BANK

RECONCILIATION
STATEMENT
FABM2: LESSON 8
LEARNING OUTCOMES
Identify common reconciling items and their
effects
Prepare a bank reconciliation statement
 ACCOUNT
BALANCE

DEPOSITS AND BANK

BANK CHARGES
WITHDRAWALS STATEMENT

INTEREST
ERNED
 DEBIT CREDIT

• Bank service • Collection

charge - monthly • Interest income
fee charged by
the bank for its
services
• NSF - (Not
Sufficient Fund)
 BANK RECONCILIATION STATEMENT

A report which compares the bank

balance as per company's accounting
records with the balance stated in the
bank statement.
Two common causes of the discrepancy in figures:

Time • prevent one of the parties from

recording the transaction in the
lags same period as the other party.

• Errors in recording transactions

Errors by either party
The importance of Bank Reconciliations are as follows:

Help in the identification of errors in the accounting

records of the company or the bank.

Provide the necessary control mechanism to help

protect the valuable resource (cash) of the company.

Provide added comfort that the bank transactions

have been recorded correctly in the company records

Assists in the regular monitoring of cash flows of a

business
THREE METHODS OF PREPARING BANK RECONCILIATION STATEMENT

Adjusted Method Book to Bank Bank to Book

• balances per bank Method Method
and per book are • book balance is • bank balance is
separately adjusted to agree adjusted to agree
determined with the bank with book balance
balance
DEPOSITS IN TRANSIT

• amounts already received and recorded by

the company, but are not yet recorded by the bank.

Outstanding checks

• checks that have been written and recorded in the

company's Cash account but have not yet cleared the
bank account or presented to the bank by the payee.

Bank errors

• mistakes made by the bank.

Bank service charges

• fees deducted from the bank statement for the bank's

processing of the checking account activity

NSF check

• check that was not honored by the bank of the person or

company writing the check because that account did not
have a sufficient balance

Check printing charges

• occur when a company arranges for its bank to handle the

reordering of its checks.
Interest earned

• It will appear on the bank statement when a bank gives

a company interest on its account balances.

Errors in the company's Cash account

• entering an incorrect amount

• entering a transaction that does not belong in the
account
• omitting a transaction that should be in the account.

Notes Receivable/Collection
 BANK RECONCILIATION PROCESS

Balance per Bank Statement on Jan 31, 2018

Step 1. Adjusting Adjustments:

Add: Deposits in transit
the Balance per Deduct: Outstanding Checks
Add/Deduct: Bank Errors
Bank Adjusted/Corrected Balance per Bank
 BANK RECONCILIATION PROCESS

Balance per Books on Jan 31, 2018

Step 2. Adjusting Adjustments:

Deduct: Bank Service Charges

the Balance per Deduct: NSF Checks and Fees

Deduct: Check Printing Charges
Add: Interest Earned
Books Add/Deduct: Errors in company's Cash
Account
Adjusted/Corrected Balance per Bank
 BANK RECONCILIATION PROCESS

Step 3. Comparing the Adjusted Balances

Bank reconciliation problem:
1.The bank statement for Juan Company shows a balance per bank of P15,907.45 on November 30, 2020.
2.On this date the balance of cash per books is P11,589.45.
3.Additional information are provided below:
Deposits in transit: November 30 deposit (received by the bank on December 1) P2,201.40
Outstanding checks: No. 453-P3,000.00
No. 457-P1,401.30
No. 460-P1,502.70
Errors: Juan wrote check no. 443 for P1,226.00 and the bank correctly paid that amount. However, he
recorded the check as P1,262.00.
Bank memoranda:
Debit– NSF check from Pedro P425.60 .
Debit– Charge for printing company checks P30.00
Credit – Collection of note receivable for P1,000 plus interest earned of P50, less bank collection fee of
P15.00.
Required: Prepare a bank reconciliation statement using the adjusted method.
Hint: Bank Debit Memo are deductions made by the bank to the account of the depositor
Bank Credit Memo are additions made by the bank to the account of the depositor