceptable by the bank for deposit and
immediate credit. (tinatanggap ng bangko.)
It includes cash on hand, demand deposits
and other items that are unrestricted for
use in the current operations.
 To consider it as cash, it should be readily
available to use anytime (UNRESTRICTED).
 Postdated checks cannot be considered as
cash yet because these checks are
unacceptable by the bank for deposit or
immediate encashment
 In POV of the company yung postdated
check na ibibigay mo is cash mo yun. But
the postdated checks na narereceive mo,
hindi pa sya cash kasi hindi sya readily
available to encash anytime.
sya pwede iencash yung check until Nov 18. So
hindi sya cash kasi hindi sya liquid.
To record:
Cash in the bank xx
Accounts Payable xx
(kasi hindi pa nag sya payment until Nov 18,
kaya hindi pa sya nababawasan)
Presentation of cash: line item, if current asset
ba sya ganon or noncurrent asset, etc.
Measurement of Cash – FACE VALUE is the
general rule of measurement (yung nakalagay
mismo sa document or sa pera)
2 periods of measurement:
 Initially – Magkano sya noon nung una
mong Nakita
 Subsequently – magkano ang value nya
ngayon after makalipas ng panahon.
Exception the the rule: Reasonable
amount/estimated realizable amount
- Measurement if may problema yung cash (ex:
100k yung dineposit mo sa bank tapos biglang
nabankcrupt si bank. Tas ang sabi ni bank is
instead of 100k, 80k nalang yung mabibigay nila
sayo so hindi sya mineasure at face value,
mineasure sya as estimated value lang.
a. Cash on hand
1. Undeposited dated customer’s checks or
customer’s checks awaiting deposit - Nasayo na
pero hindi mo pa nadedeposit (not funded)
2. Traveler’s check/ Cashier’s/ Treasurer’s and
Manager’s checks – postdated checks na hindi
tatalbog (bounce back checks) kasi funded
sila/good as check. It is a deduction to the
outstanding considered as payment. Automatic
syang nababawas sa deposit account.
- Traveler’s check is check na funded na dala ni
traveler. Manager’s check is funded check
approved by the manager. Cashier’s check is
funded check approved by the cashier.
4. Postal money orders - (a demand credit
instrument issued and payable by a post office)
– yung credit is pinapadala ni/sa postal office
but it is unusual na because we already have
bank transfers and over the bank counters.
5. Undeposited cash collections - (currencies
such as bills and coins). Nasayo na pero hindi
mo pa nadedeposit.
6. Bank drafts – document na sinulat ni bank
(hindi tatalbog) kasi funded sya. Mas
guaranteed sya kesa sa manager and cashier’s
check kasi bank mismo ang nag iissue.
7. Money order – can be from other financial
institutions. Icoconvert yung pera mo into
check/ money order sa isang financial
institution na pwede mo na ipambayad (ex:
GCash)
b. Cash in the bank – This includes demand
deposits or checking account and saving deposit
which are unrestricted as to withdrawal.
Example: Nagbayad ka ng electricity/ utang by
means of check:
Electricity expense/ Acc Payable xx
Cash in the bank xx
(nababawasan yung cash mo)
1. Demand deposit/commercial
deposit/current account/checking account
* Generally non-interest bearing (walang
interest)
* Withdrawable by checks against bank (pwede
iwithdraw by checks kahit not by cash)
- the current account or checking account or
commercial deposit where deposits are covered
by deposit slips and where funds are
withdrawable on demand by drawing checks
against the bank (noninterest bearing)
2. Savings deposit (Savings Account-SA)
* Generally non-interest bearing
* Depositor is issued an ATM card or passbook
* Withdrawable in ATM station or within the
bank.
- If mag iissue ng check, manggagaling sya lag
isa checking account (ex: nag issue ka ng 50k
worth of check, dun sya matik manggagaling sa
checking account.) And then yung checking
account manggagaling sya sa savings account
(ex: pagka issue mo ng 50k from the check
account, papalitan agaad sya ni savings
aaccount.) This process is called automatic
transfer. The reason why hindi dapat nageerror
or nag boubounce back ang check na to kasi
funded sya.
- the depositor is given a passbook upon the
initial deposit. It is required upon withdrawals
and deposits. Withdrawals are made anytime
but the bank may require notice of withdrawal
(interest bearing)
c. Cash fund
- Classification of a cash fund as current or non-
current should be parallel the classification of
the related liability.
- Cash fund is if there is a restriction for current
operation. If it is for long term operation (Ex:
fund for PPE expansion), it is not cash.
Ex: Kahit long term asset yan, basta ang liability
nya is mag due in 12 mos, current liability sya. If
short term investment sya tapos ang due is
above 12 mos, long term liability sya.
NOTE: EMERGENCY FUND IS NOT INCLUDED IN
CASH FUND BECAUSE IT IS FOR LONG TERM
1. Change fund - A set amount of money used
by a department to make change for customers
who are purchasing goods or services (fund or
barya na iniiwan pangsukli)
2. Payroll fund – capital fund for employee
payroll
3. Purchasing fund (for purchasing of
inventories) – Mostly used by manufacturing
businesses
3. Revolving fund (fund that is used for limited
or specific purpose set by management) –
capital fund na pinapaikot sa business.
4. Interest fund – Fund for paying interests
5. Petty cash fund (for small and miscellaneous
disbursements) – set aside for small expenses
which cannot be paid conveniently by checks.
 petty cash expenses recorded upon
replenishment; replenishment usually
equal to the amount of disbursements
IMPREST SYSTEM - all cash receipts deposited
intact, all cash payments via check
Procedures:
a. A check is drawn to establish a fund
Petty cash fund xx
Cash in the bank xx
b. Payment of expenses out of fund (no formal
entry)
c. Replenishment of petty cash payments
(usually equal to the petty cash disbursements)
Expenses xx

