Senior High School

Fundamentals of
Accountancy, Business
and Management 2
Quarter 2 – Module 7.2: Bank
Reconciliation Statement

Writer:
NESSA B. DIMALANTA
Teacher-II BACOLOR HIGH SCHOOL

Editors:
JANE P. VALENCIA, ED. D., EPS Mathematics
CHAIRMAN
BETHEL GRACE M. GUIAO- Teacher-III
VIENNAH MARIE M. BUSTOS Teacher-II
What I Need to Know
This module was designed and written with you in mind. It is here to help
you master the Bank Reconciliation Statement. The scope of this module
permits it to be used in many different learning situations. The language used
recognizes the diverse vocabulary level of students. The lessons are arranged
to follow the standard sequence of the course. But the order in which you read
them can be changed to correspond with the textbook you are now using.

The module has one lesson, namely:

Lesson 2: Analyze the effects of the identified reconciling items and bank
reconciliation statements preparation.

After going through this module, you are expected to:

1. analyze the effects of the identified reconciling items;
2. preparing bank reconciliation statements.

Analyze the effects of the

Lesson
identified reconciling items and
2 bank reconciliation statements
preparation
It is usual for a company's bank balance as per accounting records to differ
from the balance as per bank statement. The difference between these figures is
the reasons why companies prepare a bank reconciliation statement. Bank
reconciliation statement is a report which compares the bank balance as per
the company's accounting records with the balance stated in the bank
statement.

What’s New

ACTIVITY 1: FIX ME
Everyone makes a mistake; the only thing you can do is find ways and
fix it.
Determine the amount of the error and state whether the amount will be added or
deducted in the preparation of the bank reconciliation (use adjusted method):
Write your answer on a separate sheet of paper.
1. Romel Repairs received Ᵽ2,000 from Alessandro. The company recorded the
amount as Ᵽ200.
2. Pampanga Bank collected from the customer of Romel Repairs the sum of
Ᵽ7,000 representing the said customer's payment to Romel Repairs. No entry
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made in the books of Romel Repairs.
3. The bank teller debited a check amounting to Ᵽ2,500 from the account of
Romel Repairs. The said check issued by Romel Refrigeration, a different
depositor of the bank.
4. Romel Repairs recorded in the Cash Disbursement Journal a check
amounting to Ᵽ4,010. The correct amount of the check was Ᵽ4,100.
5. Romel Repairs deposits gained the interest of Ᵽ200 for the month. Romel
Repairs did not know of any interest gained until the bank statement was
received

What is It
Analysis of the Effects of the Identified Reconciling Items
NAME OF THE ADD/ ADD/DEDUCT
TRANSACTION BANK/BOOK DEDUCT TO TO BANK
RECONCILING BOOK
ITEM
1. A check of Ᵽ35, 000 Outstanding Deduct to bank
issued to a supplier, Check
was not yet presented
as payment to the
bank
2. Ᵽ1,500 cash received by Deposit in Add to bank
the company, recorded Transit
on March 31, however,
the cash deposited at the
bank on the afternoon
of April 1.
3. The bank erroneously Bank Error Deduct to bank
added Ᵽ12,000 Note: The cash
deposit of Rommel bank balance
Upholstery Co, to overstated, thus
Rommel Repairs the correction is
account. a deduction of P
Ᵽ12,000 to the
cash bank
balance
4. The teller erroneously Bank Error Add to bank
debited Ᵽ20,000 to Note: The cash
Rommel Repairs bank balance
account instead of was
Ᵽ2,000. understated;
thus the
correction is an
addition of
Ᵽ18,000
2
(20,000-2,000)
to the cash
bank balance
5. The customer depo- Collection of Add to book
sited Ᵽ10,000 to the receivables
company’s bank directly
account as payment received by
of receivable but not the bank
recorded in the (Credit Memo)
company’s book.
6. Payment of electric Auto Debits Deduct to book
bills automatically (Debit Memo)
deducted on the
company’s bank
account
7. A collection of Book Error Add to book
Ᵽ10,000 recorded Note: The cash
in the company’s book balance
book as Ᵽ1,000. was
The bank state- understated;
ment shows the thus the
correct amount of correction is
Ᵽ10,000 an addition of
Ᵽ9,000
(10,000-
1,000) to the
cash book
balance
8. A collection of Book Error Deduct to
Ᵽ5,000 recorded in book Note:
the company’s The cash book
book as Ᵽ50,000. balance
The bank state- overstated;
ment shows the thus the
correct amount of correction is a
Ᵽ5,000 deduction of
Ᵽ45,000
(5,000-
50,000) to
the cash book
balance
9. Charge for printing Bank Service Deduct to
company checks Charge (Debit book
and service fee Memo)
10.Interest credited to Interest Income Add to book
the bank account (Credit
Memo)

