Colegio de San Gabriel Arcangel

Area E, City of San Jose del Monte, Bulacan

Lesson Module

Course Title: CCA1 – Financial Acctg. & Reporting Level: Fourth Year
Course Code: CCA1 Lesson No.: 2
Lesson Hours: 2

Objectives:

At the end of this Module, the student will be able to:

1. To understand reasons for preparing bank reconciliation.
2. To learn the reconciling items affecting the cash in bank per book
and cash in bank per bank records.
3. To have a sound knowledge and mastery of the preparation of bank
reconciliation.
4. To prepare the adjustments necessary to reconcile the cash in bank
balance per book with the cash balance per bank statement.
5. To prepare a two-date bank reconciliation.
6. To know how to reconcile cash receipts per book and cash receipts
per bank statement.
7. To know how to reconcile cash disbursements per book and cash
disbursements per bank statement.
8. To understand the nature of proof of cash.

Subject Matter: Audit of Cash – Bank Reconciliation

Procedures:
A. Motivation – Materials needed: 1) Answer boards and 2) Marker

B. Lesson Presentation
Review of Concepts and Terminologies

BANK RECONCILIATION
 A statement which brings into agreement the cash balance per book
and cash balance per bank
 It is usually prepared monthly because the bank provides the depositor
with the bank statement at the end of every month
 Bank Statement – is a monthly report of the bank to the depositor
showing the cash balance per bank at the beginning, the deposits
 acknowledged, the checks paid, other charges and credits and the
daily cash balance per bank during the month
 Reconciling Items:
 Credit Memos
- Items already credited or added in the bank statement but
not yet debited or added in the depositor’s books
Examples:
a) Collections made by the bank for the account of the
depositor (notes, drafts, etc.)
b) Loans granted by the bank
c) Interest revenues
d) Matured money market placements or investments
 Debit Memos
- Items already debited or deducted in the bank statement but
not yet credited or deducted in depositor’s books
Examples:
a) Service charges
b) Repayment of loans
c) Checks returned by the bank – checks received by a
depositor from his customers, deposited to the bank, and
later returned by the bank due to lack of fund on the part
of the customer
d) Cost of documentary stamps affixed on the checks
e) Automatic deductions
f) Withdrawals made via ATM
 Deposits in Transit
- Items already debited or added in the depositor’s books but
not yet credited or added in the bank statement
Examples:
a) Unrecorded deposits
b) Undeposited collections
 Outstanding checks
- Items already credited or deducted in the depositor’s books
but not yet debited or deducted in the bank statement
- Checks already issued and recorded by the depositor but not
yet presented to the bank for encashment or clearing

 Reconciling items resulting from errors

 Errors must be analyzed for proper treatment. These are
reconciling items of the party who committed them. Errors are
either slide or transposition.
FORMS OF BANK RECONCILATION
 Adjusted Balance Method – both the bank and book balances are
reconciled to arrve at the adjusted or corrected balances

Balance per bank statement P xxx

Add
 Deposits in Transit P xxx
 Errors that have an effect of
understating the balance per xx xxx
bank statement
Total P xxx
Less
 Outstanding Checks P xxx
 Errors that have an effect of
overstating the balance per xx xxx
bank statement
Adjusted balance per bank P xxx

Balance per book P xxx

Add
 Credit Memos P xxx
 Errors that have an effect of
understating the balance per xx xxx
book
Total P xxx
Less
 Debit memos P xxx
 Errors that have an effect of
overstating the balance per xx xxx
book
Adjusted balance per book P xxx

 Bank to Book Balance Method – The bank balance is reconciled to arrive

at the book balance
P xxx
Balance per bank statement
Add
 Deposits in Transit P xxx
 Errors that have an effect of
understating the balance per xx xxx
bank statement
Total P xxx
Less
  Outstanding Checks P xxx
 Errors that have an effect of
overstating the balance per xx xxx
bank statement
Adjusted balance per bank P xxx
Add
 Debit memos P xxx
 Errors that have an effect of
overstating the balance per xx xxx
book
Total P xxx
Less
 Credit Memos P xxx
 Errors that have an effect of
understating the balance per xx xxx
book
Balance per depositor’s books P xxx

