Republic of the Philippines

Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

LECTURE in FUNDAMENTALS OF ABM 2

2nd Quarter - Week 3-5 Day 1- 4 (Bank Reconciliation Statement; nature and reconciling items)

WHAT IS A BANK STATEMENT?

A bank statement is a summary of all transactions an account holder or entity had in the bank during a specific
period. A typical bank statement will show you all deposits and withdrawals in the account.

Cash-in-bank

Cash receipts > deposited altogether

Cash payments > made through checks

Sources of details about cash-in-bank

 Cash-in-bank ledger account of the entity

 Bank statement issued by the bank

Bank Statement
> increase in entity’s cash > credit
> decrease in entity’s cash > debit

Ledger
> increase in cash > debit
> decrease in cash > credit

A bank reconciliation statement is prepared by an entity to reconcile the cash-in-bank account balance in the
entity’s book versus the balance as reported by the bank in the bank statement.

Bank balance reconciling items

Deposit in transit (add)

Cash that has been received by an entity and was recorded in the cash-in-bank account balance as a deposit.
However, this deposit that has been sent to the bank is not yet processed and posted by the bank, thus not
reflecting in the bank statement.
Outstanding checks
(deduct)

Checks that the company has issued and was recorded as a credit entry in the entity’s cash-in-bank account.
However, these checks were not yet presented for the payment and has not yet cleared from the bank account
from which it is drawn.
Outstanding checks / (add or deduct)

Erroneous debits and credits by the bank in the entity’s account.

Ledger balance reconciling items

Credit memos

Items credited by the bank to the bank account of the entity not yet recorded by the firm in their books.
These include notes receivable collected by the bank in behalf of the entity and interest earned in putting their
cash in the bank.
 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Debit memos

Items charged against the company’s bank account not yet recorded in the company’s ledger. These
includes NSF (not sufficient funds) check which are check deposited but were returned by the bank because the
source account has insufficient balance. It also includes bank service charges.

Book errors

Erroneous debits and credits of cash in the entity’s ledger.

Adjusted balance method

Bank-to-book method
 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Book-to-bank balance

Problem 1

Sunny Company maintains cash in SNSD Bank. The following information was made available for the month
of May 2020.

 The bank statement at the end of the month shows P10,000.

 Deposits not yet reflected in the bank statement, P84,000.
 Checks issued but not yet encashed but the holders that are already recorded as credit to the cash-in-bank,
P65,000.
 The bank made an error o debiting the account of Sunny Company which was actually a debit for Somi
Company, P4,000.
 The ledger shows a cash-in-bank balace of P12,000.
 Notes receivable collected by the bank for Sunny amounted to P16,000.
 Interest earned by Sunny from keeping their cash a SNSD Bank is P5,000.
 SNSD bank charge Sunny P1,000 service charge directly debited to their account seen in the bank
statement.
 Sunny received a check from Jiyeon Company amounting to P7,000 but it was drawn against insuficient
funds.
 There was a bank-related transaction that erroneously credited the ledger balance of cash-in-bank account
amounting to P8,000.

Prepare a BANK RECONCILIATION STATEMENT using the three methods.

 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Answer:

Adjusted balance method

Transactions that were not reflected in the books of the company should be journalized to adjust to correct
balance of cash. Adjusting entries should be prepared.
 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Bank -to-book method

Problem 2:

Given is Bank statement and Ledger of the Cash-in-bank. Prepare the bank reconciliation statement using the
adjusted balance method.

Bank of the Islands- Apathy Company (Account 100678988781)

Date Check No. Withdrawal Deposits Balance

Dec 2 100,000.00 100,000.00
Dec 18 104 10,000.00 90,000.00
Dec 20 101 5,000.00 85,000.00
Dec 22 106 25,000.00 60,000.00
Dec 27 50,000.00 110,000.00
Dec 29 10,000.00 120,000.00
Dec 29 103 40,000.00 80,000.00
Dec 29 CM 30,000.00 110,000.00
Dec 31 SC-DM 2,000.00 108,000.00
 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Cash-in-bank (Bank of the Islands 100678988781)

DEC 1 DEPOSIT 100,000.00 DEC 04 CHK 101 5,000.00
DEC 21 DEPOSIT 50,000.00 DEC 06 CHK 102 15,000.00
DEC 27 DEPOSIT 10,000.00 DEC 08 CHK 103 40,000.00
DEC 31 DEPOSIT 80,000.00 DEC 08 CHK 104 10,000.00
DEC 10 CHK 105 30,000.00
DEC 14 CHK 106 25,000.00
DEC 28 CHK 107 50,000.00

240,000.00 175,000.00
175,000.00
Bal. 65,000.00

Answer:
 Republic of the Philippines
Department of Education Region III – Central Luzon SCHOOLS DIVISION OF CITY OF BALANGA
BATAAN NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL
City of Balanga, Bataan

Reconciling items for Bank balance:

Deposits in transit - Deposit Dec 31, P80, 000, unrefleted to the bank statement since it is
deposited at the end of the period.

Outstanding checks, checks unpresented to the bank and also not reflected in the
statement.
Chk# 102 P 15,000
Chk# 105 30,000
Chk# 107 50,000
Total P 95,000

Reconciling items for Book balance:

Credit memos - reflected in the bank statement Dec. 29, P30, 000 was not recorded to the
book.

Debit memos - bank service charge reflected in the bank statement Dec 31, P2,000.