Chapter ñ lUmmary:

, A /›,/›ik rccunciliaiion sfmt,m/t/// iñ> a report that i» prepared for

tpt purpose of bringing thc• balil£lces of cash (a)
per records
» d (b) per bank stalelTtent into agrqq• ppt.

« Pro forma bank reconciliation:

Bal. per books, end. xX Bal. per bank, end. xx
Add.’ C xx Add: DIT ;cx
Less: DM (xx) Less:DC (xx)
+/-: Book errors: xx
Adjusted balance xx +/-: Bank errors: xx
xxAdjusted b«i«»‹e

• Credit ineMOS (CM) - are additions Qank nedits) made by the

bank to the depositor's bank account but not yet recorded by
the depositor, e.g., collections made by the bank on behalf of
the depositor.
• Drsii rne›<os (DM) - are deducGons Qank debits) made by
%e bank to the depositor's bank account but not yet recorded
@ the depositor, e.g., NSF checks, bank service charges.
• D OSits in transit EDIT) are deposits made but not yet
cedited by the bank to the depositor's bank account.
• Outstanding checlcs (OC) - are checks drawn and released to
payees but are not yet encashed with the bank.

PROBLEUS

PROBLEM 1: TRUE OR FALSE

1. The baitk statement shows a balanCe Of P100. & SI S +*
Aansit are 820 whfie j¿utstan$ding checks are 810. The adjusted
cash balance is P115.”
t memos are P20
2, while debit memos are P10, The adjusted cash balance is 850. "
bdan•C'. of B100. Credit memos
3- aq
TheR0 while
bank debit memos
statement shows ar
a t
P10. DeppSits in transit are P50
,.' .--.
. ’. ,
 •iiail t›i i 1st.futhi›;; cl u!i’ks iit‘e 1’ (I-°‹' ‹'‹ j * (-'° ‹' a•'lance ;j
I* 12(1,
J. I( (let' iL|JIf •i(t't,] ¿¿ ]j lviiIn nt t› IS k Ill, f DC II11‹9 cJ)tlStt?d C¿l¿\
1aill.a llce iq l'H .iitil llleru ›ire rat› tl ebit '°° ** * °lnd errors, the
ci exlil ij’it'ni‹› wt›ti1tl have boe1'l P2.
•
• I JC .1( jbl (' f:Uh bet d»‹c is P2t), the cash b*alane-e• per bai›\
st*atenci›i is P27 oiad iherc «re no dep‹›sits in traFi"** and
t'i’i’ors, the P7 tliffierence lrust be an otltstanding check.
ft. An ciality lléid inadvcrtclatly rc•corded •a cash disbursement
of l'’l0 *i.« l'1(IU. 'flae• effee-t r›f tlac error is an understatement of
the ending cash bcl›ince for f'90.
7. Irt a prt»•if ‹)l' cash, i? the June 30 cash balance is P20 while
the July cash receipts and disbursements are P10 and 8i8,
respectively, the July 31 cash balance must be 812.
b. An entity is preparing a proof of cash for November 30 anq
December 31. If the unadjusted bank statement balance on
November 30 is P30, the unadjtlstud deposits and
withdrawals during December are P.5 and P3, respectively, ie
unadjusted bank statement balance o» December 31 must be
P28.
9. The credit memos frona the previous naoilth are extended to
the cash receipts column of a proof of cash as an addition.
10. The debit memos ñ om the prev?o,pS mom are extended to
the cash disburseme•nts column of a proof of cash as a
deduction.

PROBLEM 2: POR CLASSROOM DISCUSSION

Bank reconciliation
1. If tlae b•oJance showr on a company's bank statement is less
than the coJve•ct cash balance, and nei%er the company nor the
bank hns made any errors, there must be
a. deposits credited by the bank but not yet recorded by @e
company.
b. outstanding checks.
c. bank charges not yet recorded by the company.
d. dc'ptisits in transit.
2 ;f II c• cash balance shOwia ill a company's accoun ’hug records
is lcsn than the correct balance, and neither the company
cash
nor the baiTk has made any errors, there must be
a. dD/(1Sits credited by the bank but not yet recorded by the
company.
b deposits in transit.
c.
outstanding checks.
d. bank charges not yet recorded by the company.
(Adapted)

