Method of Preparing a Bank Reconciliation Statement
Adjusted Balances Method
➔ The balances per bank and per book are separately determined
Book to Bank Method
➔ The book balance is adjusted to agree with the bank balance
Bank to Book Method
➔ The bank balance is adjusted to agree with book balance
Bank Reconciliation Statement
Book Balance (Bank column of cash book) Bank Balance (Bank statement)
● prepared by business concern ● prepared by bank (banker)
● cash deposits are entered on the debit side ● cash deposits are entered in the debit
column
● cash withdrawals are entered on the credit
side ● cheque deposits are credited only at the
time of realization of cheque
● cheque deposits are debited on the day of
deposit ● cheque issued by customers are debited by
bank on the date on which the payment is
● cheque issued are credited on the day of made
issue of cheque
● collection and payment as per standing
● collections and payments as per standing instructions of the business are entered in
instructions of the business are entered the banker’s book on the date of
only after checking with the bank realization of payment
statement
● balanced each transaction
● balanced at the end of a specific period
Book Balance ≠ Bank Balance
Two Common Causes of the discrepancy in figures are:
Time Lags Errors
(+) Deposit in Transit/Uncredited Cash or Checks Bank Errors
➔ cash or checks received and recorded by ➔ mistakes made by the bank
the company and deposited to the bank but ➔ can either increase or decrease the balance
are not yet reflected in the records of the in bank statement depending on the errors
bank
(-) Outstanding checks or Uncashed Checks Book Errors/Errors in Cash Account
➔ checks already issued for payment by the ➔ mistakes made by the company
company but not yet presented by the ➔ can either increase or decrease the balance
payee to the bank for payment in the company’s book depending on the
errors
(+) Credit Memo
➔ this results when the bank has not received
a direct amount on behalf of the company
is unaware of it
(+) Interest Income/Interest credited by the
bank
➔ subject to tax
➔ the company comes to know about it only
at the end of the month upon the receipt of
the bank statement
(-) No Sufficient Funds (NSF) Check/Dishonored
Check
➔ also called a bouncing check
➔ the account of the customer from which the
check was drawn has no sufficient funds
(-) Debit Memo
➔ this result when the bank has deducted a
direct amount from the company’s account,
but the company is not aware of it until the
bank statement arrives
Examples:
Situation Reconciling Item Effect (+ or - to bank/book)
Bank has deducted Php 350.00 from MATH Debit Memo Minus to book
store’s account for service charge
MATH store has deposited Php 23.00.00 check Deposit in Transit Add to bank
but this was not recorded by the bank on the
bank statement
Pinoy Bank collected the notes receivables Credit Memo Add to book
directly from a customer on behalf of MATH
store
MATH store issued Php 15,000.00 amount of Outstanding Check Minus to bank
check but the check was not yet presented by
the payee to the bank statement
Pinoy bank credited Php 64,500 interest to Interest Income Add to book
math store’s amount