 Book to Bank Balance Method

Balance per book P xxx

Add
 Credit Memos P xxx
 Errors that have an effect of
understating the balance per xx xxx
book
Total P xxx
Less
 Debit memos P xxx
 Errors that have an effect of
overstating the balance per xx xxx
book
Adjusted balance per book P xxx
Add
 Outstanding Checks P xxx
 Errors that have an effect of
overstating the balance per xx xxx
bank statement
Total
Less
 Deposits in Transit P xxx
 Errors that have an effect of
understating the balance per xx xxx
bank statement
Balance per bank P xxx
In addition to the form presented above, another form of reconciliation is
frequently used by auditors. That is the so-called proof of cash or four
column bank reconciliation. It Is an expanded version of the bank
reconciliation and composed of the following:
 Reconciliation of the beginning of the period cash balance per the bank
statement and the books (first column)
 Reconciliation of the current period cash receipts (deposits) per the
bank statement to receipts recorded in the books (second column)
 Reconciliation of the current period cash disbursement per the bank
statement to disbursement recorded in the books (third column)
 Reconciliation of the end of the period cash balance per the bank
statement and the book (fourth column)

XYZ Company
Proof of Cash
For the month ended December 31, 2010

Nov. 30 Receipt Disburseme Dec. 31

Balance s nts Balance
Unadjusted book balance Pxx Pxx Pxx Pxx
Add (Deduct) Adjustments
Proceeds of note collected
by bank
30-Nov Xx (xx)
31-Dec xx xx
Bank Charges
November (xx) (xx)
December xx (xx)
Adjusted book balance Pxx Pxx Pxx Pxx

Unadjusted bank balance Pxx Pxx Pxx Pxx

Add (Deduct) Adjustments
Deposits in transit
30-Nov Xx (xx)
31-Dec xx xx
Outstanding checks
November (xx) (xx)
December xx (xx)
Adjusted bank balance Pxx Pxx Pxx Pxx
C. Application

ACTIVITY 1
MAC Traders received the September bank statement that showed a balance
of P77,620 as of September 30 of the current year. Other information is as
follows
Balance per checkbook P76,330
Checks Outstanding
 No. 3406 2,240
 No. 3416 2,809
 No. 3419 14,481
 No. 3428 990
Customer’s check returned marked NSF 1,360
August 31 deposit not recorded in the bank 16,860
statement
Bank service charge for the month 1,100
Check No. 3431 in payment of Meralco Bill for
P2,120 had been recorded in the books as
P2,210

Instruction: Prepare the bank reconciliation statement on September

Balance per book P 76,330
Debit Memo
NSF Check (1,360)
Bank service charge (1,100)
Book error (2,120 – 2,210) 90
Adjusted balance per book P 73,960
Add outstanding check 20,520
Less Deposits in transit (16,860)
Balance per bank P 77,620

ACTIVITY 2
Angela Gonzales Company deposits all receipts and makes all payments by
checks. The following information is available from the cash records
June 30 Bank Reconciliation
Balance per bank P7,000
Add: Deposits in 1,540
 Transit
Deduct: Outstanding (2,000)
Check
Balance per books P6,540

Month of July results

Per Per
Bank Books
Balance, July 31 P8,650 P9,250
July deposits 5,000 5,810
July checks 4,000 3,100
July note collected (not included in July 1,000
deposits
July bank service charge 15
July NSF check of customer returned by the bank 335
(recorded by bank as a charge)

Instructions:
a) Prepare a bank reconciliation statement using the adjusted balance
method
DIT, end = DIT beginning + Deposits per book – Deposits per bank
= 1,540 + 5,810 – 5,000 = 2,350
OC, end = OC beginning + Disbursement per book – Disbursement per
bank
= 2,000 + 3,100 – 4,000 = 1,100

Balance per book – June 30 6,540

Add Deposits for the month 5,810
Less Disbursements for the month (3,100)
Balance per book – July 31 9,250
Debit Memo – BS Charge (15)
NSF Check (335)
Credit Memo – Notes collected by 1,000
bank
Adjusted balance per book 9,900