Cash in – Receipts Cash in the bank xx

Cash out – Disbursements
d. Adjusting the replenished expenses at the
Replenishment – lalagyan ulit yung Nawala sa
end of the accounting period
petty cash funds for paying expenses (ni
custodian). Recorded the moment na nag Expenses xx
replenish ka.
Petty cash memorandum book – kung saan Petty cash fund xx
minemaintain/nirerecord ni custodian yung
(Adjusting is required to be reversed at the
petty cash.
beginning of the next accounting period)
 Imprest system - A system of control of
cash which requires that all cash receipts e. Increase in the fund
should be deposited intact, and all cash
disbursements should be made by means of Petty cash fund xx
check. However, there are sometimes that Cash in the bank xx
issuance of checks may be inconvenient or
impractical. With this instance, you may pay f. Decrease in the fund
in cash rather than checks.
Cash in the bank xx
 Hinihintay nya lahat ng mga collections
hanggang sa cut-off para sabay sabay or Petty cash fund xx
isahan nalang yung pagdedeposit so
that wala nang matitira na cash
collections.
 So para makabayad ng expenses, hindi
nya dapat sa cash collections kukunin,  Fluctuating fund system – the checks
sa cash in the bank (thru checks) drawn to replenish the fund do not
 necessarily equal the petty cash  Kapag yung cash sinet aside for use in
disbursements current operations (for short term), or
- Every movement of the fund is recorded for payment of short-term obligation,
(updated) cash fund is current asset (included in
- petty cash expenses immediately cash and cash equivalents)
recorded; replenishment may differ from  THE ONLY EXEMPTION THE RULE IN THE
petty cash disbursements. SHARES OF STOCKS: redeemable
shares. It is part of the cash & cash
a. Establishment of the fund – paglalabas ng
equivalents because it has maturing
pera/check from the bank para gawing bills and
date & is convertible to cash from the
coins
company anytime.
Petty cash fund xx Petty Cash Custodian – taga hawak/maintain ng
Cash in the bank xx petty cash funds (totoong pera: bills/coins)