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11. The bank statement NSF- No Deduct to
shows a return check sufficient fund book
of Ᵽ500 by the (Debit Memo)
customer.

Illustrations are as follows using the Adjusted Method

BankReconciliation Format
PER BOOK
Unadjusted Book Balance Ᵽ XX
Add: Credit Memo
Interest Income XX
Collection received by the bank XX
Less: Debit Memo
NSF Checks (XX)
Bank Service Charge (XX)
Add/Less: Book errors XX
Adjusted Book Balance Ᵽ XX

PER BANK
Unadjusted Bank Balance Ᵽ XX
Add: Deposit in Transit (DIT) XX
Less: Outstanding Checks (OC) (XX)
Add/Less: Bank errors XX
Adjusted Bank Balance Ᵽ XX

ILLUSTRATION 1: TRANSACTION ANALYSIS

Kayanatin Repairs March 2020 bank statement shown Ᵽ510,000 balance. As
of March 31, 2020, accounting records had a cash balance of Ᵽ710,000.
Determined the following information.
a. Kayanatin Repairs issued a check amounting Ᵽ55,000 to a supplier,
which not yet presented to the bank for payment.
b. A deposit slip no. 1234 was a check deposit amounting to Ᵽ305,000,
which not yet added to the company's account.
c. Collection of account receivable amounting to Ᵽ70,000 deposited by a
customer directly to the company's account, which not yet recorded to the
company's record.
d. The bank directly takes out Ᵽ20,000 as payment to the company's monthly
PLDT bill. Requirement: Analyze the transactions and prepare the Bank
Reconciliation

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Solution:
a. The check of Ᵽ55,000 issued to the supplier but not yet encashed is an
Outstanding check, which deducted to the bank cash balance.
b. The check deposited of Ᵽ305,000 but not yet credited to the company's
bank account is a Deposit in Transit added to the bank cash balance.
c. The collection of Receivable amounted to Ᵽ70,000 is not yet recorded to the
company's cash balance. Therefore, it should be a Credit Memo added to the
company's book balance.
d. Ᵽ20,000 payment or auto-debit should be deducted to the cash book
balance as a Debit Memo since the company's had no record of it yet.

Kayanatin Repairs
Bank Reconciliation
For the month ended March 31, 2020
PER BOOK
Unadjusted Book Balance Ᵽ 710,000
Add: Credit Memo 70,000
Less: Debit Memo (20,000)
Adjusted Book Balance Ᵽ 760,000

PER BANK
Unadjusted Bank Balance Ᵽ 510,000
Add: Deposit in Transit (DIT) 305,000
Less: Outstanding Checks (OC) (55,000)
Adjusted Bank Balance Ᵽ 760,000

ILLUSTRATION 2: USE OF FORMAT

Agyumu Repairs received June 2020 bank statement showing Ᵽ330,000
cash balance. Accounting records cash balance shows Ᵽ200,000. Determined
the following reconciling items:
a. Credit Memo – Ᵽ19,000
b. Interest Income – Ᵽ100
c. Debit Memo – Ᵽ4,000
d. Deposit in Transit – Ᵽ60,000
e. Outstanding Checks – 55,900
Requirement: Prepare the Bank Reconciliation Solution:

Agyumu Repairs
Bank Reconciliation
For the month ended June 30, 2020

PER BOOK
Unadjusted Book Balance Ᵽ 200,000
Add: Credit Memo 19,000
Interest Income 100
Less: Debit Memo (5,000)
Adjusted Book Balance Ᵽ 214,100

