fa1 - bank reconciliation
DESCRIPTION
notes on bank reconciliationTRANSCRIPT
BANKRECONCILIATION
Bank Deposits
1. Demand deposit – CA or commercial deposit, NONinterest-bearingdeposits – covered by deposit slipswithdrawal – drawing checks
2. Saving deposit – deposits and withdrawals can be made anytime with passbook- interest-bearing
Bank Deposits (cont.)
3. Time deposit – evidenced by formal agreement embodied in certificate of deposit- interest-bearing- may be preterminated or withdrawn on demand or after a certain period of time agreed upon
Bank Reconciliation
• Statement w/c brings into agreement the cash balance per book and the cash balance per bank
• necessary only for a demand deposit or checking account
Reconciling items
Book reconciling items
1. Credit memos2. Debit memos3. Errors
Reconciling items (cont.)
Bank reconciling items
1. Deposits in transit2. Outstanding checks3. Errors
Credit memos
• Items not representing deposits credited by the bank to the account of the depositor but not yet recorded by the depositor as cash receipts
• Increase bank balance• Examples: note receivable collected by bank,
proceeds of bank loan, matured time deposit
Debit memos
• Items not representing checks paid by bank w/c are charged or debited by the bank to the account of the depositor but not yet recorded by the depositor as cash disbursements
• Decrease bank balance• Examples: NSF checks, technically defective
checks, bank service charges, reduction of loan
Deposits in transit
• Collections already recorded by the depositor as cash receipts but not yet reflected on the bank statement
• Include:a. collections already forwarded to the bank for deposit but too late to appear in BSb. undeposited collections (cash on hand)
Outstanding checks
• Checks already recorded by the depositor as cash disbursements but not yet reflected on the bank statement
• Include:a. checks drawn & delivered to payee but not yet presented for paymentb. certified checks – should be deducted from the total OC (if included therein)
Forms of bank reconciliation
1. Adjusted balance method – book & bank balance are brought to correct cash balance that must appear on the balance sheet
2. Book to bank method – book balance is adjusted to equal the bank balance
3. Bank to book method – bank balance is adjusted to equal the book balance
Adjusted balance method
Book balance xxAdd: Credit memos xxLess: Debit memos (xx)Adjusted book balance xx
Bank balance xxAdd: Deposits in transit xxLess: Outstanding checks (xx)Adjusted bank balance xx
Book to bank method
Book balance xxAdd: Credit memos xx
Outstanding checks xx xxTotal xxLess: Debit memos xx
Deposits in transit xx (xx)Bank balance xx
Bank to book method
Bank balance xxAdd: Debit memos xx
Deposits in transit xx xxTotal xxLess: Credit memos xx
Outstanding checks xx (xx)Book balance xx