BANK RECONCILIATION Notes

BANK RECONCILIATION_BASIC ACCOUNTING
BANK RECONCILIATION STATEMENT

It is a report that is prepared for the purpose of bringing the balances of cash in bank (a) per
records/books- set of records ng nagmamay-ari ng bank account and (b) per bank statement into agreement - record of the
bank.
Bank reconciliation are prepared to:

a. Explain the difference between the cash balance in accounting records and the cash balance
reported on the bank statement. If there is no error, timing differences lang. Kailangan i-reflect ng may-ari ng bank account yung naka-
reflect na record ng banko at i-reflect ng banko ang records nan aka-reflect sa records/books ng nagmamay-ari ng bank account.
b. Arrive at the adjusted (correct) cash in bank balance to be shown in the financial statement;
and
c. Provide information for reconciling journal entries.
Bank statement >>> is report issued by a bank that shows the deposits and withdrawals during
the period and the cumulative balance of a depositor’s bank account.
Note: When a business has more than one bank account, separate bank reconciliations are made
for each of those accounts.
Bank reconciliations are normally required only for checking accounts. Theoretically, bank
reconciliation is not required for savings accounts because no checks can be drawn from them.
However, if the balances of the savings account per books and per bank passbook do not tally,
bank reconciliation should nonetheless be prepared to account for the difference.
PRO-FORMA BANK RECONCILIATION STATEMENT

Balance per books, end >>> the cash balance in the accounting records as of the end of the
current month. (Unadjusted)
Balance per bank statement, end >>> the ending cash balance in the bank statement of the
current month. (Unadjusted)
RECONCILING ITEMS
1. RECONCILING ITEMS DUE TO TIMING DIFFERENCES:
BOOK RECONCILING ITEMS
*Credit Memos – are additions (bank credits) made by the bank to the depositor’s bank account
but not yet recorded by the depositor.
a. Collections made by the bank
b. Interest income earned by the deposited amount.
c. Proceeds from loan directly credited or added to the depositor’s bank account.
d. Unrolled-over matured time deposits transferred by the bank to the depositor’s account.
*Debit memos – are deductions (bank debits) made by the bank but not yet recorded to the
depositor’s account.
a. Bank service charge – fees to bank, interest, penalties and surcharge.
b. Not Sufficient Fund (NSF) checks or Drawn Against Insufficient Fund (DAIF) – These are
checks deposited and already recorded by the bank but subsequently returned to the depositor
because the subsequently returned to the depositor because the drawer’s fund is insufficient to
pay for the check.
c. Auto-Debits – Such as when the depositor and the bank agree that the bank will make
automatic payments of bills on behalf of the depositor.
d. Payment of loans – Which the entity (depositor) agreed to be made out directly from its bank
account.
2. RECONCILING ITEMS DUE TO ERRORS:
BOOK RECONCILING ITEMS
*Book Errors – Errors committed by the depositor (erroneous recording in the books of
account)
*Bank Errors – Errors committed by the bank.
1. RECONCILING ITEMS DUE TO TIMING DIFFERENCES:

BANK RECONCILING ITEMS
*Deposit in transit (DiT) – are deposits made but are not yet credited by the bank to the
depositor’s bank account. DiT often occur when deposits are:
mailed to the bank,
place in an overnight depository,
made through check and the check has not yet cleared, or
made after bank’s cut off.
*Outstanding checks (OC) – are checks drawn and released to payees but are not yet encashed
with the bank.
Outstanding checks (OC) excludes the following:
- Certified checks – The bank, when certifying checks automatically debits (reduces) the
depositor’s account and assumes direct liability on paying the certified checks to the payee.
Certified checks are already deducted from the account; thus, they are no longer outstanding.
- Stale checks – (not encashed by at least 6 months) Are reverted back to cash, meaning, they are
added back to the cash balance per books, and are excluded from OC.
BOOK ERRORS
BANK ERRORS
DEPOSIT IN TRANSIT
OUTSTANDING CHECKS
BANK RECONCILIATION – proof of cash