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PER BANK
Unadjusted Bank Balance Ᵽ 330,000
Add: Deposit in Transit (DIT) 60,000
Less: Outstanding Checks (OC) (55,900)
Adjusted Bank Balance Ᵽ 214,100

ILLUSTRATION 3: BANK RECONCILIATION

The accountant of Ikawpa Repairs obtained the following information for
preparing the bank reconciliation for the month of April 2020.
Subsidiary Ledger
Cash in Bank- Pampanga Bank Current Account
Date Description Debit Credit Balance
4/1 Bal. forwarded 460, 000
4/10 Deposit 360,000 820, 000
4/11 Check #109 100,000 720,000
4/11 Deposit 580,000 1,300,000
4/18 Check #110 300,000 1,000,000
4/21 Check #111 60,000 940,000
4/27 Check #112 180,000 760,000
4/30 Deposit 250,000 1,010,000

PAMPANGA BANK
Account Number: 1234-567-89 Account Type: PB Checking Account
Branch: Malaut Branch
Period Covered: 4/1/2020-4/30/2020
Date Description Ref Details Debit Credit Balance
Beginning Bal. 460, 000
4/10/20 Cash Deposit 032 Ale Co. 360,000 820, 000
4/11/20 Cash Deposit 091 Ale Co. 580,000 1,400,000
4/12/20 Payment 010 35,000 1,365,000
4/15/20 Ck Encashment 039 Ck#109 100,000 1,265,000
4/18/20 Ck Encashment 098 Ck#110 300,000 965,000
4/26/20 Check Deposit 065 Ale Co. 80,000 1,045,000
4/29/20 Ck Encashment 075 Ck#112 180,000 865,000

Solution:
Compare the amount in the ledger and the bank statement to
determine the reconciling items.
Bank reconciling items are the amount in the ledger but not in the bank
statement.
a. From ledger dated 4/21, Ck#111 amount Ᵽ60,000 is an outstanding
check
b. From ledger dated 4/30, Deposit amount Ᵽ250,000 is a deposit in
transit Book reconciling items are the amount in the bank statement but not
in the ledger.
a. From the bank statement dated 4/12 described as PAYMENT amount,
Ᵽ 35,000 is a Debit Memo
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b. From bank statement dated 4/26 described as CHECK DEPOSIT
amount Ᵽ80,000 is a Credit Memo

Ikawpa Repairs
Bank Reconciliation
For the month ended April 30, 2020

PER BOOK
Unadjusted Book Balance Ᵽ1010,000
Add: Credit Memo 80,000
Less: Debit Memo ( 35,000)
Adjusted Book Balance Ᵽ1,055,000

PER BANK
Unadjusted Bank Balance Ᵽ 865,000
Add: Deposit in Transit (DIT) 250,000
Less: Outstanding Checks (OC) (60,000)
Adjusted Bank Balance Ᵽ1,055,000

ILLUSTRATION 4: BANK/BOOK ERRORS

Kayanatin Repairs had the following information in preparing
it's August 31, 2019 bank reconciliation.
a. Bank statement has an end balance of Ᵽ80,000
b. NSF Check shows Ᵽ60,000
c. Ᵽ 32,000 Deposit in Transit
d. Ᵽ27,000 Outstanding Checks
e. Book balance August 32, 2019 is Ᵽ143,000
f. Bank erroneously added a Ᵽ12,000 deposit of Sipag Co. to Kayanatin
Repairs
g. Book recorded a collection of Ᵽ120,000, which supposed to be Ᵽ220,000.
The correct amount shown in the bank statement is 220,000.
Requirement: Prepare the Bank Reconciliation

Solution:
❖ Bank error was the error made by the bank adding Ᵽ12,000 deposit of
Sipag Co. to Kayanatin Repairs, which cause the cash balance per bank
overstated. Therefore, the correction of Ᵽ12,000 is a deduction to the
cash balance per bank
❖ T-account analysis

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❖ Entry Made Should be Entry
CASH CASH
Dr. Cr. Dr. Cr.

g. Ᵽ12,000 g. -
Bal. Ᵽ12,000 Bal. -

Correction made
CASH
Dr. Cr.
Ᵽ 12,000
(deduct) Ᵽ 12,000
Bal. -

• Overstated by Ᵽ12,000
❖ Book Error was the collection of Ᵽ220,000 was erroneously recorded as
Ᵽ120,000, which understated the cash balance per book. Therefore, the
correction of Ᵽ100,000(220,000-120,000) added to the cash book
balance.

