INTERMEDIATE ACCOUNTING 1

BANK RECONCILIATION
Reminders in preparing bank reconciliation statement:
1. Always write the name/header of the report you are preparing.
2. Look for the unadjusted balances (books and bank) from the given data. There will be
times when you would have to compute for them, so you should know how to distinguish
one from the other; which among the data will give or lead you to the book and bank
unadjusted balances.
3. Recall the reconciling items, and where you should properly extend them, whether to
the books or to the bank.
4. Deposit in Transit - compare the book receipts (Dr side of the ledger or t-account) with
the bank credits (Cr side of the bank statement; sometimes the column heading used is
"Deposits"). If they are recorded or reflected in the ledger or t-account but they cannot be
located or traced in the bank statement, then they are Deposit in Transit.
5. Outstanding Checks - compare the book disbursements (Cr side of the ledger or t-
account) with the bank debits (Dr side of the bank statement; sometimes the column
heading used is "Withdrawals"). If they are recorded or reflected in the ledger or t-account
but they cannot be located or traced in the bank statement, then they are Outstanding
Checks. Make sure to write the check number as reference.
6. Errors - analyze carefully who committed the error, whether the company (books) or the
bank. Analyze further the effect of the error, whether the error understates or overstates
the book or bank balance.
7. Bank CM - compare the bank credits (Cr side of the bank statement; sometimes the
column heading is "Deposits") with the book receipts (Dr side of the ledger or t-account). If
they are recorded or reflected in the bank statement but cannot be located or traced in the
ledger or t-account, then they are Bank CM.
8. Bank DM - compare the bank debits (Dr side of the bank statement, sometimes the
column heading is "Withdrawals") with the cash disbursements (Cr side of the ledger or
the t-account). If they are recorded or reflected in the bank statement but cannot be
located or traced in the ledger or t-account, then they are Bank DM.
9. Adjusting Entries - only reconciling items of the books are adjusted. If the reconciling
item is an addition to the unadjusted balance, then your adjusting entry should have a
debit to Cash in Bank and a credit to an appropriate account title. If the reconciling item is
a deduction from the unadjusted balance, then your adjusting entry should have a credit to
Cash in Bank and a debit to an appropriate account title. Remember, "NSF Check(s)” is
not an account title.