Bank to book method Bankbalanco ‘Add: Depositsin rancit xx x Debit memos is ‘Total xe Less: Outstanding checks xx ax (Credit memos Bockbalance en the re Jon starts with the bank balance and endy en atti ra em srt Gee bi baie laanee thay a treat in, tha adlcnel ented in he aE pon ABE outstanding check is ‘deducted. However, with respect to the book reconciling treatment is simply “reversed. ‘Thus, since the credit, memes are added to the book balances, thay are now deducted from the bank balance, and since the Gobtt memos axe deducted from the book balance, they are now ‘added to the bank balance. is added and items, the Explanation of reversal rule ‘The bank to book méthod means that the bank balance is adjusted to equal the book balance. Dac manos sendy dete ib bank balan but bn abet on te muse they are not yet recorded by ‘Consequently, the bank balance is understated in ne theta flo Hes Ba eae ded tote a On the other hand, credit memos already incree Sih ei ek el memes sy cine te be not yet recorded by the depositor. Consequently, the bank balance is ‘book balance. He: ‘overstated in relation to Soak brlmee, Hence, credit meme are deducted from the D*Illustration ‘The cash records of Company X show the following for the month of January. CASH RECEIPTS ‘CASH DISBURSEMENTS Jan. 5 Jan. 6 Check No.721 5,000 13 7 Check No.122 10,000 2% 10 Check No 723 18.000 at MM CheckNo.724 2.000, 28 CheckNo.725 37,000 31 CheckNo.726 — _ 28000 ‘The general ledger of the company shows the cash in bank account for January as follows: (Cash in bank ~ First Banle Jan.91 CR 160,000 Jen.31 CD 100,000 ‘The balance ofthe cash in bank on the depositor'sbook is P50,000, 1 IBank statement y rei re bank statement for JANUATY FOSS from ‘The following isthe bat the First Bank In account with: No. 778 inst BANK Canpany 8 Nani, Philippines Quezon Cty _ Deposits Bala Date Check No, Withdrawale Dopo’ - es 60,000 60,000 3m 000 a. um ro.cco oa 18,000 7 : °° 20,000 47,000 a7 ms 2,000 ‘S00 2 30,000 75.000 : 18000CM 90,009 x S000RT 85.000 x 1.00080 84.0 Code: CM ~ Credit memo SC~Servie charge DM_Debitmema RT—Returned check ‘The following data are gathered in connection with the CM and DM appearing on the bank statement: The CM of P15,000 on January 26 represents proceeds cf note collected by the bank in favor ofthe company. ', The RT of P5,000 represents check of customer previously but returned | ion aes by the bank because of no sufficientGeneral procedures in preparing the reconciliation. Determine the balance per book and the balance per bank. i mentioned earlier, the cash in bank account on the «of the depositor has a debit balance of P50,000. The bank balance is shown on the bank statement as the final item, P84,000, ' ‘Trace the cash receipts to the bank statement to ascertain Whether there are deposits not yet acknowledged by the In the illustrative problem, the cash receipt of P40,000 on January 31 does not appear in the bank statement. ‘This represents deposit in transit. ‘Trace the checks issued to the bank atatement to ascertain whether there are checks not yet presented for payment. In the illustrative problem, Check Nos, 725 for P37,000 and 726 for P28,000 do not appear in the bank statement. ‘These are outstanding checks, 4. The bank statement should be examined to determine whether there are bank credits or bank debits not yet recorded by the depositor. In the illustrative problem there is CM of P25,000 and DM for returned check of P5,000 and service charge of 1,000. ¢, Watch out for errors. Again, errors are reconciling items of the party which committed them. In the illustrative problem, there are no errors committed, At this point, a formal reconciliation may be prepared because all the reconciling items have already been determined. DSc