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Chapter 3
Bank Reconciliation

1. It is a report that is prepared for the purpose of bringing the balances of cash per records and per
bank statement into agreement.
a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
d. Bank deposit slip

2. These are deposits made but not yet credited by the bank to the depositor’s bank account.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

3. These are deductions made by the bank to the depositor’s bank account but not yet recorded by
the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

4. These are additions made by the bank to the depositor’s bank account but not yet recorded by
the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

5. These are checks drawn and released to payees but are not yet encashed with the bank.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

6. Which of the following is added to the cash balance per books when preparing a bank
reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit
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7. Which of the following is added to the cash balance per bank statement when preparing a bank
reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit

8. Which of the following represents a debit memo?

a. Collections made by the bank on behalf of the depositor.
b. Interest income earned by the deposit.
c. Loan proceeds directly credited or added by the bank to the depositor’s account.
d. Interest expense on a loan that is directly deducted from the depositor’s account.

9. Which of the following is not a debit memo?

a. Bank service charges
b. No sufficient funds checks (NSF)
c. Automatic debits representing payments of bills by the bank on behalf of the depositor
d. Direct deposits of customers to the depositor’s account

10. As an internal control, bank reconciliation statements are usually prepared

a. on a daily basis.
b. on a monthly basis.
c. annually every year-end.
d. whenever the accountant feels like it.

“Blessed are the pure in heart, for they will see God.” (Matthew 5:8)

- END –

1. Entity A is preparing its November 30, 20x1 bank reconciliation statement. The following
information was determined:
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 Cash balance per accounting books, Nov. 30, 20x1 ₱600,000

 Cash balance per bank statement, Nov. 30, 20x1 ₱860,000
 Credit memo ₱380,000
 Debit memo ₱ 60,000
 Deposits in transit ₱100,000
 Outstanding checks ₱ 40,000

Requirement: Prepare the bank reconciliation.

2. Entity A is preparing its February 28, 20x1 bank reconciliation statement. The following
information was determined:
 Cash balance per accounting books, Feb. 28, 20x1 ₱260,000
 Cash balance per bank statement, Feb. 28, 20x1 ₱205,000

When investigating the difference, the accountant determined the following:

a. A customer deposited ₱30,000 to Entity A’s bank account as payment for an account receivable.
This is not yet recorded in the books of accounts.
b. A ₱102,500 check deposited by Entity A during the month is not yet credited to Entity A’s
account.
c. A check drawn in the amount of ₱22,500 is not yet presented to the bank for payment.
d. The bank returned a check deposit amounting to ₱5,000 because of insufficiency in the funds of
the drawer. The check was received from a customer as payment for accounts receivable.

Requirements:
a. Prepare the bank reconciliation.
b. Prepare the adjusting (reconciling) entries.

“Blessed are the merciful, for they will be shown mercy.” (Matthew 5:7)

- END –
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SOLUTIONS

1.
Bal. per books, end. ₱600,000 Bal. per bank, end. ₱860,000
Add: CM 380,000 Add: DIT 100,000
Less: DM (60,000) Less: OC (40,000)
Add/Less: Book errors - Add/Less: Bank errors -
Adjusted balance ₱920,000 Adjusted balance ₱920,000

2.
Requirement (a): Bank reconciliation

Bal. per books, end. ₱260,000 Bal. per bank, end. ₱205,000
Add: CM 30,000 Add: DIT 102,500
Less: DM (5,000) Less: OC (22,500)
Add/Less: Book errors Add/Less: Bank errors
Adjusted balance ₱285,000 Adjusted balance ₱285,000

Requirement (b): Adjusting (Reconciling) entries

AJE (c) Cash 30,000

Accounts receivable 30,000
to record the collection of accounts receivable
AJE (d) Accounts receivable 5,000
Cash 5,000
to revert the NSF check back to accounts receivable
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1. Entity A is preparing its March 31, 20x1 bank reconciliation. The following information was
determined:
a. The cash balance per books is ₱280,000 while the cash balance per bank statement is ₱320,000.
b. Credit memo – ₱20,000
c. Debit memo – ₱15,000
d. Deposits in transit – ₱75,000
e. Outstanding checks – ₱25,000
f. The disbursements per books are overstated by ₱45,000.
g. The bank debits are understated by ₱40,000.

Requirement: Prepare the bank reconciliation.

2. Data concerning the cash records of Arones Company for the months of November and
December 20x1 are shown below:
November 30 December 31
Book balance 11,200 ?
Book debits 63,800
Book credits 56,400
Bank balance 30,000 40,800
Bank debits ?
Bank credits 54,600
Notes collected by bank 4,500 6,000
Bank service charge 40 200
NSF checks 1,760 2,800
Overstatement of check in payment
of salaries 3,800 2,400
Deposit in transit 12,000 22,500
Outstanding checks 19,500 35,700
Deposit of 123 Corporation erroneously
credited to ABC Co.’s account 4,800 3,600

Requirement: Prepare the proof of cash.

“So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help
you; I will uphold you with my righteous right hand.” (Isaiah 41:10)

- END –
SOLUTIONS

1.

Bal. per books, end. 280,000 Bal. per bank, end. 320,000
Add: CM 20,000 Add: DIT 75,000
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Less: DM (15,000) Less: OC (25,000)

Add/Less: Book errors: Add/Less: Bank errors:
Understatement 45,000 Overstatement (40,000)
Adjusted balance 330,000 Adjusted balance 330,000

2.
Per books:
Nov.
  30 Receipts Disbursements Dec. 31
Balance per books 11,200 63,800 56,400 18,600
Note collected by bank:
November 4,500 (4,500)
December 6,000 6,000
Bank service charges
November (40) (40)
December 200 (200)
NSF checks:
November (1,760) (1,760)
December 2,800 (2,800)
Book errors:
November 3,800 (3,800)
December (2,400) 2,400
Adjusted balances 17,700 61,500 55,200 24,000

Per bank:
Nov.
  30 Receipts Disbursements Dec. 31
Balance per bank 30,000 54,600 43,800 40,800
Deposits in transit
November 12,000 (12,000)
December 22,500 22,500
Outstanding
checks
November (19,500) (19,500)
December 35,700 (35,700)
Bank errors:
November (4,800) (4,800)
December (3,600) (3,600)
Adjusted balances 17,700 61,500 55,200 24,000