Review Module 2 Bank Reconcilation

3 Types of Bank Deposits Demand deposit checking account where funds are withdrawal by means of checks. Savings deposit account where a passbook is required in making deposits and withdrawals Time deposit interest-bearing savings account evidenced by a certificate of deposit o Maybe pre-terminated or withdrawn on demand, or after a certain period of time agreed upon. Bank reconciliation statement which brings agreement the cash balance per book and per bank Bank statement monthly report of bank to the depositor showing the cash balance per bank, deposits acknowledged, checks paid, and other charges and credits to the company. Reconciling items (pro-forma for adjusted balance method) Balance per book Credit memos Notes collected by bank Proceeds of bank loan Matured time deposits Debit memos NSF checks Defective checks Service charges Reduction of loan Book errors Adjusted balance Balance per bank Deposit in transit Collections forwarded to bank Collections on hand + =

P.M.G. Clamor August 24, 2011

Collections forwarded to bank Collections on hand Outstanding checks Checks not presented for payment Certified checks Bank errors Adjusted balance Credit memos Notes collected by bank Proceeds of bank loan Matured time deposits Debit memos NSF checks Defective checks Service charges Reduction of loan Book errors Balance per book

+ = -

+ =

+ =

Outstanding checks Checks not presented for payment Certified checks Bank errors Adjusted balance

Reconciling items (pro-forma for book to bank balance method) Balance per book Credit memos Notes collected by bank Proceeds of bank loan Matured time deposits Debit memos NSF checks Defective checks Service charges Reduction of loan Book errors Adjusted balance Deposit in transit Collections forwarded to bank Collections on hand Outstanding checks Checks not presented for payment Certified checks Bank errors Balance per bank

Examples of errors and their pro-forma entries 1. Misstatement of cash receipts on books of depositor a. Understatement add book balance Cash in bank xxx Accounts receivable xxx b. Overstatement deduct book balance Accounts receivable xxx Cash in bank xxx 2. Misstatement of checks drawn by depositor a. Understatement deduct book balance Accounts payable xxx Cash xxx b. Overstatement add book balance Cash xxx Accounts payable xxx 3. Deposit of another entity credited to deposit Deduct bank balance, no entry required 4. Check of another entity charged to account Add bank balance, no entry required Two-date bank reconciliation (pro-forma computation) Book balance, beginning Cash receipts per book Cash disbursements per book Book balance, end Credit memos Notes collected by bank Proceeds of bank loan Matured time deposits Debit memos NSF checks Defective checks Service charges Reduction of loan Book errors Adjusted balance Bank balance, beginning Bank credits Bank debits Bank balance, end Deposit in transit, beginning Cash receipts deposited Deposits acknowledged

+ = +

+ = + + -

+ = -

+ + =

+ =

Outstanding checks, beginning Checks drawn by depositor Checks paid by bank Bank errors Adjusted balance

Reconciling items (pro-forma for bank to book balance method) Balance per bank Deposit in transit

+ =