3. The cash balance per books and per bank on June 30, 20x1 is
8100,000. The transactions in July 20x1 are summarized belcw:
a. Collections from customers totaled P500,000. This total
amount was deposited during the period. However, only
P480,000 was credited by the bank to ie entity's account
as of July 31, 20x1. The difference was due to bank cut-
off.
b. Checks drawn totaled of ’which P140,000 were
encashed dwing ie period.
c. mring the period, ie bank coflected P360,000 from
direct customer remiHances. The entity was not notified
of these collecGons of accounts receivable during the
month.
d. During the period, the bank debited the entity's account
for #40,0& representing payments for various bills. The
entity was not notified of this payment duñ ng the month.

Requirements:
a. Prepare the journal entries in the books of (1) the entity and (2)
the bank, respectively.
b. Compute for the following: (1) deposits in Sansit, (2)
ouGtanding checks, (3) credit memo; and (4) debit memo.
c. Prepare ie July 31, 20x1 bank reconciliafion.
d. Prepare the reconciling entries in the entity's bnoks.
 of
4. The books of Steve's Service, Inc. discloscil a cash balallce
P68,757 on June 30. The bank statement i3S Of June 30 showPd
a
 t?hapt<*•3

balance of P54,780. Additional irtforlTtfltlti h be

useful in reconciling the• O biJl0FiCC*S OIIOWS!
a. Check number 74b drawn for $3,00t) was uri¿inaljJ
recorded on Uae books as P4,500.
b. A customer's note dated March 25 was disc‹iunted o»
April 12. The note was dishonored on June 29 (matu,;Jy
date). The bank charged Steve's account for P14,26s,
including a protest fee of P42.
C. The deposit on June 24 was recorded on the books as
£2,895 but it was actually a deposit of 82,700.
d. Outstanding checks totaled P9,885 as of June 30.
e. There were bank service charges for June of P210 hot yet
recorded on the books.
f. Steve's account had been charged on June 26 fOF a
customer's NSF check for P1,296.
g. Steve properly deposited P600 on June 3 but it was not
recorded by the bank.
h. Receipts on June 30 for P13,425 were recorded by the bank
on July 2.
›’. A barik memo stated fat a customer's note for P4,500 and
interest of P165 had collected on June 27, and the
bank charged a P36 collection fee.

Requirement: Prepare i:I:ie bank reconciliation.

(Adapted)

5. Adcock PlasGcs Company deposits all receipt and makes all

payments by check. The following information is available
from the cash records:

MARCH 31 BANK RECONGLlATION

Balance per bank B26,746
Add: Deposits in transit 2,100
Deduct: Outstanding checks 3 8 0)
Balance per books P25,046
 ‹if Araril It

o.«.•ncL A;*ril50 >?r Bñ n£ Per Books

„„pril depi»its P27,P95 £24,355
April chC^CkS 10,784 12,889
April note collected (trotiiicliia•d 11,100 13,080
April bank service charge
April NSF ChCck Of i1 CtiStomer returned by
the bank (recorded by bank as a charge)
900 -
R«(uirzmznl»:
a. Compute for the April 30 Deposit in Yansit.
b. Compute for the April 30 Outstanding checks.
c. Prepare the April 30 bank reconciliation.
(Adapted)

6. The information below is from the books of the Seminole

Corporation on June 30:
Balance per bank staRment P11,164
Depositsin transit 1,340
Bank charges not recorded t6
Note collected by bank and not recorded on books 1,120
Outstanding checks 1,100
NSF checks - not recorded on books nor re-deposited 160

Requiretiieni: Assuming no errors were made, compute for the cash

balance per books on June before any reconciliation
30 adjustments.

Proof of cash
7. The accountant for ie Goshen Company assembled the
following data:

CilShaccount balance
B15,822
Bagj; S ca ement balance
t07,082 137,817
DepoS1tS11› transit
8,20t t2,Rd0
 136 Chapter 3

Outstanding checks 27,718 30,lj2

Bank service char$e 72 60
Customer's check deposited July 10, re turne d
by bank on July 16 marked NSF, and
re-deposited immediately; no entry made in
books for return or redeposit 8,2S0
Collection by bank of company's notes
receivable 71,815 80,900

The bank statements and the company's cash records shOW thesg
totals:
Disbursements in July per bank statement B2\8,373
Cash receipts in July per Coshen's books 236,452
Checks 't'riHen in July per Goshen's books 212,529
Receipts in July per bank statement 249,t08

flequiremeitl: Prepare a proof of cash.

