BANK Reconciliation - Cue about bank recon and proof of cash PDF

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Cue about bank recon and proof of cash...

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BANK RECONCILIATION- is a report presented (normally at month end) to bring the balance per book and bank at equal amounts

ADJUSTED CASH BALANCE BANK RECONCILIATION BANK

BOOK

UNADJUSTED CASH BAL :

XX

XX

+ DEPOSIT IN TRANSIT

XX

CREDIT MEMO

XX

-OUTSTANDING CHECKS

XX

DEBIT MEMO

XX

+/- ERROR

X(X)

X(X)

ADJUSTED CASH BALANCE

XX

XX

Unadjusted Cash Balance per Bank- is the ending figure shown in the cut-off bank statement Unadjusted Cash Balance per Book- ending figure shown in the accounting record of the company If the missing item is the UNADJUSTED CASH BALANCE – (Baliktarin mo lang) Example : Bank Adjusted Cash Balance +/- ERROR+OSC-DIT= UNADJUSTED BANK BALANCE Another : Bank to Book or Book to Bank Unadjusted Bank Balance + DIT – OSC +/- ERROR + Debit Memo – Credit Memo = UNADJUSTED BOOK BALANCE *Inadd yung DM kase na deduct na siya sa bank, Niless yung CM kase na add na siya sa bank.

BANK RECONCILING ITEMS 1. DEPOSIT IN TRANSIT – collections during the month by the entity but not yet deposited to the bank 2. Outstanding Checks- checks drawn and already released by the entity but not yet presented to the bank Certified check- checks drawn by the company and already presented to the bank but not yet encashed in the same day, once certified it should be deducted by the depositors account (should be deducted if included in the OSC) Stale check- checks drawn by the company but not yet presented to the bank for at least 6months from the issue date. These checks were reverted back to cash in the balance per book (should be deducted if included in the OSC)

BOOK RECONCILING ITEMS 1. Credit Memo – collections made by the bank directly to the depositors account but not yet recorded by the entity a. Notes / Interest collected b. Proceeds of bank loan c. Matured Time deposits

2. Debit memo – deductions made by bank directly to the depositors account but not yet recorded by the entity A. Bank Service Charge B. No Sufficient Fund (NSF)/ Drawn against Insufficient Fund (DAIF)/ Drawn Against Uncollectible Deposit(DAUD) – already recorded by the entity as cash receipts, but once deposited to the bank it was found out that the check has no fund C. Technically defective checks that is returned - already recorded as cash receipts by the company but returned due to defects of the check. D. Payments made directly by banks HOW TO DEAL WITH ERRORS QUESTION1 : Who committed mistake? - If it is the BANK , then adjust it in Bank Balance - If it is the BOOK, then adjust it in Book Balance

Question 2: What is the effect of error? -

DEDUCT the overstatement ADD the understatement

ADJUSTING ENTRIES – prepared on BOOK reconciling items only this is because the bank reconciling items will be corrected by the bank To adjust Credit Memo Cash Notes Receivable Interest Income Loans Payable Time Deposit

To adjust Debit Memo Expense Loan/Notes Payable Time Deposit Cash Looking for the Missing Reconciling Items

1. Deposit In Transit DIT *beg of current mont *ending of last month +Book Debit (Collections recorded in the book) -(Last month Credit memo – already debited to book)

x xx (x)

x x

Less: Bank Credit (Collections recorded in the bank) -(Current Month Credit memo- already included in the bank)

xx (x)

x X

ERROR

X/(X) X

2. OUTSTANDING CHECK OSC *beg of current mont *ending of last month +Book CREDIT (Disbursement recorded in the book) -(Last month DEBIT memo – already DEDUCTED to book)

x xx (x)

x x

Less: Bank DEBIT (Disbursement recorded in the bank) -(Current Month DEBIT memo- already DEDUCTED in the bank)

ERROR

xx (x)

x X X/(X) X

BANK DEBIT – DECREASE BANK BALANC E BANK CREDIT – INCREASE BANK BALANCE BOOK DEBIT- INCREASE BOOK BALANCE BOOK CREDIT – DECREASE BOOK BALANCE

Proof of Cash - is essentially a roll forward of each line item in a bank reconciliation from one accounting period to the next, incorporating separate columns for cash receipts and cash disbursements.

UNADJUSTED BANK BALANCE DIT beg

BEGINNING

RECEIPT

DISBURSEMENT

ENDING

XXX

XXX

XXX

XXX

xx

(xx) – Last month receipt Xx – current month receipt

DIT end OSC beg

(XX)

xx (xx) – last month disbursement Xx –current month disbursement

OSC end

(XX)

ERROR Adjusted Balance

UNADJUSTED BOOK BALANCE CM beg

xx

xx

xx

xx

BEGINNING

RECEIPT

DISBURSEMENT

ENDING

XXX

XXX

XXX

XXX

xx

(xx) – Last month receipt Xx – current month receipt

CM end DM beg

(XX)

xx (xx) – last month disbursement Xx –current month disbursement

DM end

(XX)

ERROR Adjusted Balance

xx

xx

xx

xx

UNADJUSTED BANK BALANCE DIT beg

BEGINNING

RECEIPT

DISBURSEMENT

ENDING

XXX

XXX

XXX

XXX

xx

(xx) – Last month receipt Xx – current month receipt

DIT end OSC beg

(XX)

xx (xx) – last month disbursement Xx –current month disbursement

OSC end

(XX)

ERROR Adjusted Balance

xx

xx

CM beg

(X)- NA- ADD NA

X- this month magrereflect (X)- next month pa magrereflect

CM end DM beg

X – NA DEDUCT NA

DM end

xx

xx (X) NA-ADD NA

X- this month magrereflect (X)- next month pa magrereflect

X- NA DEDUCT NA

XX

XX

ERROR UNADJUSTED BOOK BALANCE

XX

XX

BANK TO BOOK

-kung napansin mo parang binaliktad lang yung signs nung sa book, ganyan din kapag book to bank naman.

1. ERROR IN CURRENT MONTH NOT YET CORRECTED - ENDING BEGINNING RECEIPT OVERSTATED RECEIPT UNDERSTATED DISBURSEMENT OVERSTATED

RECEIPT

DISBURSEMENT

ENDING

(x)

(x)

x

x (x)- magbawas dahil sobra ang disbursement x- magdagdag dahil kulang ang disbursement

DISBURSEMENT UNDERSTATED

X- magdagdag dahil sobra ang nabawas (x)- magbawasa dahil kulang ang nabawas

2. ERROR IN PRIOR MONTH CORRECTED IN CURRENT MONTH BEGINNING RECEIPT OVERSTATED RECEIPT UNDERSTATED DISBURSEMENT OVERSTATED DISBURSEMENT UNDERSTATED

RECEIPT

(x) - deduct x- add X - add

DISBURSEMENT

ENDING

(x) – the reduction is not a disbursement (x) – the receipt is earned last month (X) – the addition is not a receipt

(x)- deduct

(X)- the disbursement is incurred last month

3. ERROR IN CURRENT MONTH CORRECTED IN CURRENT MONTH BEGINNING

RECEIPT

RECEIPT (x) OVERSTATED x RECEIPT UNDERSTATED DISBURSEMENT OVERSTATED DISBURSEMENT UNDERSTATED -eto diko pa sure pero parang inaapply ko yung sa 1.

DISBURSEMENT

(x) x

ENDING...