 Introduction

• Kinds of bank accounts

• Definition of bank statement

 Bank reconciliation
• Definition of bank reconciliation
• Methods of preparing bank reconciliation
• Reconciling items
• Adjusting entries for book reconciling items

 Proof of cash
 Demand deposit Savings deposit Time deposit
Document/s Bank statement Passbook Certificate of time
Deposits  deposit slips deposit
Withdrawals  checks
Interest Generally does not earn interest Earns interest Earns interest
Others Also called current account or Has a maturity date
checking account May generally be pre-
terminated
 A reportprepared by the bank on a monthly basis
for demand deposit accounts which shows the
following:
• Beginning cash balance per bank
• Deposits acknowledged
• Checks paid
• Other charges and credits
• Ending cash balance per bank
 A statementwhich brings into agreement the cash
balance per book and cash balance per bank

 Usually prepared on a monthly basis

 Book-to-bank method

 Bank-to-book method

 Adjusted balances method

 Bank reconciling items
Treatment under the
Bank reconciling item Description adjusted balances
method
Deposits in transit / Collections already recorded as Add to balance per
undeposited receipts or cash receipts by the depositor bank
collections but not yet reflected on the bank
statement
Outstanding checks Checks issued by the depositor Deduct from balance
but are not yet presented to the per bank
bank for payment.

Certified checks Checks where the bank immediately Deduct from outstanding
debits the account of the depositor to checks (if included therein)
ensure or certify eventual payment
 Bank reconciling items
Bank reconciling item Description
Bank errors Deposit of another company is
credited by the bank to the
account of the company
Check drawn by another
company charged by the bank to bank
the account of the company
Treatment under the
adjusted balances
method
Deduct from balance
per bank
Add to balance per
 Book reconciling items
Treatment under the
Book reconciling item Description adjusted balances
method
Unrecorded bank Items which are charged or Deduct from balance
charges debited by the bank to the per books
account of the depositor aside
from checks paid. These are
evidenced by debit memos.

Examples:
NSF check
Bank service charges
Payment of bank loan
 Book reconciling items
Treatment under the
Book reconciling item Description adjusted balances
method
Unrecorded bank Items which are credited by the Add to balance per
credits bank to the account of the books
depositor aside from deposits
received. These are evidenced
by credit memos.

Examples:
Collection of notes receivable
Proceeds of bank loan
Interest income earned
 Book reconciling items
Treatment under the
Book reconciling item Description adjusted balances
method
Book errors Understatement of recorded Add to balance per
amount of cash receipts books
Overstatement of recorded Deduct from balance
amount of cash receipts per books
Understatement of recorded Deduct from balance
amount of checks drawn per books
Overstatement of recorded Add to balance per
amount of checks drawn books
NSF Check
Accounts receivable xxx
Cash in bank xxx

Bank service charges

Miscellaneous expense xxx
Cash in bank xxx

Payment of bank loan with interest expense

Notes payable or loans payable xxx
Interest expense xxx
Cash in bank xxx
Collection of notes receivable with interest income
Cash in bank xxx
Notes receivable xxx
Interest income xxx

Proceeds of bank loan

Cash in bank xxx
Notes payable or loans payable xxx
 Anexpanded reconciliation in that it includes
proof of receipts and disbursements

 May be useful in discovering possible discrepancies

in handling cash