PROBLEM 3: EXERCISES
1. In preparing its bank reconciliation at December 31, 20x1, Sun
Co. has available the foPowing data:
Balance per bank statement, 38,075
12/31/x1 Deposit in transit, 12/31/x1 5,200
Outstanding checks, 12/31/x1 6,750
Amount erroneously credited by bank to Sun's
account, 12/28/x1 4@
Bank service charges for December y5

Sun's adjusted cash in bank balance at December 31, 20x1

is
(AICPA)

2. In prepqring its August 31, 20x3 bank reconciliation, Morning

Co. has made available the folloWing informalion:
Balance per bank statement, 8/31/x3 18,0*0
De•posJt in transit, S/31/x3 3,jj\I
 ppfue^ •f customer's check for insufficient funds, 8/31/x3 60O
t;«tstandil1g checks, 8/31/x3 2,7D
B•»k »€fvice charges for AuguSt

Wh t1 lS t},c correct Cash balance If MOrfling On Auguet 31, 20x3?

(AICPA)

3. I\'ashing Co. had the following bank reconciliation at March

31, 20x1:
Balance per bank statement, 3/31/x1 46,500
A dd depos i t in transit
S6,800
Less outstanding checks 12,600
Balance per books, 3/31/x1 44,200

Data per bank for the month of April 20x1:

Deposits.....................,.., ,. ,..........................,.5g,qpg
Disbursements .................,...............................49,700

All reconciling items at March 31, 20x1 cleared the bank in April.
Outstanding checks at April 30, 20x1 totaled $7,000. There were no
deposits in transit at April 30, 20x1. What is %e cash balance per
(b l ksJat April 30, 20x1? / '’ ' “ "
A
C i ’’- ” “
Ramos Company had the following bank reconc t on at
March 31:
Balance per bank statement, 3/31 ........................ £ 93,000
Add: Deposit in transit ....................... - 20,600
#113,600
Less: Outstanding checks ............:...-------- ----- 25\ ,_@_)20
Balance per books, 3/31 .....,................-----------

Data per bank statement for %e month of April follow:

JJeposits ,........,.....,..,....................... -.- P116,800
Disbursements ..,......................- - -- 99,400
 138 Chapter3

All reconciliation items at March 31 cleared through the bariy ;g

April. Outstanding checks at April 30 totaled I*1S,900. What is J);q
amount of cash disbursements per books in April?

5. The Eric Manufacturing Company received its bank statement

for the month ending May 31. The bank statement indicates ,
balance of P32,400. The cash account as of the close of business
on May 31 has a balance of P8,350. In reconciling the balanced,
the following items were discovered:
(a) Collection by bank of note for P1,500 less collection fees o;
P250.
@) Deposits in transit, P5J,000.
(c) The bank charged the depositor F800 for overdrahs.
(d) Checks outstanding on May 31, P79,100.
(e) A check issued to Scott Corp. for 84,500 was not recorded in
Eric Company's books. The check cleared the bank in May.

How much is the adjusted balance of cash?

6. Information on ABC Co. is shown below:

Book balance i32,200 180,000

. Book debits (receipts) 60,000
Book credits (disbursements) y
Bank balance 100,600 169,000
Bank debits (disbursements) 20,600
Bank credits (receipts) y
Notes '£§llected by bank jo.ooa 35.000
Debit memos -— «- ' ” 7,800 8,900
«•-:›› '•-'
Understatement of book receipts - 2,gQg
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900
Requirenietil: Prepare a prooi of cash.
 139

The Accountant for the DEC Co. assembled the following data:

Book bdli2/ 400,000 540,QXI

Book debits j gg,ggg
Book credits
Box balance 280,000
Bank debits
Bank credits 190,000
Credit mEITlOS 3d,Q€ 23,tXO
Bank charges 10,000 16,000
Deposit in transit td9,000 136,000
Outstanding checks 23,000 30,000

AdJitional information:
a. Disbursements in April of P45,000 were recorded as P54,000.
b. Deposit in April amounting to P10,000 was erroneously
credited by the bank to another company's account.

