Chapter 13

CASH
CONTROL
 Bank Reconciliation

 Brings into agreement the book balance and

the bank balance
 Create bank reconciliation reports
 Find errors during reconciliation
 Correct errors found during reconciliation
 Reconciling items

1. Book Reconciling items

 Credit Memos
 Debit Memos
 Errors
2. Bank Reconciling items
 Deposits in transit
 Outstanding checks
 Errors
 Credit Memo

 Notes Receivable collected by the bank in favor of the

depositor and credited to the account.

 Proceeds of bank loan

 Matured time deposit

 Debit Memo

 NSF or No Sufficient Fund checks

 Technically defective checks

 Bank service charges

 Reduction of loan
 Deposit in Transit

 Collections already forwarded to the bank for deposit

but too late to appear in the bank statement.

 Undeposited collections or those still in the hands of

the depositor.
 Outstanding checks

 Check drawn and already given to payees but not yet

presented for payment.

 Certified checks
 Types of Reconciliation

 Adjusted balance method – book and bank balance

are brought to the correct cash balance.

 Bank to Book method – bank balance is reconciled

with the book balance.

 Book to Bank method – book balance is reconciled

with the bank balance
 Adjusted balance method

Book balance xx
Add: Credit memos xx
Total xx
Less: Debit memos xx
Adjusted book balance xx

Bank balance xx
Add: Deposit in transit xx
Total xx
Less: Outstanding checks xx
Adjusted bank balance xx
 Book to bank method

Book balance xx
Add: Credit memos xx
Outstanding Checks xx
Total xx
Less: Debit memos xx
Deposit in transit xx
Bank balance xx
 Bank to book method

Bank balance xx
Add: Deposit in transit xx
Debit memos xx
Total xx
Less: Outstanding checks xx
Credit memos xx
Book balance xx
 Illustration
Cash Receipts Cash Disbursements
Jan. 5 60,000 Jan. 6 Check No. 721 5,000
13 20,000 7 Check No. 722 10,000
25 30,000 10 Check No. 723 18,000
31 40,000 14 Check No. 724 2,000
150,000 28 Check No. 725 37,000
31 Check No. 726 28,000
100,000

Date Check No. Withdrawals Deposits Balance

Jan. 6 60,000 60,000 •CM of P15,000 –
8 721 5,000 55,000 proceeds of note
11 722 10,000 45,000 collected by the
12 723 18,000 27,000 bank
14 20,000 47,000
17 724 2,000 45,000 •RT of P5,000 –
26 30,000 75,000 check of customer
26 15,000 CM 90,000 returned by bank
30 5,000 RT 85,000 because of NSF
30 1,000 SC 84,000
 Adjusted balance method

Balance per book 50,000

Add: Note collected by bank 15,000
Total 65,000
Less: NSF customer check 5,000
Service charge 1,000 6,000
Adjusted book balance 59,000

Balance per bank 84,000

Add: Deposit in transit 40,000
Total 124,000
Less: Outstanding checks:
Check No. 725 37,000
Check No. 726 28,000 65,000
Adjusted bank balance 59,000
 Book to bank method

Balance per book 50,000

Add: Note collected by bank 15,000
Outstanding
checks: No. 725 37,000
No. 726 28,000 65,000 80,000
Total 130,000
NSF customer
Less: check 5,000
Service charge 1,000
Deposit in transit 40,000 46,000
Balance per bank 84,000
 Bank to book method

Balance per bank 84,000

Add: Deposit in transit 40,000
NSF customer check 5,000
Service charge 1,000 46,000
Total 130,000
Less: Outstanding checks: No. 725 37,000
No. 726 28,000 65,000
Note collected by bank 15,000 80,000
Balance per book 50,000
 Illustration 2

 The following data are gathered from the records of

Zita Co. for the month of December of the current
year.
Balance per book 5,000,000
Balance per bank 4,450,000
Deposit in transit 3,000,000
Outstanding check 850,000
Bank service charge for the month of December 50,000
Customer’s check returned by bank marked “NSF” 500,000
Customer’s note collected by bank
Face, P2,000,000; Interest P200,000; Collection 2,150,000
fee, P50,000
 Adjusted balance method

Balance per book 5,000,000

Add: Note collected by bank 2,150,000
Total 7,150,000
Less: Service charge 50,000
NSF check 500,000 550,000
Adjusted book balance 6,600,000

Balance per bank 4,450,000

Add: Deposit in transit 3,000,000
Total 7,450,000
Less: Outstanding checks 850,000
Adjusted bank balance 6,600,000
 Illustration 3
 Antoco Co. gathered the following information for the month of
October.
Balance per bank statement 4,000,000
Balance per cash book 2,700,000
Outstanding checks 600,000
Deposit in transit 475,000
Service charge 10,000
Proceeds of bank loan (not recorded on company books) 940,000
Customer’s check charged back because of absence of 50,000
counter signature
Deposit of P100,000 incorrectly recorded by bank as 10,000
Check of Amor Co. charged by bank against Antoco Co. 150,000
Customer:s note collected less collection fee 435,000
Erroneous debit memo 200,000
Deposit of Amor Co. credited to Antoco Co. 300,000
 Adjusted balance method
Balance per book 2,700,000
Add: Proceeds of bak loan 940,000
Note collected 435,000 1,375,000
Total 4,075,000
Less: Service Charge 10,000
NSF check 50,000 60,000
Adjusted book balance 4,015,000

Balance per bank 4,000,000

Add: Deposit in transit 475,000
Error in deposit 90,000
Error on check charged 150,000
Erroneous debit 200,000 915,000
Total 4,915,000
Less: Outstanding check 600,000
Erroneous credit 300,000 900,000
Adjusted bank balance 4,015,000
 Illustration 4

 In preparing the August 31, 2015 bank reconciliation,

Franco Company provided the following information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer’s check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

 How much is the adjusted cash balance?

 Answer

Balance per bank 1,805,000

Add: Deposit in transit 325,000
Total 2,130,000
Less: Outstanding check 275,000
Adjusted bank balance 1,855,000
 Illustration 5

 The following data pertains to account of Gozun Company:

Balance per book 1,000,000

Bank charges 3,000
Outstanding checks 235,000
Deposit in transit 300,000
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF 62,000
Depositor’s note charged to account 250,000

 How much is the adjusted cash balance?

 Answer

Balance per book 1,000,000

Add: Note collected by bank 375,000
Interest on note 15,000 390,000
Total 1,390,000
Less: Bank charges 3,000
NSF check 62,000
Note charged to account 250,000 315,000
Adjusted book balance 1,075,000
 Illustration 6

 Teodoro company provided the following information for

the purpose of reconciling the book and bank balance on
December 2015.
Balance per bank statement 2,000,000
Outstanding check (including certified check of P100,000) 500,000
Deposit in transit 200,000
NSF checks 100,000
Erroneous credit to Teodoro’s account 300,000
Proceeds of note collected by bank 750,000

 What is the cash in bank on December 31, 2015?

 Answer

Balance per bank 2,000,000

Add: Deposit in transit 200,000
Total 2,200,000
Less: Outstanding checks 400,000
Erroneous bank credit 300,000 700,000
Adjusted bank balance 1,500,000