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Intermediate
Accounting 1
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Bank Reconciliation
Prof. Ernie D. Tano, CPA, MBA
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Bank Reconciliation
Cash Ledger
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Bank Reconciliation
Bank Statement
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Bank Reconciliation
Cash Ledger vs. Bank Statement
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Bank Reconciliation
1. Determine ending balances
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements
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Bank Reconciliation
Illustration:
Additional Information:

a. The DM of P31,905 represents payment for matured loan of P30,000

and interest of P1,905.

b. The credit memo of P90,000 on May 26 represents collection from

customers directly deposited to the account.
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Bank Reconciliation
Forms of bank reconciliation
Adjusted Balance Method Book to Bank Method Bank to Book Method
Balance per book xxx Balance per book xxx Balance per bank Xxx
Add: Credit Memos xxx Add: Credit Memos xxx Add: Deposit in Transit Xxx

Total xxx Outstanding xxx Debit Memos xxx

Checks
Less: Debit Memos (xxx)
Total xxx
Adjusted book balance xxx Total xxx

Less: Outstanding (xxx)

Balance per bank xxx Less: Debit Memos (xxx) Checks
Add: Deposit in Transit xxx Deposit in Transit (xxx) Credit Memos (xxx)
Total xxx Total (xxx) Total (xxx)

Less: Outstanding (xxx)

Checks Balance per bank xxx Balance per book xxx
Adjusted bank balance xxx
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Bank Reconciliation
Forms of bank reconciliation
Adjusted Balance Method Book to Bank Method Bank to Book Method
Balance per book xxx Balance per book xxx Balance per bank Xxx
Add: Credit Memos xxx Add: Credit Memos xxx Add: Deposit in Transit Xxx
Total xxx Outstanding xxx Debit Memos xxx
Less: Debit Memos (xxx) Checks

Adjusted book balance xxx Total xxx

Total xxx

Balance per bank xxx Less: Outstanding (xxx)

Add: Deposit in Transit xxx Less: Debit Memos (xxx) Checks
Total xxx Deposit in Transit (xxx) Credit Memos (xxx)

Less: Outstanding (xxx) Total (xxx) Total (xxx)

Checks
Adjusted bank balance xxx Balance per bank xxx Balance per book xxx
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Bank Reconciliation
Adjusted Balance Method
Balance per book xxx
Add: Credit Memos Xxx
Total Xxx
Less: Debit Memos (xxx)
Adjusted book balance Xxx

Balance per bank xxx

Add: Deposit in Transit xxx
Total xxx
Less: Outstanding Checks (xxx)
Adjusted bank balance xxx
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Bank Reconciliation
1. Determine ending balances
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Add: Credit Memos
Total
Less: Debit Memos
Adjusted book balance

Balance per bank

299,095
Add: Deposit in Transit
Total
Less: Outstanding Checks
Adjusted bank balance
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements

Deposit in transit
- Collections already recorded by
the depositor as cash receipts but
not yet reflected on the bank
statement
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Add: Credit Memos
Total
Less: Debit Memos
Adjusted book balance

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
Less: Outstanding Checks
Adjusted bank balance
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements
Outstanding checks
- Checks already recorded by the
depositor as cash disbursements
but not yet reflected on the bank
statement
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Add: Credit Memos
Total
Less: Debit Memos
Adjusted book balance

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
Less: Outstanding Checks
(80,000)
Adjusted bank balance
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements
Credit Memos
- Items not representing deposits credited
by the bank to the account of the
depositor but not yet recorded by the
depositor as cash receipts
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Add: Credit Memos 90,000
Total
Less: Debit Memos
Adjusted book balance

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
Less: Outstanding Checks
(80,000)
Adjusted bank balance
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Bank Reconciliation
b. Trace cash receipts/checks to bank statements

Debit Memos
- Items not representing checks paid by the
bank which are charged or debited by the bank
to the account of the depositor but not yet
recorded by the depositor as cash
disbursements
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Add: Credit Memos 90,000
Total
Less: Debit Memos (31,905)
Adjusted book balance

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
Less: Outstanding Checks
(80,000)
Adjusted bank balance
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Bank Reconciliation
Adjusted Balance Method
Balance per book 321,000
Note 1:
Add: Credit Memos 90,000
Total 411,000 Errors are reconciling items of
Less: Debit Memos the party which committed
(31,905) them.
Adjusted book balance 379,095
Note 2:
Balance per bank
299,095
Add: Deposit in Transit Only book reconciling items
160,000 require adjusting entries on the
Total
459,095 book of depositor
Less: Outstanding Checks
(80,000)
Adjusted bank balance
379,095
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Bank Reconciliation
Forms of bank reconciliation
Adjusted Balance Method Book to Bank Method Bank to Book Method
Balance per book 321,000 Balance per book 321,000 Balance per bank 299,095
Add: Credit Memos 90,000 Add: Credit Memos 90,000 Add: Deposit in Transit 160,000
Total 411,000 Outstanding 80,000 Debit Memos 31,905
Less: Debit Memos (31,905) Checks

Adjusted book balance 379,095 Total 491,000

Total 491,000

Balance per bank 299,095 Less: Outstanding (80,000)

Add: Deposit in Transit 160,000 Less: Debit Memos (31,905) Checks
Total 459,095 Deposit in Transit (160,000) Credit Memos (90,000)

Less: Outstanding (80,000) Total (191,905) Total (170,000)

Checks
Adjusted bank balance 379,095 Balance per bank 299,095 Balance per book 321,000
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Bank Reconciliation
Another illustration

Let us use the cash and bank transactions for the

month of June of our previous illustration
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Bank Reconciliation
Cash Ledger - June
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Bank Reconciliation
Bank Statement - June
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Bank Reconciliation
Cash Ledger vs. Bank Statement
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Bank Reconciliation
a. Determine ending balances
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Bank Reconciliation
b. Trace Previous reconciling items to current cash ledger
Balance per book 321,000
Add: Credit Memos 90,000
Total 411,000
Less: Debit Memos (31,905)
Adjusted book balance 379,095

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
459,095
Less: Outstanding Checks
(80,000)
Adjusted bank balance
379,095
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Bank Reconciliation
c. Trace Previous reconciling items to bank statement
Balance per book 321,000
Add: Credit Memos 90,000
Total 411,000
Less: Debit Memos (31,905)
Adjusted book balance 379,095

Balance per bank

299,095
Add: Deposit in Transit
160,000
Total
459,095
Less: Outstanding Checks
(80,000)
Adjusted bank balance
379,095
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Bank Reconciliation
d. Trace cash receipts/checks to bank statements
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Bank Reconciliation
d. Trace cash receipts/checks to bank statements
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Bank Reconciliation
d. Trace cash receipts/checks to bank statements
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Bank Reconciliation
d. Trace cash receipts/checks to bank statements
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Bank Reconciliation
d. Trace cash receipts/checks to bank statements
Errors
- Are reconciling items of the party which
committed them
- In this case, a check was erroneously
recorded as P162,000 instead of P126,000
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Bank Reconciliation
Additional information
a. The DM of P150,000 represents check of customer deposited previously
but returned by the bank because of “no sufficient fund” or NSF. The other
DM of P1,500 represents bank charge on returned check.

b. Check No. 1114 amounting to P126,000 was erroneously recorded

by the company as P162,000.

c. The credit memo in the amount of P800 represents interest earned on bank
account .