Requirement: Prepare a proof of cash.

8. Information on ABC Co. is shown below:

31-Jan 28-Feb
Book balance - 264,403 360,000
Book debits 120,000
Book credits 24,400
Bank balance 201,200 370,820
Bank debits , \„,; 17,320
Bank credits 186,940
Credit memos 30,000 52,500
,
15,600 10,680
Bank charges
Understatementof book receipts 4,000
2,800
Overstatement of book receipts U—‘
95,040 43,800
Depositin transit
13,440 15,600
Otttstanding checks

*quireniyuf: Prepare a proof of cash.

9. lnf‹armation on Yano Cc›. i.SShown belts :

lJ‹i‹›k balance 3S2,3fJ(J

llc›‹ak debits
Dia‹›k credits
l3ank balance
Dank debits
Dnnk credits
t?redit memos
Bank charges
Deposit in transit
Outstanding checks
 35,qyp
36o,360 653,7yj
108,(gp
39p,@
74,200 262,gQj
2,000 6,gp
169,000 1b,qp
23,000 39,gp
Book balance 396,600
Book debits
180,0tN
Book credits
Bank balance 280,900
Bank debits
Bank Pedits
191,150
Credit memos 36,000
Debit memos 10,920
Deposit in transit
46,780 I3l,4J
Outstanding checks
28,00g
Additional iii/pgppp¿pp;
 p j-},p „titstanding checks ip March inc
lude cerhfied rhecks ot
2s,v0l›. These were certifieQ i Marc
$fly,yc‹»t Sin**Uifirch
April. of P h but were prmentcd for
Collerti*^ I i4,0 were recordedas P41,oou. -*3 /
. cnecksd‹awn in April amu12Fl§}flg P12,000clewed the bank
for b2J,000. lnvesti gation shows %at the Comp lfly comm;tt,g}
the error
» Deposit in March amounting to P100 was erroneously
cred›teh by the bank as P10,000.-‘

prJ«irr»‹sf: Prepare a proofof cash.

PROBLEM 4: CLASSROOM ACTIVNIES

ACTIVITY SI: BANK RECONCILIATION

INSTItUCTIONS:
1. Find a study partner.
2. Imagine that you and your study partner are accountants. One
of you is the accountant of ABC Co. and the other one is the
accountant for PIGGY Bank.
3. Answer the requirement below.

Requirement (A): Record the transactions below in yow respective

company's books.

Tratisactions during the period:

a.
ABC Co. opened an account with PIGGY Bank for an initial
' deposital P1,000,iD0,
b, ABC Co. draws checks amoun ’bng to P254,32I.
C• PIGGY Bank encashes ABC's checks amounting to P220,320.
d. PIGGY Bank receives collections kOm ABC's customers
a'*Ounting to 82,460,660.

e. A C Co. coPects P1,592,0I2 Jt,g; ‹;usfomers and deposits the

CollectioR with PIC6Y Bank. However, ABC CJ-
 142

inappropriately records the Collection and deposit „

P3,952,‹iJ2. "the bank rec:ards the deposit at the coppq
amt›ur.t.
f. A P25,000 customer check lncluded in the collections p (
ab‹›vc is dishonored due to insufficiency of funds. ABC C„o,
not notified rrf the dishonor.
g. I'IGGY Bank pays utility bills of P1,602 direc5y from qgq
Co.’s account.
h. ABC Co. deposits a P40,000check at the end of the period. the
check clears the bank only in the next period.

Requirement Q): Determine the difference between the reciprocal

accounts as of the end of the period.
Requirement ICI: Prepare the bank reconciliation.
Requiremetif @): Prepare %e adjusting (reconciling) entry/entrie9.

ACTIVITY #2: BANK RECONCRIATION

ABC Co. uses the imprest system. The following are excerpts hon
ABC*s ”Cash in bank — Baboy Bank” subsidiary ledger and from
the November bank statement.

