BANK RECONCILIATION

INTERMEDIATE ACCOUNTING I

BANK RECONCILIATION  It is evidenced by a formal agreement

embodied in an instrument called
Certificate of Deposit.
Bank Reconciliation is a schedule prepared that  It is interest bearing.
accounts for the differences between cash balances
per book and per bank statement.
JOURNAL ENTRIES
 It is prepared only for checking
account/demand deposit. Collection & Deposit
o Prepared monthly because bank a. Books of the company
provides the depositor with the Cash xx
bank statement at the beginning A/R xx
of the following month To record the collection.
 It is prepared because of timing difference b. Books of the bank
or receipts and disbursements. Cash xx
Take Note! Company X xx
 There are three kinds of bank deposits: To record the amount deposited by the
1. Demand deposit company.
2. Savings deposit Take Note!
3. Time deposit  The bank is crediting the depositor’s
account to recognize its liability to the
Demand Deposit depositor.
 It is the current/checking o When a deposit is made,
account/commercial deposit where debtor-creditor relationship
deposits are covered by deposit slips and exists between the bank and the
where funds are withdrawable on depositor
demand by drawing checks against the  Credit means increase in the depositor’s
bank. account balance
o Current transactions are
deposited here with the Issuance of Check for Payment of A/P
purpose of using it in the a. Books of the Company
current operations A/P xx
 It is noninterest bearing. Cash xx
To record the payment of a payable.
Savings Deposit b. Books of the Bank
 The depositor is given an ATM/passbook Company X xx
upon the initial deposit. Cash xx
o Required when making deposits To record the issuance of check to the
or withdrawals payee.
 it is interest bearing.

Time Deposit Take Note!

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BANK RECONCILIATION
INTERMEDIATE ACCOUNTING I
 Debit means decrease in the depositor’s
RECONCILING ITEMS
account balance.
 Book and bank have same balances if no
errors are committed in recording. 1. Book Reconciling Items
o However, there are items on the a. Credit Memos (+)
depositor’s book which do not b. Debit Memos (-)
appear on the bank record, and c. Errors (+/-)
vice versa. 2. Bank Reconciling Items
 That is why bank a. Deposits in Transit (+)
reconciliation exists b. Outstanding Checks (-)
c. Errors (+/-)

IMPORTANT TERMS
Take Note!
 When it comes to the errors, kung sino
Deposit in Transit yung nagkamali, yun dapat yung mag-
 These are deposits already recorded in adjust.
the cash books in one period but were  The memos (debit/credit) comes from the
taken up by the bank only in the next bank, then pinapadala sa entity.
period. o To inform them about the
o Already in the bank but not yet deductions and increases in
deposited to the depositor’s their account
account  Adjusting Entries are only for book
Outstanding Checks records.
 These are checks written and released to
payees and are already recorded in the Credit Memo
cash books but are not yet presented for 1. Proceeds of a Loan
encashment or deposit to the bank. Cash xx
Certified Checks Payable xx
 These are checks that the bank already 2. Matured Time Deposit
certified as having sufficiency of funds and Cash xx
thus technically are no longer outstanding Time Deposit xx
checks. 3. Collection of Receivable
Debit Memo Cash xx
 These are charges and deductions made Receivable xx
by the bank to the account of the entity
but not yet recorded by the entity. Debit Memo
o Deductions 1. Service Charge
Credit Memo Service Charge xx
 These are collections or deposits made by Cash xx
the bank to the account of the entity but 2. Payment of Loans (Auto debit)
not yet recorded by the entity. Payable xx
o Increases Cash xx
3. NSF/DAIF Checks
Receivable xx
Cash xx

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BANK RECONCILIATION
INTERMEDIATE ACCOUNTING I
4. Technically Defective Checks
Absence of signature, mutilated checks,
conflict between words and amount.
Receivable xx
Cash xx

FORMS OF BANK RECONCILIATION

a. Adjusted Balance Method

Book Balance xx
Add: Credit Memos xx
Total xx
Less: Debit Memos (xx)
Adjusted Book Balance xx

Bank Balance xx
Add: Deposit in Transit xx
Total xx
Less: Outstanding Checks (xx)
Adjusted Bank Balance xx

b. Book to Bank Method

Book Balance xx
Add: Credit Memos xx
Outstanding Checks xx xx
Total xx
Less: Debit Memos xx
Deposit in Transit xx (xx)
Bank Balance xx

c. Bank to Book Method

Bank Balance xx
Add: Deposit in Transit xx
Debit Memos xx xx
Total xx
Less: Outstanding Checks xx
Credit Memos xx (xx)
Book Balance xx