(Intermediate Accounting 1A)

LECTURE AID

2020

ZEUS VERNON B. MILLAN

Chapter 3 BANK RECONCILIATION

Learning Objectives
• Define cash and identify the items that can be
included in the “Cash and Cash Equivalents”
classification.
• Understand the accounting for petty cash
funds and cash shortages/overages.
• Understand the basic internal controls for
cash.
• Prepare a bank reconciliation.
• Prepare a proof of cash.
INTERMEDIATE ACCTG 1A (by: MILL
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Bank reconciliation

Balance per books, end. xx Bal. per bank statement, end. xx

Add: Credit memos (CM) xx Add: Deposits in transit (DIT) xx
Less: Debit memos (DM) (xx) Less: Outstanding checks (OC) (xx)
Add/Less: Book errors xx Add/Less: Bank errors xx
Adjusted balance xx Adjusted balance xx

INTERMEDIATE ACCTG 1A (by: MILL

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Proof of cash - Per books
Nov. 30 Receipts Disbursements Dec. 31
Per books xx xx
CM
November xx (xx)
December xx xx
DM
November (xx) (xx)
December xx (xx)
Book errors:
November
December
Adjusted balances xx xx xx xx

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 General guidelines
The proof of cash is similar to a T-account.
PROOF OF CASH T – ACCOUNT

Nov. 30 + Receipts = Disbursements + Dec. 31

Per books 60 + 30 = 20 + 70
ADD: CM
November xx xx
December xx xx
LESS: DM Cash in bank
November xx xx
December xx xx
Nov. 30 60
Book errors: Receipts 30 20 Disbursements
November 70 Dec. 31
December
Adjusted bal. xx + xx = xx + xx
INTERMEDIATE ACCTG 1A (by: MILL
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General guidelines:
The “Nov. 30” and “Dec. 31” columns follow the regular
bank reconciliation format.

Nov. 30 Receipts Disbursements Dec. 31

Per books 60 xx xx 70
ADD: CM
November 25 xx
December xx 35
LESS: DM
November (65) xx
December xx (95)
Book errors:
November
December
Adjusted bal. 20 xx xx 10
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General guidelines:
The “Receipts” and “Disbursements” columns pertain to the
current month only - in this illustration, the month of December.
Nov. 30 Receipts Disbursements Dec. 31
Per books xx xx xx xx
ADD: CM
November xx xx
December xx xx
LESS: DM
November xx xx
December xx xx
Book errors:
November
December
Adjusted bal. xx xx xx xx
INTERMEDIATE ACCTG 1A (by: MILL
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 General guidelines:
CREDIT MEMO: LAST MONTH (November)
• The November credit memo is a collection last month. However,
it is only recorded this month (i.e., December).
• Therefore, it is deducted from the “Receipts” column because
only the receipts in December should be included in this column.
Nov. 30 + Receipts = Disbursements + Dec. 31
Per books 60 + 30 = 20 + 70
ADD: CM Notice that
EQUILIBRIUM
November 25 + (25) = + is maintained.
December xx xx
LESS: DM
November xx xx
December xx xx
Book errors:
November
December
Adjusted bal. xx + xx = xx + xx
INTERMEDIATE ACCTG 1A (by: MILL
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General guidelines:
CREDIT MEMO: THIS MONTH (December)
• The December credit memo is a collection this month. However,
it is not yet recorded this month (it will only be recorded next
month).
• Therefore, it is added in the “Receipts” column because it is an
unrecorded receipt in December.
Nov. 30 + Receipts = Disbursements + Dec. 31
Per books 60 + 30 = 20 + 70
ADD: CM
November 25 + (25) =
December + 35 = + 35
LESS: DM
November xx xx
December xx xx
Book errors:
November
December
Adjusted bal. xx + INTERMEDIATE
xx =
ACCTG 1A (by:xx
MILL + xx
AN)
General guidelines:
• The proof of cash is completed as follows:

Nov. 30 Receipts Disbursements Dec. 31

Per books 60 30 20 70
ADD: CM
November 25 (25)
December 35 35
LESS: DM
November (65) (65)
December 95 (95)
Book errors:
November
December
Adjusted bal. 20 40 50 10

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 APPLICATION OF CONCEPTS

PROBLEM 6: FOR CLASSROOM DISCUSSION

INTERMEDIATE ACCTG 1A (by: MILLAN)

 OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

INTERMEDIATE ACCTG 1A (by: MILLAN)

 END
INTERMEDIATE ACCTG 1A (by: MILLAN)