BANK RECONCILIATION- is a report presented (normally at month end) to bring the balance per book and
bank at equal amounts
ADJUSTED CASH BALANCE BANK RECONCILIATION
BANK BOOK
UNADJUSTED CASH BAL : XX XX
+ DEPOSIT IN TRANSIT XX CREDIT MEMO XX
-OUTSTANDING CHECKS XX DEBIT MEMO XX
+/- ERROR X(X) X(X)
ADJUSTED CASH BALANCE XX XX
Unadjusted Cash Balance per Bank- is the ending figure shown in the cut-off bank statement
Unadjusted Cash Balance per Book- ending figure shown in the accounting record of the company
If the missing item is the UNADJUSTED CASH BALANCE – (Baliktarin mo lang)
Example :
Bank Adjusted Cash Balance +/- ERROR+OSC-DIT= UNADJUSTED BANK BALANCE
Another : Bank to Book or Book to Bank
Unadjusted Bank Balance + DIT – OSC +/- ERROR + Debit Memo – Credit Memo = UNADJUSTED BOOK
BALANCE
*Inadd yung DM kase na deduct na siya sa bank, Niless yung CM kase na add na siya sa bank.
BANK RECONCILING ITEMS
1. DEPOSIT IN TRANSIT – collections during the month by the entity but not yet deposited to the bank
2. Outstanding Checks- checks drawn and already released by the entity but not yet presented to the bank
Certified check- checks drawn by the company and already presented to the bank but not yet encashed in
the same day, once certified it should be deducted by the depositors account (should be deducted if
included in the OSC)
Stale check- checks drawn by the company but not yet presented to the bank for at least 6months from
the issue date. These checks were reverted back to cash in the balance per book (should be deducted if
included in the OSC)
BOOK RECONCILING ITEMS
1. Credit Memo – collections made by the bank directly to the depositors account but not yet recorded by
the entity
a. Notes / Interest collected
b. Proceeds of bank loan
c. Matured Time deposits
2. Debit memo – deductions made by bank directly to the depositors account but not yet recorded by the
entity
A. Bank Service Charge
B. No Sufficient Fund (NSF)/ Drawn against Insufficient Fund (DAIF)/ Drawn Against Uncollectible
Deposit(DAUD) – already recorded by the entity as cash receipts, but once deposited to the bank it
was found out that the check has no fund
C. Technically defective checks that is returned - already recorded as cash receipts by the company but
returned due to defects of the check.
D. Payments made directly by banks
HOW TO DEAL WITH ERRORS
QUESTION1 : Who committed mistake?
- If it is the BANK , then adjust it in Bank Balance
- If it is the BOOK, then adjust it in Book Balance
Question 2: What is the effect of error?
- DEDUCT the overstatement
- ADD the understatement
ADJUSTING ENTRIES – prepared on BOOK reconciling items only this is because the bank reconciling items
will be corrected by the bank
To adjust Credit Memo
Cash
Notes Receivable
Interest Income
Loans Payable
Time Deposit
To adjust Debit Memo
Expense
Loan/Notes Payable
Time Deposit
Cash
Looking for the Missing Reconciling Items
1. Deposit In Transit
DIT *beg of current mont *ending of last month x
+Book Debit (Collections recorded in the book) xx
-(Last month Credit memo – already debited to book) (x) x
Less: Bank Credit (Collections recorded in the bank) xx
-(Current Month Credit memo- already included in the bank) (x) x
ERROR X/(X)
2. OUTSTANDING CHECK
OSC *beg of current mont *ending of last month x
+Book CREDIT (Disbursement recorded in the book) xx
-(Last month DEBIT memo – already DEDUCTED to book) (x) x
Less: Bank DEBIT (Disbursement recorded in the bank) xx
-(Current Month DEBIT memo- already DEDUCTED in the bank) (x) x
X
ERROR X/(X)
X
BANK DEBIT – DECREASE BANK BALANC E
BANK CREDIT – INCREASE BANK BALANCE
BOOK DEBIT- INCREASE BOOK BALANCE
BOOK CREDIT – DECREASE BOOK BALANCE
Proof of Cash - is essentially a roll forward of each line item in a bank reconciliation from one accounting
period to the next, incorporating separate columns for cash receipts and cash disbursements.
BEGINNING RECEIPT DISBURSEMENT ENDING
UNADJUSTED XXX XXX XXX XXX
BANK BALANCE
DIT beg xx (xx) – Last month
receipt
DIT end Xx – current month xx
receipt
OSC beg (XX) (xx) – last month
disbursement
OSC end Xx –current month (XX)
disbursement
ERROR
Adjusted Balance xx xx xx xx
BEGINNING RECEIPT DISBURSEMENT ENDING
UNADJUSTED XXX XXX XXX XXX
BOOK BALANCE
CM beg xx (xx) – Last month
receipt
CM end Xx – current month xx
receipt
DM beg (XX) (xx) – last month
disbursement
DM end Xx –current month (XX)
disbursement
ERROR
Adjusted Balance xx xx xx xx
BEGINNING RECEIPT DISBURSEMENT ENDING
UNADJUSTED XXX XXX XXX XXX
BANK BALANCE
DIT beg xx (xx) – Last month
receipt
DIT end Xx – current month xx
receipt
OSC beg (XX) (xx) – last month
disbursement
OSC end Xx –current month (XX)
disbursement
ERROR
Adjusted Balance xx xx xx xx
CM beg (X)- NA- ADD NA X- this month (X) NA-ADD NA
magrereflect
CM end (X)- next month pa
magrereflect
DM beg X – NA DEDUCT X- this month
NA magrereflect
DM end (X)- next month pa X- NA DEDUCT
magrereflect NA
ERROR
UNADJUSTED XX XX XX XX
BOOK BALANCE
BANK TO BOOK
-kung napansin mo parang binaliktad lang yung signs nung sa book, ganyan din kapag book to bank naman.
1. ERROR IN CURRENT MONTH NOT YET CORRECTED - ENDING
BEGINNING RECEIPT DISBURSEMENT ENDING
RECEIPT (x) (x)
OVERSTATED
RECEIPT x x
UNDERSTATED
DISBURSEMENT (x)- magbawas dahil X- magdagdag dahil
OVERSTATED sobra ang sobra ang nabawas
disbursement -
DISBURSEMENT x- magdagdag dahil (x)- magbawasa
UNDERSTATED kulang ang dahil kulang ang
disbursement nabawas
2. ERROR IN PRIOR MONTH CORRECTED IN CURRENT MONTH
BEGINNING RECEIPT DISBURSEMENT ENDING
RECEIPT (x) - deduct (x) – the reduction is
OVERSTATED not a disbursement
RECEIPT x- add (x) – the receipt is
UNDERSTATED earned last month
DISBURSEMENT X - add (X) – the addition is
OVERSTATED not a receipt
DISBURSEMENT (x)- deduct (X)- the
UNDERSTATED disbursement is
incurred last month
3. ERROR IN CURRENT MONTH CORRECTED IN CURRENT MONTH
BEGINNING RECEIPT DISBURSEMENT ENDING
RECEIPT (x)
OVERSTATED
RECEIPT x
UNDERSTATED
DISBURSEMENT (x)
OVERSTATED
DISBURSEMENT x
UNDERSTATED
-eto diko pa sure pero parang inaapply ko yung sa 1.
