BANK RECONCILIATION
1. Book reconciling items:
There are three kinds of bank deposits, namely:
Demand Deposit – this is the current account or
checking account or commercial deposit where
deposits are covered by deposit slips and where
funds are withdrawable on demand by drawing
checks against the bank.
Saving Deposits – the depositor is given
passbook/ATM card upon the initial deposit. The
passbook is required when making deposits and
withdrawals.
Time Deposit – this is like saving deposit in the
sense that it is interest bearing.
What is bank reconciliation?
A bank reconciliation is a statement which
brings into agreement the cash balance per book
and cash balance per bank. It is usually prepared
monthly because the bank provides the depositor
with the bank statement at the end of every
month.
A bank statement is a monthly report of the bank
to the depositor showing the cash balance per
bank at the beginning, the deposits
acknowledged, the checks paid, other charges
and credits and the daily cash balance per bank
during the month.
 Bank statement is the exact copy of the
depositor’s ledger in the records of the
bank
 When the bank statement is received,
attached thereto:
o Depositor’s canceled checks
 Canceled checks are issued
by the depositor and paid
by the bank during the
month. They are literally
canceled by stamping or
punching to show that they
have been paid.
o Debit/Credit memoranda
Reconciling Items
a. Credit memos
b. Debit memos
c. Errors
2. Bank reconciling items:
a. Deposits in transit
b. Outstanding checks
c. Errors
CREDIT MEMOS
Refer to items not representing deposits credited
by the bank to the account of the depositor but
not yet recorded by the depositor as cash
receipts. The credit memos have the effect of
increasing the bank balance.
A. Notes receivable collected by the
bank in favor of the depositor and
credited to the account of the
depositor.
B. Proceeds of bank loan credited to
the account of the depositor.
C. Matured time deposits transferred
by the bank to the current account of
the depositor.
DEBIT MEMOS
Refer to items not representing checks paid by
the bank which are charged or debited by the
bank to the account of the depositor but not yet
recorded by the depositor as cash disbursements.
The debit memos have the effect of decreasing
the bank balance.
A. NSF or No Sufficient Fund checks
these are checks deposited but
returned by the bank because of
insufficiency of fund. It is also known
as DAIF or “drawn against insufficient
fund”.
B. Technically defective checks these
are checks deposited but returned by
the bank because of technical defects
such as absence of signature or
countersignature, erasures not
countersigned, mutilated checks,
conflict between amount in words and
amount in figures.
C. Bank service charges these include
bank charges for interest, collection,
checkbook and penalty
 D. Reduction of loan this pertains to the PROFORMA FOR BANK RECONCILIATION
amount deducted from the current
account of the depositor owes to the 1. ADJUSTED BALANCE METHOD
bank and which has already matured.
Book balance xx
DEPOSITS IN TRANSIT Add: Credit memos xx
Are collections already recorded by the depositor Total xx
as cash receipts but not yet reflected on the bank Less: Debit memos xx
statement.
A. Collection already forwarded to the Adjusted book balance xx
bank for deposit but too late to appear
in the bank statement. Bank balance xx
B. Undeposited collections or those still in Add: Deposit in transits xx
the hands of the depositor. Total xx
Less: Outstanding checks xx
OUTSTANDING CHECKS
Are checks already recorded by the depositor as Adjusted bank balance xx
cash disbursement but not yet recorded on the
bank statement. 2. BOOK TO BANK METHOD
A. Checks drawn and already given to
payees but not yet presented for Book balance xx
payment. Add: CM xx
B. Certified checks – is one where the Outstanding checks xx xx
bank has stamped on its face the word
“accepted” or “certified” indicating Total xx
sufficiency of fund. Less: DM xx
DIT xx xx
Forms of bank reconciliation
Bank balance xx
A. Adjusted balance method – under this
method, the book balance and bank 3. BANK TO BOOK BALANCE
balance are brought to a correct cash
balance that must appear on the balance Bank xx
sheet. Add: DIT xx
B. Book to bank method – under this DM xx xx
method, the book balance is reconciled
with the bank balance or the book balance Total xx
is adjusted to equal the bank balance. Less: Outstanding checks xx
C. Bank to book method – under this CM xx xx
method, the bank balance is reconciled
with the book balance or the bank balance Book balance xx
is adjusted to equal the book balance.