T-account analysis
Entry Made Should be Entry
CASH
Dr. Cr. CASH
a. Ᵽ 120,000 Dr. Cr.
h. Ᵽ 120,000
Bal. Ᵽ 120,000
Bal. Ᵽ 220,000

Correction made
CASH
Dr. Cr.
Ᵽ 120,000
(add) 100,000
Bal. Ᵽ 220,000
• Understated by Ᵽ100,000 (220,000-120,000)

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Book Errors:
Effect on the
Nature of Error ending cash Correction
balance
Book debit Understatement Add (Debit) the
understated (Kulang (Kulang) amount understated
sa pagdagdag) (dagdagan)
Book debit overstated Overstatement Deduct (Credit) the
(Sobra sa (Sobra) amount overstated
pagdagdag) (bawasan)
Book credit Overstatement Deduct (Credit) the
understated (Kulang (Sobra) amount overstated
sa pagbawas) (bawasan)
Book credit Understatement Add (Debit) the
overstated (Sobra sa (Kulang) amount understated
pagbawas) (dagdagan)

Bank Errors:

Nature of Error Effect on the ending Correction

cash balance
Bank debit Overstatement Deduct (Debit) the
understated (Kulang (Sobra) amount overstated
sa pagbawas) (bawasan)
Bank debit overstated Understatement Add (Credit) the amount
(Sobra sa pagbawas) (Kulang) understated (dagdagan)

Bank credit Understatement Add (Credit) the

understated (Kulang (Kulang) amount understated
sa pagdagdag) (dagdagan)
Book credit Overstatement Deduct (Debit) the
overstated (Sobra sa (Sobra) amount overstated
pagdagdag) (bawasan)

Notes to the Teacher

For our learners, the adjusted method used, which
commonly used in actual accounting practice. The two
remaining methods are discussed in their higher accounting
subjects as they wish to pursue an accounting degree.

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ACTIVITY 1: CASH
A. Have you ever been in a situation you need to know what’s left or
the balance in your allowance? Below will make you experience it.
Given the following information, compute the correct cash balance using the
adjusted method. Write your answer on a separate sheet of paper.
Balance per bank Ᵽ20,100
Deposit in Transit 1,500
Outstanding Checks 2,350
Balance per book 19,555
Additional Information:
Collection of Ᵽ130 was recorded by book as Ᵽ310
Auto-debit of Ᵽ125 for mobile data
Requirement: Compute for the correct cash balance:

B. It is not easy to search for things missing, it will make you dizzy,
but if you have the perseverance to find it, you will be able to answer
what is asked below.
Given the following information, compute the missing information using the
adjusted method. Write your answer on a separate sheet of paper.
Sulong CO.’s cash has the following information
a. Cash balance per bank Ᵽ 9,000
b. Credit Memo 5,000
c. Debit Memo 2,000
d. Deposit in Transit 5,000
e. Outstanding Checks 2,000
Requirement: How much is the cash unadjusted book balance?

ACTIVITY: IDENTIFY ME
A. Typo errors happen, even when you send messages via text, though
still, you correct it by sending another message which same goes
with this activity, you will be able to correct it.
For the month of May 2019, Kulot Company issued the following checks as
recorded in its Cash Disbursement Journal:
Check Date Check No Payee Amount
5/2/2019 1256 Mary Ᵽ 1,000
5/10/2019 1257 Jane 400
5/15/2019 1528 Alessandro 2,500
5/18/2019 1259 Alejo 9,500
5/30/2019 1260 Dan 2,300

As per the bank statement received by Tope, the following checks were
presented and paid by the bank:
Check No. Payee Amount
1256 Mary Ᵽ 1,000
1259 Alejo 9,500
1260 Dan 2,300

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Requirement: Identify the outstanding checks as of the end of
May 2019. Write your answer on a separate sheet of paper.