Balance per bank 8,650

Deposits in transit 2,350
Outstanding check (1,100)
Adjusted balance per bank 9,900
 From 9,250 to 9,900 = increase of P650
b) Prepare the general journal entry or entries to correct the cash
account
Cash 650
Bank service charge 15
Accounts receivable 335
Notes receivable 1,000

ACTIVITY 3
James Logan Company has just received the August 31, 2010, bank
statement which is summarized below
Disbursemen Receipts Balance
ts
Balance, August 1 P9,369
Deposits during August 32,200 41,569
Note collected for depositor, 1,040 42,609
including P40 interest CM
Checks cleared during August 34,500 8,109
Bank service charge 20 8,089
DM
Balance, August 31 8,089

The general ledger cash account contained the following entries for the
month of August
CASH
Balance, August 1 10,050 Disbursements in 34,903
August
Receipts during 35,000
August
Ending 10,147

Deposits in transit at August 31 are P3,800 and checks outstanding at

August 31 are determined to total P1,050. Cash on hand at August 31 is
P310. The bookkeeper improperly entered one check in the books at
P146.50 which was written for P164.50 for supplies expense; it cleared the
bank during August
Instructions:
a) Prepare the bank reconciliation dated August 31, 2010 proceeding to
correct balance
Balance per book – June 30 10,147
Add Credit Memo – Note collected 1,040
Less Debit Memo – BSC (20)
Book error (18)
Adjusted balance per book 11,149

Balance per bank 8,089

Undeposited collections 310
Add deposits in transit 3,800
Less outstanding check (1,050)
Adjusted balance per bank 11,149

b) Prepare any entries necessary to make the books correct and

complete
c) What amount of cash should be reported in the August 31, balance
sheet

ACTIVITY 4
Given are the following: The January reconciliation, and parts of the bank
statement, cash receipts journal, and cash payments journal of Pabahay
Catering Services. Based on these, prepare the February 28 bank
reconciliation statement and the corresponding adjusting entry on the books
of Pabahay Catering services
Pabahay Catering Services
Bank Reconcilation Statement – Equal Bank
January 31, 2010

Balance per cash books P45,345.0

0
Less: Bank service charge for January 125.00
Adjusted balance per cash books P45,220.0
0

Balance per bank statement P36,550.2

5
Add: Undeposited collections, January 31 10,500.00
P47,050.2
5
Less: Outstanding check
 Check No. 121235 P997.7
5
  Check No. 121241 600.00
 Check No. 121242 232.50 1,830.25
Adjusted balance per bank statement P45,220.0
0

A part of the statement received from bank shows the transactions of

February

CHECKS
Amount Amount Deposits Date Balance

36,550.2
5

10,500. Februar 47,050.2

00 y1 5

12124 4,54 12123 99 12,125. 53,636.5

4 1.00 5 7.75 00 2 0

52,445. 106,082.
50 4 00

12124 7,82 4,250.0 102,511.

6 1.00 0 7 00

12124 60 12124 3,87 3,462.5 101,498.