Lxcerpt fiom subsidkry ledger,-

Dole C£eck No. Debifs | Credits
10.00.8
NV.4 0339
7J4 27,000 8
N‹n›. J2 135
/'/Pv.7J Cosh 16,000.& 30,@0.0
J36 8,000.00 22,006.B
Noo.11 254 52,000.& 74,@0.â
0784 19,&0.& 93,000
N‹m. 29 J37 85,400G
No». 30 d846 23,H0.& 108,900
144,500.00 | 45,600.00
 143

$$I1p St¿tement
rid:-‹ t pvrrcd: NoV-I, 20x1 t,j pjgy ?0, 2I?xi
CJ/rck N p Debi#s

ñ 3?9
0389 <,xo
.****-*IO J22,QQ,jgl

984
J2s,QO.IXI J58,0D0.D0 1H,000.
33,000. 17s,gjg,pp
8,000.00 194,000.00
2J4
25,0&,00
0784
19,000,00
0784(WSf) yg,ggq.gq
fOMJ 2,000.00
7,600.00
165,40B 00

pequirement: Prepare ie November bartk reconcGiation. Assume

any error is commited by ABC Co.

PROBEEM’5: MULTIPLE CHOICE - THEORY

I. Which ol the lollowUig may be to compute for the
adjusted balance of cash?
a. Balance per books + Credit mémo &bit memo
Understatement of cash collections
b. Balance per books + Credit memo Debit memo +
Dverstatementof cash co£ections
*- Balmce per books + Credit memo — Debit memo +
Dveretatement of cash disbwsements
d. Balance per books + Credit memo &bit memo -
Overstatementof cash disbursements

ot the foPowing is used to compute for %e adjusted

b8lance Of ca9ht
 a. Balanceper bank StfltCW$ J)t/i›sits in tran¿jJ
Outstanding checks - Erronc‹›tis i-reclit t‹a the accppp/
made by the bank
b. Balance per bank statement + Deposits ir tran;j¿
Outstanding checks • Erroneous credit ft› thc• aCqpt,q
made by the bank
c. Balance per bank statement + De•posits in transit .
Outstanding checks - Erroneous debit to the account maqt
by Ge bank
d. Balance per bank statement + Deposits in transit -
Outstanding checks, net of certified checks - ErronenS
credit to the account made by the bank

3. Which of the following reconciliation items requires a joumd

entry in the books of ABC Co.?
a. Amortization of loan of XYZ, Inc. erroneously credited by
%e bank to ABC Co.’s account
b. NSF check remmed by bank and re-deposited by ABC Co,
during the period and appropriately cleared ie bank in
the same period
c. Cash deposits made but were not yet credited to ABC
Co.’s account as of cut-off date
d, Customer payments directly remitted to the bank

4. When preparing a proof of cash, a credit memo from ie

previous month is
extended to the book receipts column as an a
a. ddition.
extetided to the bank receJpts column as Yn
b. addition.
c. extended to the book receipts column as a de
duction,
d. Plot eXtended in any of the book colllmn .
s

PROBLEM 6: MULTIPLE CHOICE - CO

MPUTATIONAL
1. If the month-end bank st:i'tement
outstandinQ ChOCkS are
a balance of P28,
a £i2,0 , deposit of Ps,oo0 war *
trarisit at moix@ end, end a c
heck fofi P5f)0 was erronco°"
 ,;},jrped bi the bank
«gainst the lhRCorrect
the b ank ac c ou nt at m »ih end is balanc, ;„
q éI9,S00-
C. Al.2,50p,
d. B35,500.

fOt the m•»ih »f

zo04, $regg, Inc. has available ie ApriJ
a i3
° lowing ig{O•» b
Bal ce per bank statement, 4/3o/04
suiscr k returned with 4/30/04 bany s,i3fgg,efl¿
peposi s in transit, 4/H/04
4,000
g,;ptgyding checks, 4/30/04
5,20D
Ba›i servlce charges for April 20

What should be the correct baIan& of cash at April 30,

2004?
a. P29,370 c. rz8,490
b. I•28,940 d. PB,470
tndapted)

3.
Stiner, Inc.’s checkbook balance off December 31, 2004 waS
P27,200. In addition, held the following items in its sa/e
on December 31.
(1) A check lot P450 from Peters, Inc. recei.ved December H,
2004, which was not included in the checkbook balance.
(2) An NSF check from Garner Company in the amount of
P200 that had been deposited at the bank, but was
returned for lack of sufficient funds on December 19. The
check was to be redeposited on January 3, 2005. The
original deposit has been included in the Decem@r 31
checkbook balance.
13) COlfl and currency on hand amounted to Pl,450.