b. Payment of expenses out of the petty cash Fund For Non-Current Operations
fund (immediately recorded)  If the cash is set aside for non-current
purpose or payment of noncurrent
Expenses xx
obligation, cash fund is shown as long
Petty cash fund xx term investment (Ex: sinking fund,
preference share redemption,
c. Replenishment/ increase of the fund (may or contingent fund, fund for PPE
may not be the same as petty cash acquisition etc.)
disbursements)
1. Pension fund – if related liability is current,
Petty cash fund xx then pension fund is current, thus part of cash.
Cash in the bank xx 2. Preferred redemption fund - noncurrent
investment (unless the preferred share capital
d. No adjustment is necessary at the end of the
has a mandatory redemption, and the
period because the petty cash expenses are
redemption is already within one year from the
recorded outright
reporting period in which case this fund is
e. Decrease of the fund already part of cash equivalent)

Cash in the bank xx 3. Acquisition of Property, plant and

Petty cash fund xx
6. Dividend fund – Fund set aside for the
dividend declarations (retained Earnings)
7. Travel fund – Fund set aside for employee
transportation
8. Tax fund – Fund set aside for tax payments
CASH FUND FOR A CERTAIN PURPOSE:
equipment – always noncurrent even if
expected to be disbursed next year.
4. Contingent fund – noncurrent investment
5. Insurance fund – Noncurrent investment
6. Sinking fund – if the related bonds payable is
current, then sinking fund is current, thus part
of cash.
- Classification of cash fund as current or non-
current should parallel the classification applied
to the related liability. Thus, an entity should
classify such non-current asset if the related
liability becomes current.
- fund na iniipon para hindi ka malubog sa
utang/pondo na iniipon pambayad ng utang.
Cash Equivalents
- short term and highly liquid investments that
are readily convertible in cash and so near their
maturity that they present insignificant risk of
changes in value because of changes in interest
rates.
- If cash is convertible within 3 months, it is
considered as cash equivalents. If more than 3
mos, it is long term investments (strictly 3
months from the date of acquisition/purchase
to the maturity date)
Time deposit – evidenced, however by
formal agreement instrument called certificate
of deposit. May be predetermined or
withdrawn on demand or after a certain period
of time agreed upon.
Examples:
3-month BSP Treasury bill – galling kay BSP/
ininvest mo sa BSP, kumbaga parang may utang
sayo si BSP tapos babayaran ka nya with
interest.
3- year BSP treasury bill purchased three
months before date of maturity – Ex: 5 years
yang maturity ng t-bill tapos 3 months nalang
natira before maturity date saka mo binilli,
considered as cash equivalents sya. It doesn’t
matter kelan or gano kahaba yung investment
basta binili mo sya 3 mos before the maturity
date (date or purchase matters)
3-month time deposit – Nagdedeposit ka pero
hindi mo pwedeng withdraw in a certain period
of time. Kelangan mo ng antayin yung time na
yun before mo ma encash pero dapat within 3
months lang.
3-month money market
3-month commercial paper – same concept
with t-bills except hindi sya galing sa BSP. Galing
sya sa private entities so instead of t-bills,
commercial paper ang tawag.
TAKE NOTE:
 If three months or less = cash & cash
equivalents
 If more than 3 months but within 1 year
= short term investment
 If more than year = long term
investments
Redeemable preference shares - specified
redemption date and acquired three months
before maturity date are classified as cash
equivalents
Investment of Excess Cash
The control and proper use of cash is an
important aspect of cash management. Any
accumulated in excess of that needed for
current operations should be invested even
temporarily in some type of revenue earning
investment (cash equivalents)
Equity securities – cannot qualify as cash
equivalents because shares do not have a
maturity date.
Preference shares – with specified redemption
date, acquired 3 mos before redemption date
can qualify as cash equivalents
- If an item cannot be included as cash
equivalent because it did not qualify the cut-off
time period (ie three months), it will always be
classified as investments (short term or long
term) depending on the period up to maturity.
If the problem is silent with regard to:
1. Treasury note – assumed investment
2. Cash in money market account – cash and
cash equivalent
3. Time deposit – cash and cash equivalent
Measurement Issues in Cash and Cash
Equivalents
1. Cash - measured at face value
2. Cash in foreign currency - translated to
Philippine Peso (measured at the current
exchange rate)
3. Deposit in foreign bank - unrestricted
(included as cash) Restricted (if material,
classified separately among noncurrent assets
as receivables.)
- Deposits in foreign countries which are not
subject to any foreign exchange restriction are
included in cash.
4. Cash in closed bank/banks In bankruptcy -
noncurrent asset. If a bank or financial
institution holding the funds of an entity is in
bankruptcy or financial difficulty, cash should be
written as estimated realizable value
5. Bank overdraft - Different banks (current
liabilities) Same bank (netted against the
account with positive balance but cannot be
offset against restricted account.
- a written order addressed to the bank to pay
an amount of money to the order of the make
(for book purposes only: wala tayong kinalaman
sa error or records ni bank) – illegal in the PH
- Cash in the bank account has a credit balance.
This results from the issuance of checks in
excess of the deposits
- classified as current liability and should not be
offset against other bank accounts with debit
balances
Example 1: Bank A – may overdrawn na 10,000
si bank B may debit balance na 100,000. Bale
ang net cash balance ni company is 90,000 kasi
liability nga si overdraft which is yung bank A
(see bank draft under cash on hand)
Example 2: Nagbigay ka ng cash na 1.2M kaso
ang naka deposit lang sa bank is 1M. Ang
maeencash nya lang is to the extent of 1M.
However, pinapayagan lang ang bank overdraft
or nangyayari lang sya kapag halimbawa,
maganda ang relationship ni bank and
company. Ang mangyayari jan, ipapaencash ni
bank yung 1.2M kumbaga aabonohan muna ni
bank yung 200k, tapos magkakautang ng
deposit of 200k si company sakanya.
- Pwede ka lang mag offset/ ideduct sa total
cash in the bank kapag same bank or same bank
but different account no. (ex: tatapalan ni BPI
(A) yung kulang sa balance ni BPI (B) ganon.)
Pero if different bank, ang general rule is that
hindi ka pwede mag offset ng bank drafts in diff
banks.
- Excepption: pwede mo lang ioffset yung hindi
same bank kapag immaterial which will be
stated sa problem. However, if no mentioned,
different banks = offsetting not allowed.
- BANK OVERDRAFTS IS A CURRENT LAIBILITY
6. Compensating balance - is the minimum
checking or demand deposit account balance
that must be maintained in connection with a
borrowing agreement with a bank not legally
restricted – part of cash legally restricted
 short term- presented as “cash held as
compensating balance”, current
(Receivable)
 long term- presented as “cash held as
compensating balance”, non-current
(Receivable). If the problem is silent
with regard to compensating balance, it
is assumed not legally restricted.
- generally, takes form of minimum checking or
demand deposit account balance that must be
maintained in connection with borrowing
arrangement with a bank.
- Ex: May loan ka na 5M tapos nag agree kayo ni
creditor na yung 5% sa inutang mo na 5M is
magiging maintaining balance. Or kapag nagpa
open ka ng bank account, may maintaining
balance ka which is hindi withdrawable
(restricted), meaning, hindi sya part ng cash mo
kasi hindi sya pwedeng galawin.
 Not legally restricted – withdrawable
because of an informal compensating
balance agreement (it is part of cash)
 Legally restricted – because of forma
compensating balance agreement, it is
part of “cash held as compensating
balance” under current asset kapag
related si asset sa short-term liability.
 If related na sa long-term liability,
compensating balance is classified as
noncurrent investment.
7. Undelivered/unreleased check - Reverted
back to cash. Check is one that is merely drawn
and recorded but not given to the payee before
the end of the reporting period. Subject parin sa
control ni entity so pwede icancel anytime
before delivery. Ibibigay mo sana, kaso hindi
mo naibigay sa dapat na mabibigyan mo non, so
hindi mopa nababayaran
Adjusting entry is required to restore the cash
balance and set up the liability:
Cash/ cash in bank XX
AP/ appropriate account XX
8. Stale checks/Checks outstanding - for more
than six months from the date of check -