A. Dave Company prepared the following bank reconciliation on December 31:
The entity had cash on hand P500,000 and petty cash fund P50,000 on December 31.
1. What amount should be reported as cash in bank at year end?
a. P2,930,000
b. P3,095,000
c. P2,895,000
d. P3,130,000
2. What total amount of cash should be reported at year end?
a. P3,395,000
b. P3,350,000
c. P3,445,000
d. P3,380,000
B. Bonbon Company provided the following data for the month of January:
What amount should be reported as adjusted book balance on January 31?

a. P3,130,000
b. P3,500,000
c. P3,400,000
d. P2,950,000
C. In reconciling the cash balance on December 31 with that shown in the bank statement,
Sammy Corp. provided the following information:
What amount should be reported as adjusted cash in bank on December 31?
a. P4,315,000
b. P3,925,000
c. P3,075,000
d. P4,015,000
D. McQueen Inc. provided the following data pertaining to the cash transactions and bank
account for the month of May:

What amount should be reported as adjusted cash in bank?
a. P3,000,000
b. P2,910,000
c. P3,080,000
d. P2,990,000
PROOF OF CASH – O.C.

Slay Company provided the following information for October and November
What amount was reported as outstanding checks on November 30?
a. P275,000
b. P300,000
c. P315,000
d. P290,000
PROOF OF CASH
Lazy Company had the following bank reconciliation on June 30:
All reconciling items on June 30 cleared through the bank in July.

The outstanding checks totaled P600,000 and the deposit in transit amounted to P1,000,000 on
July 31.
1. What is the adjusted cash in bank on July 31?
a. P2,500,000
b. P5,400,000
c. P2,900,000
d. P5,000,000
2. What is the cash balance per book on July 31?
a. P5,400,000
b. P5,350,000
c. P5,550,000
d. P4,500,000
3. What is the amount of cash receipt per book on July 31?
a. P9,400,000
b. P9,600,000
c. P8,600,000
d. P9,800,000
4. What is the amount of cash disbursement per book on July 31?
a. P6,550,000
b. P6,700,000
c. P7,300,000
d. P6,850,000
Zoro Company had the following bank reconciliation on Mar. 31:
Data per bank statement for the month of April:

Deposits P5,480,000
Disbursements P4,970,000
All reconciliation items on Mar. 31 declared cleared through the bank in April.
Outstanding checks on Apr. 30 totaled P700,000 and there were no Deposit in transit on April 30.
What is the cash balance per book on April 30?
a. P4,820,000
b. P5,290,000
c. P5,520,000
d. P5,850,000
PROOF OF CASH – D.I.T. AND O.C.

Jamintor Company provided the following bank reconciliation on May 31:
Data for the month of June:
1. What is the amount of check outstanding on June 30?

a. P200,000
b. P150,0000
c. P100,000
d. P0
2. What is the amount of deposit in transit on June 30?
a. P400,000
b. P100,000
c. P200,000
d. P0
PROOF OF CASH
3. What amount should be reported as adjusted cash in bank on June 30?
a. P1,760,000
b. P2,200,000
c. P1,950,000
d. P2,250,000

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BANK RECONCILIATION_BASIC ACCOUNTING

BANK RECONCILIATION STATEMENT

Bank reconciliation are prepared to:

PRO-FORMA BANK RECONCILIATION STATEMENT

1. RECONCILING ITEMS DUE TO TIMING DIFFERENCES:

BANK RECONCILIATION – proof of cash

What amount should be reported as adjusted book balance on January 31?

account for the month of May:

PROOF OF CASH – O.C.

All reconciling items on June 30 cleared through the bank in July.

Zoro Company had the following bank reconciliation on Mar. 31:

Data per bank statement for the month of April:

PROOF OF CASH – D.I.T. AND O.C.

Data for the month of June:

1. What is the amount of check outstanding on June 30?

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