B. Practice makes perfect. By correcting mistakes, you’ll have tons of

ways.
The cash receipts journal of Malaya Merchandising reflected the following
collections for the month of April 2019:
Official Official Receipt No. Customer Amount
Receipt Date
5/2/2019 1256 Mary Ᵽ 6,000
5/8/2019 1257 Jane 3,000
5/9/2019 1528 Alessandro 900
5/25/2019 1259 Alejo 800
5/26/2019 1260 Dan 3,000
5/30/2019 1261 Juven 4,500
5/30/2019 1262 Net 4,000

It is the policy of the company to deposit collection within the following day
from the date of collection.
The bank statement for April 2019 revealed following deposits made:

Deposit Date Amount

5/3/2019 Ᵽ 6,000
5/9/2019 3,000
5/10/2019 900
5/26/2019 800
5/26/2019 3,000
Requirement: Compute for the deposit in transit or undeposited
collection as of end of April 2019. Write your answer on a separate
sheet of paper.

ACTIVITY 3: CHECK ME!

A. Determine whether the following reconciling items should be added to
the book or bank account balance or deducted from the book or bank
account balance by putting a (√) checkmark. Write your answer on a
separate sheet of paper.

ADD TO DEDUCT ADD DEDUCT

RECONCILING ITEMS BOOK FROM- TO FROM-
BOOK BANK BANK
1. Jodi Dela Cruz Company had
a receipt of Ᵽ100,000 and
correctly prepared its bank
deposit slip for Ᵽ100,000.
However, the company
recorded the receipt in its Cash
account as Ᵽ101,000. How is the
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difference of Ᵽ1,000 handled on
the bank reconciliation?

2. Blaze Mudlong wrote a check

worth Ᵽ46,000, and it cleared
the bank for Ᵽ46,000. However,
the company recorded the
receipt in its Cash account as
Ᵽ64,000. How is the difference
of Ᵽ18,000 handled on the
bank reconciliation?
3. Bank erroneously posted
another company’s Credit memo
to MN Mitz Company bank
account

4. Bank inadvertently charged

Mikka Joson Company’s bank
account for another Company’s
bank fees

5. Bank service charge

6. Deposit in transit
7. The fee charged by the bank
for a returned check
8. Interest credited to the bank
account
9. Outstanding checks
10. The bank collected a Note
Receivable for the Acer Garcia
Corporation and Credited
the company’s bank account for
Ᵽ1,000,000

B.Prepare for the Bank Reconciliation of Matiaga Company for the

month of September 30, 2019. Write your answer on a separate sheet
of paper.
a. The bank statement for September 2019 shows an ending balance of
Ᵽ3,490.
b. On September 30, the bank statement shows charges of Ᵽ35 for the
service charge for maintaining the checking account.
c. On September 26, the bank statement shows a returned item of Ᵽ100 plus
a related bank fee of Ᵽ10. The returned item is a customer's check returned
because of insufficient funds.
d. The bank statement shows a charge of Ᵽ80 for check printing on
September 22.

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e.The bank statement shows that Ᵽ8 was added to the checking account on
September 30 for interest earned by the company during September.
f. The bank statement shows that a note receivable of Ᵽ1,000 was collected
by the bank on September 29 and deposited into the company's account. On
the same day, the bank withdrew Ᵽ40 from the company's account as a fee
for collecting the note receivable.
g. The company's Cash account at the end of September shows a balance of
Ᵽ967.
h. During September, the company wrote checks totaling more than
Ᵽ50,000. As of September 30, Ᵽ3,021 check written in September had not
yet cleared the bank, and Ᵽ200 of checks written in July had not yet cleared
the bank.
i. The Ᵽ1,450 cash received by the company on September 29 recorded on
the company's books as of September 30. However, the Ᵽ1,450 of cash
receipts deposited at the bank on the morning of October 1.
j. On September 29, the company's Cash account shows cash sales of Ᵽ145.
The bank statement shows that the amount deposited was Ᵽ154. The
company reviewed the transactions and found that Ᵽ154 was the correct
amount.

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