Reverted back to cash
- check not encashed by the payee within
relatively long period of time. In banking
practice, a check becomes stale if not encashed
within 6 months from the time of issuance.
- If the number of stale checks is immaterial, it
is simply accounted for as miscellaneous
income:
Cash xx
Miscellaneous income xx
- however, if the amount is material, and
liability is expected to continue, the cash is
restored, and liability is set up again.
Cash xx
AP/ Appropriate account xx
- If nabigay mo na yung check tapos Nawala nila
(means hindi pa nababawasan cash mo kasi
hindi pa naeencash), tapos nanghingi ng bagong
check sayo, wala yung damage sayo. Pero
pwede ka tumanggi sabi ng batas kasi kasalanan
naman daw nila yun.
9. Postdated checks - checks dated after
reporting period
 Company’s check – reverted back to
cash. Cash disbursements book/ cash
payments journal (hawak ni payee)
 Customer’s check – not yet cash (A/R).
Cash receipt book/ cash receipt journal
(hawak ni payer)
Postdated checks delivered – check drawn,
recorded and already given to the payee but it
bears a date subsequent the end of reporting
period.
Original entry recording a delivered postdated
check shall also be reversed and therefore
restored to the cash balance:
Cash xx
AP/Appropriate account xx
10. IOUs (I owe you) - Part of receivable. A
written acknowledgement of debt that one
party owes another. In business transactions, an
IOU may be followed by a more formal written
contract.
11. Equity securities - cannot be classified as
cash equivalents because shares do not have
maturity a date (except redeemable preference
shares)
13. Callable preference shares - shareholder’s
equity
14. NSF/DAUD/DAIF - Reverted back as part of
receivables (bounceback checks.) Tumalbog na
checks dahil hindi pala funded/walang laman
 NSF – no sufficient funds (maintaining
balance lang yung natira, yung cash
wala na talaga)
 DAUD – drawn against uncleared
deposits (hindi pa cleared tas dineposit
mo agad, so tatalbog sya kasi lalabas na
walang fund.
 DAIF – drawn against insufficient funds
(may cash ka pa don pero kulang lang
talaga. Ex: 150 yung iiissue mot as 50k
lang yung cash in the bank mo ganon)
15. Expenses advances - Receivable or prepaid
expenses
16. Temporary investments in shares of stock -
either FVTPL or FVTOCI
17. Unused credit line - Disclosed in the notes.
Nirerequest ni company kay bank (parang credit
card) – requirement for import/export abroad.
Pag may natire (unused) pwede mong
gamitin/ubusin, pero hindi mo sya pera utang
sya.
18. Treasury warrants - a warrant for the
payment of money into or from public treasury.
(Included as part of cash)
- An authorization that a payment be made
from a public treasury, usually in the form of a
check. Government disbursements are paid
with treasury warrants.
19. Escrow deposit - restricted amount held in
trust for another party, ie deposit required by
court of law for a pending case (other current or
noncurrent)
- money held in an account by a third party
while other parties complete a transaction.
Often, a contract outlines the conditions that
must be met in order for the money to transfer
from one party to the other.
20. Unrecorded cash disbursements - increase
recording of disbursements (Mga cash outflows
na hindi pa narerecord)
21. Unrecorded cash collections - increase
recording of receipts (mga cash inflows na hindi
pa narerecord)
22. Certificate of deposits - Invested 3 months
before maturity – cash equivalents
Invested for more than three months –
investment (short or long term)
- A certificate of deposit (CD) is a savings
product that earns interest on a lump sum for a
fixed period of time. CDs differ from savings
accounts because the money must remain
untouched for the entirety of their term or risk
penalty fees or lost interest. CDs usually have
higher interest rates than savings accounts as
an incentive for lost liquidity.
23. Postage stamps on hand - office supplies
- Postage stamps on hand are considered as
Prepaid expenses. Prepaids are any expense the
business pays for in advance, such as rent,
insurance, office supplies, postage, travel
expense, or advances to employees
24. Window dressing: opening the books of
accounts beyond the close of the accounting
period to show better financial position and However, if reasonable efforts fail to disclose
performance the cause of the shortage the adjustment is:

 Record subsequent collections in the Loss from cash shortage xx

current period
 Record current payments in the subsequent Cash short over xx
period

25. Lapping: misappropriating collections from Accounting for cash overage

one customer and concealing this by recording
subsequent collections from other customers as Where the cash account show cash, which is
a collection from the previous customer more than the balance per book, there is a cash
overage to be recorded as follows:
26. Kiting: transfer of cash from one bank to
another bank; usually drawing a large amount Cash xx
against the first bank and depositing the same
Cash short over xx
check in a second bank to cover the shortage in
the latter bank. The cash overage is treated as miscellaneous
income if there is no claim on the same
Deposit in transit – dineposit pero hindi abot sa
cutoff. Cash short over xx
Undeposit in transit – nasayo pa, hindi mo pa Miscellaneous income xx
nadedeposit.
If the cash overage if properly found to be the
Outstanding check – hindi pa nadedeposit pag money of the cashier, the journal entry is:
hawak mo yung check = cash (nasa company pa)
Cash short over xx

Accounting for cash shortage Payable to cashier xx

Where the cash account shows cash, which is
less than the balance per book, there is a cash NOTES: (non-cash)
shortage to be recorded as follows: Current account (deficit) – current liability
Cash short/over xx
Travel advances – Advances for liquidation
Cash xx
Travel advances xx
The cash short over account is only
temporary/suspense account. When financial Cash xx
statements are prepared the same should be Accounts Receivable – Customer’s post-dated
adjusted. check
If the cashier is held responsible for the NFS/DAIF – bounce checks
shortage the adjustment should be:
NCA/CA – compensating Balance
Due from cashier xx
Advances to Stockholders (a check drawn) -
Cash short over xx Post Dated check

Bank Balance 620,000

Outstanding Balance 820,000
Adjusted (Deficict) (20,000)
BANK RECONCILATION
- is a statement which bring into agreement the
cash balance per book and cash balance per
bank. This usually prepared monthly because
the provides the depositor with the bank
statement at the end of every month.
- may mistake sa records kaya need
ipagkasundo (meet halfway)
- Kung nakanino yung book reconciling items,
sya yung magcocorrect (pero tayo POV lagi ni
company, if si bank ang nagkamali, hindi natin
sya papakielamanan)
- Usually, si bank ang laging tama.
required when making deposits and
withdrawals.
 Withdrawals are made anytime but the
bank sometimes may require notice of
withdrawal.
 Interest- bearing
3. Time Deposit – May restriction (depende sa
time given yung classification nya to be a
cash equivalent – 3 months)
 Interest-bearing
 Evidenced, however by a formal
agreement embodied in an instrument
called certificate of deposit
 May be predetermined or withdrawn in
demand or after a certain period of
time agreed upon