the p,p@r amount to A reported on Stiner's balance sheet for

'dsh at Dece+ber 31, 2004 is
F27,50p- b‘ R6,9s0.
c. 828,400.
d.
P27,950.
 146

4. The cash account shows a balance of ›aa,000

reccnciliatiun. The bank statcmc°nt does nut ›ncJude a dep
•t
fif 82,300 made on the last day of the mo»h. :
statement shows a collection by the bznk of
Customer's check for P220 was returned beCause it >» NSr.
cH«torner's check tar P4D was recorded on the books •
and a check wñtten for f79 was recorded as f97. The
balance in the cash account was ^ ney
a. c. P38,g28.
P3g,612. b, d. P40,948.
P38,648.

May 31, 2004 bank reconciliation, D

ogg Co,
'- In preparing its
has the following infomation availab
le:
latancepe bank stateme
nt, 5/31/04
deposit ¿g *^••‹*. */Jt/04 P27,0gg
R8tanding @lks,5JI/04 5,4s
° e C° Wted by bank in May 4,9gp
The correct pgj=«ofc
dBh i2(May 3i,
2 is
b. P26,2S0. c. 827,S&..
!apted)
d. P3g.750.

prepajJ2lg ip qp
Co . has bQ
ava›IabJ &•! 31. reconcil;pgt,
200§
fl Cloud
e the toyppz'
"'8 nfoTmation:
ance j*erba% st
atetg¿y•, s/3:/«
*” !** ”^^*’• 8/3I/@ F25,650
°°S mner'S checkJp, JggpjyJ ppg
'*"'>*tg checks,8/31/¿Ig
ce
•*• g«s forAlIg„,
750
ieotg
by nk
2,tIO
 /\ Ct C Sh
,j›y,q,iJ(JI). ba1af1ce is
*. P26,100.
d. P26,500.

hc3d ML fCill wing b

ank reccnciliafjp
r at Mar,;¿ 3j,

g l„i,cc per bank state***en , 3/3i/04

g\ J;J.' Dcpos'it in ti'ansit P37,200
0j_,j@
¿y,s, Outsrziading checks 47,500
Balance per books, 3/3lJpq 23_@@0

Dat.aper bank for the month of April 2004 follow:

Deposits
Disbursements P42,700 49,?
00

All reconciling items at March 31, 2004 cleared the bank in April.
Ckitstanding checka at April 30, 2004 totaled P5,0&. There were
no deposiis in Nznsil zt April 30, 2004.What is the cash balance
per books at April 30, 2004?
a. P25,200 c. P30r200
b. 827,500 d. P35,500
(Adapted)

8. Assume the following iscts for Kurt Company: The month-

end bank sfatement shows a balance of P40,000; outstanding
cheeks total #2,000; a deposit of #8,000 is in transit at
month- end; and a check ior P400 was erroneously charged
against the account by the bank. What is the correct cash
balance at the end of ie month?
a. P33, c. 845,600
d. P4h,400
adapt)

^ preparing the bank reconciliation of

° ***<th of JuJy, thr› following infornati°"' '*
Ia| Ce Pi4,(I'5
°" ’er bank st.att-mt'›it, 7/31
Deposits in transit, 7/31
9.37;
Ckitstanding chee-ks, 7/31
8,gy$
Deposit erroneously recorded by bank to Crews
375
account, 7/18
Bank service charges for July

What is the corre% cash balance at July 31?

a. P52,875 c. f•54,450
b. P54,375 d. P54,825
(Adaptecl)

10. The August 31 bank statement of Kelvin Inc. showed a balant,

of £113,000. Deducted in arriving at this amount w£tS il
customer's i’5SF check for P2,400 that had been returned,
Kelvin had received no prior notice concerning this check, jq
addition to the bank statement, other records showed there
were deposits in transit totaling P17,?00 and that outstand»g
checks totaled P10,800. What is tlle cash balance per booky Alt
August 31 (prior to adjustments)?
a. P121,800 c. P1I7,0H
b. P119,400 d. P115,400
(Adapted)