BANK

RECONCILIATION
SCOPE
Preparation of the bank reconciliation statements
for “Cash in Bank – Local Currency, Current
accounts”.

Preparation of the proposed adjusting entries.

DEFINITION OF TERMS
Bank Reconciliation – settlement of differences
contained in the bank statement and the cash account in
the agency’s/entity’s books of accounts.

Bank Statement – reflects the transactions in the

agency’s/entity’s bank account for a period such as
deposits made to the account as well as checks/ADAs
drawn on the account, bank charges, returned items, etc.
Deposits-in-Transit – are amounts of agency
or entity deposits in the bank but which are yet
to be recorded by the bank until the next period.
These usually pertain to late deposits in the last
day of business for a period.

Outstanding Checks – checks the agency/

entity has issued and recognized but which
have not been presented to the bank for
payment.
Credit Memorandum – document issued by
the bank informing an increase in the agency’s/
entity’s account, such as previous bank debit
errors and collection directly deposited to the
agency’s/entity’s bank.

Unrecorded Deposits – are collections of the

agency/entity which are directly deposited by
the debtor/client to the bank account of the
agency/entity but remain unrecorded by the
agency/entity as at the period under
reconciliation.
Cancelled Check/ADA – checks/ADAs issued
and chargeable to the agency bank account
but was later voided due to expiration of validity,
and other valid reasons.

Returned Check – a check returned by the

bank due to errors or deficiencies in the
maker’s or agency’s/entity’s account.
Debit Memorandum – document issued by the
bank informing a decrease in the account, such
as previous bank credit errors or service charges
and fees.

Bank Charges – charges imposed by the bank

for various services rendered excluding interest
charges. This also includes cost of checkbooks,
penalties and surcharges on overdrafts.
Notice of Cash Allocation – authority issued by
the DBM to central, regional and provincial offices
and operating units to cover the cash
requirements of the agency/entity.

Lapsed NCAs – NCAs which are no longer valid

or its validity has expired but remain unadjusted
by the bank or the agency/entity.
OBJECTIVES

a. check correctness of both the bank’s and agency’s/

entity’s records
b. serve as a deterrent to fraud
c. enable the agency/entity or bank to take up charges or
credits recognized by the bank or agency/entity but not
yet known to the agency/entity or bank
METHOD OF BANK RECONCILIATION

 Preparation of the Bank Reconciliation Statement

 Recognition of Adjustments
 Reporting
• Original – COA Auditor (with all the supporting documents
and JEVs)
• Copy 2 – Head of Agency/Entity
• Copy 3 – Accounting Division/Unit file
• Copy 4 – Bank, if necessary
Procedures for the Preparation of the Bank
Reconciliation Statement
1. Secures/Gathers the monthly Balance Sheet, General Ledger and
Subsidiary Ledgers of “Cash in Bank” accounts and previous
month’s Bank Reconciliation Statement.

2. Ensures that the unadjusted balance per book and balance per
bank in the previous month’s Bank Reconciliation Statement are the
current month’s beginning book and bank balances, respectively. If
not the same, determines the cause of the difference and effects
the appropriate adjustments, if necessary.
3. Reviews the previous month’s Bank Reconciliation
Statement to determine reconciling items needing
adjustments by the agency/entity which remain
unadjusted. Lists or marks the previous months’
unadjusted items for inclusion in the current month’s
reconciling items.

4. Compares the deposits per book with those reflected in

the Bank Statement.

5. Compares the checks issued per book with those

negotiated as reflected in the Bank Statement.
BANK RECONCILING ITEMS
6. Adds to the unadjusted balance per bank, the following:
a. deposit-in-transit
b. errors discovered in the Bank Statement that und
erstates the bank balance.

7. Subtracts from the unadjusted balance per bank, the

following:
a. outstanding checks
b. errors in the Bank Statement which overstates the bank bala
nce.

8. Calculates the adjusted balance per bank

BOOK RECONCILITING ITEMS
9. Adds to the balance of the “Cash in Bank” account per
General Ledger:
a. deposits per Bank Statement which were not yet
recorded in the books
b. cancelled checks
c. errors discovered in the agency’s records that
understates the book balance

10. Subtracts from the balance of the “Cash in Bank”

account per General Ledger:
a. returned check deposits
b. errors in the agency’s records which overstate the cash
balance
c. bank charges
9.c. Example of error
which understate
the book balance
10.b. Example of error
which overstate
the book balance
11. Calculates the adjusted balance per books.

12. Prepares the Bank Reconciliation Statement in

accordance with the format shown as Appendix 81.

13. The senior bookkeeper prepares Journal Entry Vouchers

to record the necessary adju
stments affecting the balance per books.
15. The senior bookkeeper records the adjustments in the
General Journal based on the approved Journal Entry
Vouchers.

16. Submits the BRS to the following:

a. Original – COA Auditor (with all the supporting
documents and Journal Entry Vouchers)
b. Copy 2 – Head of Agency/Entity
c. Copy 3 – Accounting Division/Unit file
d. Copy 4 – Bank, if necessary
Thank you for
listening. 