A BANK STATEMENT: monthly report of the * If naka collect ka, and nilagay mo na sa
bank to the depositor showing cash balance per bangko after mo pagsama samahin para
bank, deposits, withdrawals, checks paid, other icollect:
charges and credits, and daily cash balance per
bank during the month is a monthly report of Book
the bank to the depositor showing: Cash/ Cash in the bank xx
a. The cash balance per bank at the Accounts Receivable xx
beginning (dahil may utang sayo si bank since nilagay mo
b. The deposits made by the depositor and nga dun yung collections mo)
acknowledged by the bank
c. The checks drawn by the depositor and Bank
paid by the bank
d. The daily cash balance per bank during Cash xx
the month
Demand Deposit/Company Y xx
TYPES OF BANK DEPOSITS: (May utang sila sayo kaya credited, kasi nga
1. Demand Deposits – Current nagdedeposit ka)
account/checking account/commercial
deposit (disbursement payments; * If nag issue ng checks in payment of your
withdrawable anytime) payables:
 Covered by deposit slips and where
funds are withdrawable on demand by Book
drawing checks against the bank
Accounts Payable xx
 ONLY BANK RECONCILATION IS
Cash in the bank xx
NECESSARY
Bank
2. Savings deposits – Ipon; savings na Company Y/Demand Deposit xx
kumikita ng interest na maliit Cash xx
 The depositor is given passbook upon
the initial deposit. The passbook is
(Since nagbayad ka, it means mababawasan Cash xx
yung cash mo sa bank and also the payables.) Time Deposit xx

>> Both accounts have equal or same balance  Collection of notes Receivable (sa bank
because they are reciprocal accounts. So when nagbyad ng AR si customer)
one account is debited, the other account is Cash xx
credited or vise versa Notes Receivable xx
>> There are items on the depositor’s book
which do not appear on the bank records as of
2. Debit memo – items not representing checks
the same date and vise versa kaya nagkakaroon
paid by the bank which are charged or debited
ng book reconciliation.
by the bank to the account of the depositor by
not yet recorded by the depositor as cash
BOOK RECONCILING ITEMS
disbursements. Decreasing the bank balance.
1. Credit Memo – items not representing
- credited in book and debited in the bank
deposits credited by the bank to the account of
(nababawasan yung cash mo);
depositor but not yet recorded by the depositor
- CASH IS ALWAYS CREDITED
as cash receipts. Increasing the bank balance.
- Since nakatanggap ka ng memo na
- memo na binibigay ni bank kay company for
madedecrease yung cash mo, you have to
the changes of credits.
adjust your cash account by crediting your cash
- Cash is debited in the book and credited in the
bank (meaning nadadagdagan yung cash in the
 Bank Service Charge – Service charge para
bank mo and credited from the bank itself kasi
kay bank na automatic na binabawas sa
may pera tayo sakanila)
bank mo
- increasing the cash account by the bank
Service charge (expense) xx
(credited) > deposit
Cash in the bank xx
- Since nakatanggap ka ng memo na
maiincrease yung cash mo, you have to adjust
 Auto debit/payment of loans (automatic na
your cash account by debiting your cash
nababawas sa bank mo yung bayarin (ex:
- CASH IS ALWAYS DEBITED
netflix and spotify)
 Proceeds of a loan – nangutang ka tas
di agad na approved due to the Loans Payable xx
clearance tas naging okay na after Cash in the bank xx
several days kaso hindi mo pa alam, so
bibigyan ka nila ng (credit) memo na  NSF Checks/DAIF – tumalbog na checks
naiincrease nga yung cash mo (reverse lang yung original entry kasi nga
Cash xx tumalbog lang sya, meaning no effect
Loans Payable xx dapat)
(depends on transaction) Accounts Receivable xx
Cash xx

