BANK RECONCILIATION Book Reconciling Items

TYPES OF BANK DEPOSITS Credit Memo (+)

Current Account
- Checkbook
- Bank Statements
- Non-Interest-Bearing
Savings Account
- Supported by Passbook
- Interest-Bearing
Time Deposit Account
- Evidenced by certificate of deposit
- Interest-Bearing
Bank Reconciliation
- There are differences (reconciling items)
between cash balances from the books and
from the bank so dapat itama yun. May
narecord si book na di narecord ni bank,
and vice versa
- It is a schedule prepared that accounts for
the differences between cash balances per
book (company’s record) and cash balances
per bank (bank statement)
- Prepared only for checking and demand
deposit and is prepared monthly because
the bank provides the depositor with the
bank statement at the beginning (normally
first week) of the following month.
Forms of Bank Reconciliation
- Adjusted Balance Method (commonly
used)
- Book to Bank Method
- Bank to Book Method
Reconciling Items
Book Reconciling Items Bank Reconciling Items
Credit Memo (+) Deposit in Transit (+)
Debit Memo (-) Outstanding Checks (-)
Book Errors (+/-) Bank Errors (+/-)
- These are collections or deposits made by
the bank to the account of the company but
not yet recorded by the entity
- Examples:
o Collections by the bank on behalf of the
entity. Not yet recorded by the entity
To correct the cash in bank balance:
Cash in Bank
Notes/Accounts Receivable
o Proceeds of bank loan (or any loan)
credited to the account of the entity by
the bank
To correct the cash in bank balance:
Cash in Bank
Loans Payable
o Interest Income credited to the account
To correct the cash in bank balance:
Cash in Bank
Interest Income
o Matured time deposits transferred by
the bank to the current account of the
depositor
Debit Memo (-)
- Charges and deductions made by the bank
to the account of the entity but not yet
recorded by the entity
- Nabawas na ni bank pero di pa alam ng
company
- Examples:
o Charges – includes bank charges for
interest, collection, checkbook, and
penalty.
To correct the cash in bank balance:
Expense
Cash in Bank
 o NSF/Defective Checks – checks
deposited and already recorded by the
bank but subsequently returned by the
bank to the entity because of
insufficiency of fund or errors made
To correct the cash in bank balance:
Accounts Receivable
Cash in Bank
o Loan Payments – 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.
To correct the cash in bank balance:
Loans Payable
Cash in Bank
o Final withholding tax on interest
income
Bank Reconciling Items
Deposit In Transit (+)
- Deposits already recorded in the cash books
but were taken up by the bank only in the
next period
- Usually at the end of the month
- Aka. Overnight Deposit
- Examples:
o Collections already forwarded to the
bank for deposit but too late to appear
in the bank statement
o Undeposited collections awaiting
delivery to the bank for deposit
Outstanding Checks (-)
- Checks written and released to payees and
are recorded in the cash books but are not
yet presented for encashment or deposit to
the bank
- Already deducted on the books but not by
the bank yet
- Additional Info:
o Certified Checks are checks already
verified and accepted by the bank.
These are deducted to outstanding
checks
*no entry is made for bank reconciling items
Bank/Book Errors
*for this part, assume that the company is using
the adjusted balance method
*kung sino ang nagkamali, siya and mag-
aadjust
Below are the effects of errors and the
corresponding treatment whether to add or
deduct it from the unadjusted cash in bank
balance
- Understatement of cash receipt (+)
- Overstatement of cash receipt (-)
- Understatement of cash
disbursements/checks drawn by depositor
(-)
- Overstatement of cash disbursements (+)
- Deposit of another entity is credited by the
bank to the account of the depositor (- in
bank balance)
- Deposit of another entity is debited by the
bank to the account of the depositor (+
back balance)
- Check of another entity charged to the
account of the depositor (+ bank balance)