BANK RECONCILIATION

STATEMENT
FABM 2
Mr. Denver B. Beguia
 AIM
At the end of the lesson, you should be able to:
1. Define and explain the different terminologies used in preparing a bank
reconciliation statement.
2. Prepare a bank reconciliation statement using the three formats.
3. Solve problems on bank reconciliation.
 Cash in Bank

Cash
Cash Receipts
Payments
-deposited
-made through
altogether
checks
 Sources of details about Cash in Bank

 Cash in Bank ledger account of the entity

 Bank statement issued by the bank.
Sources of details about Cash in Bank

Bank Statement
Increase in entity’s cash: Cr.
Decrease in entity’s cash: Dr.

General Ledger
Increase in entity’s cash: Dr.
Decrease in entity’s cash: Cr.
 Bank Reconciliation Statement

 It is prepared by an entity to reconcile cash in bank account

balance in the entity’s books versus the balance as reported by
the bank in the bank statement.
 Bank Balance Reconciling Items
Deposits in Transit
 Cash that has been received by an entity and was recorded in
the cash in bank account balance as deposit.
 However, this deposit has been sent to the bank is not yet
processed and posted by the bank, thus not reflecting in the
bank statement.
 Bank Balance Reconciling Items
Outstanding Checks
 Checks that the company has issued and was recorded as a
credit entry in the cash in bank account.
 However, these checks were not yet presented for payment and
has not yet cleared from the bank account from which it is
drawn.
 Bank Balance Reconciling Items
Bank errors
 Erroneous debits and credits in the entity’s account.
 Erroneous debit
 Erroneous credit
 Ledger Balance Reconciling Items
Credit Memos
 Items credited by the bank account of the entity not yet
recorded by the firm in their books.
 These include notes receivable collected by the bank on
behalf of the entity and interest earned in putting their cash in
the bank.
 Ledger Balance Reconciling Items
Debit Memos
 Items charged against the company’s bank account not yet
recorded in the company’s ledger.
 These includes NSF (not sufficient funds) check which are
checks deposited but were returned by the bank because the
source has insufficient balance. It also includes bank charges.
 Ledger Balance Reconciling Items
Book errors
 Erroneous debits and credits in the entity’s account.
 Erroneous debit
 Erroneous credit
 Presentation of Bank Reconciliation
Statement

1. Adjusted Balance Method

2. Book to Bank Method
3. Bank to Book Method
 Adjusted Balance Method
Balance per Ledger/Books
Balance per Bank
+ Notes collected by the bank
+ Deposit in Transit
+ Interest earned
- Outstanding Checks
- NSF Checks
+ Erroneous Debit
- Service Charge
- Erroneous Credit
- Erroneous Debit
ADJUSTED BALANCE
+ Erroneous Credit
ADJUSTED BALANCE
 Balance per Bank
+ Deposit in Transit
- Outstanding Checks
+ Erroneous Debit
- Erroneous Credit
- Notes collected by the bank

Bank-to-Book - Interest earned

+ NSF Checks
Method + Service Charge
+ Erroneous Debit
- Erroneous Credit
BALANCE PER BOOKS
 Balance per Ledger/Books

+ Notes collected by the bank

+ Interest earned

- NSF Checks

- Service Charge

Book-to-Bank - Erroneous Debit

+ Erroneous Credit
Method - Deposit in Transit

+ Outstanding Checks

- Erroneous Debit

+ Erroneous Credit

BALANCE PER BANK

 PROBLEMS
Bank Reconciliation Statement
 Problem # 1: Sunny Company
Sunny Company maintains cash in BDO. The following information was made available for the
month of May 2022:
 The bank statement at the end of the month shows ₱10,000.
 Deposits not yet reflected in the bank statement, ₱84,000.
 Checks issued but not yet encashed and the holders already recorded as a credit in cash in
bank, ₱65,000.
 The bank made an error of debiting the account of Sunny Company which was actually a debit
for Somi Company, ₱4,000
 Problem # 1: Sunny Company
 The ledger shows a cash-in-bank balance of ₱12,000.
 Notes Receivable collected by the bank for Sunny Company amounted to ₱16,000.
 Interest earned by Sunny from keeping their cash at BDO is ₱5,000.
 BDO charged Sunny ₱1,000 service charges directly debited to their account as seen in the
bank statement.
 Sunny received a check from Jiyeon Company amounting to ₱7,000 but it was withdrawn
against insufficient funds.
 There was a bank-related transaction that erroneously credited the ledger balance of cash in
bank account amounting to ₱8,000.