 Matured Time Deposit – Time Deposit  Reduction of Loan – amount deducted from
na nag arrive na yung time (after 3 the current account of the depositor in
months)
 payment for loan which the depositor owes
the bank and which has already matured
 Technically defective checks – checks
deposited but are returned by the bank
because of technical defects such as
absence of signature, erasures not
countersigned, mutilated checks and
conflict between amount in words and
amount in figures.
 Reverse entry lang kasi lalabas na hindi
nga pumasok yung transaction
BANK RECONCILING ITEMS
1. Deposit in Transit/Outstanding Deposits –
Collections already recorded by the depositor as
cash receipts but not yet reflected on the bank
statement. May deposits ka na or
nakapagdeposit ka na pero hindi pa narerecord;
this includes:
 Collections already forwarded to the
bank for deposits but too late to appear
in the bank statements
 Undeposited collections or those still in
the hands of the depositor (Cash on
hand) awaiting delivery to the bank
deposit (Checks na hindi pa
dumadating)
 Matagal na panahon na or nasa clearing
stage pa.
 Nag cut off na and then hindi na
nakaabot si deposit
POV ni book >> deposited na
POV ni Bank >> not yet recorded
No adjusting records here kasi si bank ang dapat
mag adjust
2. Outstanding checks – Checks already
recorded by the depositor as cash
disbursements but not yet reflected on the
bank statement. Naibigay na sa tao, nabawasan
na yung cash ni book; naissue na/nabayad na
but hindi pa naeencash so not yet recorded kay
bank
- Bank Adjustment
This includes:
 Checks drawn and already given to payees
but not yet presented for payment
 Certified checks – where the bank has
stamped on its face the word "accepted" or
"certified" indicating sufficiency of fund.
o When bank certifies the check, the
account of the depositor is immediately
debited or charged to insure the
eventual payment of the check
o Certified checks should be deducted
from the total outstanding check
because they are no longer outstanding
for bank reconciliation purposes.
3. Errors – Treatment depends on the error
basta lagi dapat same si bank and book, kung
ano ginawa sa isa dapat gawin mo rin para mag
same ng ending value.
FORMS OF BANK RECONCILATION
ADJUSTED BALANCE METHOD – The book balance
and the bank balance are brought to correct cash
balance that must appear on the balance sheet-
PREFFERED
- book and bank balance brought to the
correct cash balance to be reported in the
FS
Unadjusted book balance xx
Credit memos xx
TOTAL xx
Debit memos (xx)
Adjusted Book Balance xx
Unadjusted bank balance xx
Deposits in transit xx
TOTAL xx
Outstanding checks (xx) 3. Trace the checks issued to the bank
Adjusted Bank Balance xx statement to ascertain whether there
are checks not yet presented for
payment (outstanding checks)
BOOK TO BANK METHOD – The book balance is
4. The bank statement should be
reconciled with the bank balance or book balance is
examined to determine whether there
adjusted to equal the bank balance
are bank credits or bank debits not yet
- reconcile book balance to bank recorded by the depositor.
5. Watch out for errors.
Unadjusted Book Balance xx
Credit memo xx
Preparation of adjusting entries
Outstanding Checks xx xx
- you can only adjust your books, wala tayong
TOTAL xx
pakielam sa bank.
Debit memo xx
Deposit in Transit xx (xx)
a. To record the note collected by bank:
Unadjusted Bank balance xx
Cash in the bank xx
Notes Receivable xx
BANK TO BOOK METHOD – the bank balance is
reconciled with the book balance or the bank b. To record the NSF check:
balance is adjusted equal to the book balance.
Accounts Receivable xx
- reconcile bank balance to book Cash in the bank xx

Unadjusted Bank Balance xx

c. To record the bank service charge:
Deposit in Transit xx
Bank service charge xx
Debit memo xx xx
Cash in the bank xx
TOTAL xx
Outstanding checks xx
Credit memo xx (xx)
Unadjusted Book balance xx
In computing bank reconciliation, errors are
excluded because no definite rule can be made
whether these are to be added or subtracted. It
has to be analyzed for proper treatment.
However, it is a reconciling item of the party
which committed them.

General Procedures In preparing the

reconciliation:
1. Determine the balance per book and
the balance per bank
2. Trace the cash receipts of the bank
statement to ascertain whether there
are deposits not yet acknowledged by
the bank. (Deposits in transit)