1 0.00 5 5.15 0 9 35

12124 6,12 3,142.0 98,515.3

8 5.00 0 14 5

12125 24,52 12125 2,99 12,120. 83,119.9

1 5.00 2 0.45 00 16 0

18,758. 101,877.
00 21 90

12125 12,54 12125 11,22 78,112.9

5 2.00 6 3.00 23 0

12125 2,24 75,867.9

3 5.00 24 0

12125 12,52 12124 1,11 3,757.2 65,990.1

8 5.00 7 0.00 5 25 5

14,686. 80,676.1
00 28 5
Servic
e
Charg 80,576.1
e 100.00 28 5

The following are parts of the Cash Receipts Journal and Cash
Payments Journal of Pabahay Catering Service
CASH RECEIPTS
JOURNAL CASH PAYMENTS JOURNAL
DEBIT
Dat OR Cash in Da Chec CREDIT Cash
e No. Bank te k No in Bank
Servic
e
12,125 Charg
1 588 .00 1 e 125.00
52,445 12124
3 589 .50 1 4 4,541.00
4,250 12124
4 590 .00 2 5 3,875.15
3,275 12124
8 591 .00 5 6 7,821.00
18 12124
8 592 7.50 8 7 1,110.00
3,142 12124
11 593 .00 10 8 6,125.00
12,120 12124
15 594 .00 10 9 975.75
10,000 12125
18 595 .00 12 0 888.40
8,758 12125
18 596 .00 15 1 24,525.00
42 12125
22 597 5.75 15 2 2,990.45
3,331 12125
24 598 .50 17 3 2,245.00
1,234 12125
25 599 .00 18 4 725.50
13,452 12125
26 600 .00 21 5 12,542.00
4,25 12125
28 601 0.00 21 6 11,223.00
8,91 12125
28 602 4.00 22 7 8,753.50
137,910 12125
.25 25 8 12,525.00
 12125
28 9 24,522.00
125,512.7
5
Balance per book 57,742.50
Bank service charge 100.00
Adjusted balance per book 57,642.50

Balance per bank 80,576.15

Deposits in transit 13,164.00
Outstanding checks (36,097.65)
Adjusted balance per bank 57,642.50

Instructions:
a) Prepare the bank reconciliation dated February 28, 2010 proceeding to
correct balance
b) Prepare any entries necessary to make the books correct and
complete
c) What amount of cash should be reported in the August 31, balance
sheet

ACTIVITY 5
The bank statement for the checking account of MSU, INC. showed a
December 31, 2011 balance of P1,463,212.00. Information that might be
useful in preparing a bank reconciliation as follows:

a) Outstanding checks were P132,025

b) The December 31, 2011 cash receipts of P57,500 were not deposited
in the bank until January 2, 2012
c) One check written in payment of rent for P24,600 was correctly
recorded by the bank but was recorded by MSU as P26,400
disbursement
d) Bank service charges of P1,400 were listed on the bank statement
e) In accordance with prior authorization, the bank withdrew P45,000
directly from the checking account as payment on a mortgage note
payable. The interest portion of that payment was P35,000. MSU has
made no entry to record the automatic payment.
f) A deposit of P87,500 was recorded by the bank on December 13, but
did not belong to MSU. The deposit should have been to the checking
account of SUM, INC
g) The bank statement included a sum of P8,500 for an NSF check. The
check was returned with the bank statement and the company will
seek payment from the customer.
 h) MSU maintains a P20,000 petty cash fund that was appropriately
reimbursed at the end of December.
i) According to instruction for MSU on December 30, the bank withdrew
P1,000,000 from the account and purchased Treasury Bills for MSU.
MSU recorded the transaction in its books on December 31 when it
received1 notice from the bank. Half of the treasury bills mature in
two months and the other half in six months.

QUESTIONS
1. What is the cash balance per books on December 31, 2011?

Balance per bank 1,463,212

Outstanding check (132,025)
Undeposited collection 57,500
Bank error – deposit of Sum (87,500)
credited to MSU
Adjusted balance per bank 1,301,187
Book error (1,800)
Bank service charge 1,400
Payment for Mortgage payable 45,000
NSF Check 8,500
Balance per book – December 31 1,354,287

2. What is the corrected cash balance on December 31, 2011?

(1,354,287 )
3. What amount of cash and cash equivalents should be reported in the
current asset section of the balance sheet on December 31, 2011?
(1,354,287 + 20,000 + 500,000 = 1,874,287)
4. If the balance shown on the entity’s bank statement is less than the
correct cash balance and neither the entity nor the bank has made any
errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposit in transit
d. Bank charges not yet recorded by the entity
 5. If the cash balance shown on the entity’s accounting records is less
than the correct cash balance and neither the entity nor the bank has
made any errors, there must be
e. Deposits credited by the bank but not yet recorded by the entity
f. Outstanding checks
g. Deposit in transit
h. Bank charges not yet recorded by the entity

ACTIVITY 6
Edward Ha Co. Was organized on January 2, 2010. The following items are
from the company’s trial balance on December 31, 2010.

Ordinary share capital P1,500,0

Share premium 150,000
Merchandise inventory 69,000
Land 1,000,00
Building 1,400,00
Furniture & fixtures 367,000
Accounts receivable 165,400
Accounts payable 389,650
Notes payable-bank 500,000
Sales 6,235,20
Operating expenses (including depreciation of 1,005,15

Additional information

Deposits in transit P384,660

Service charge for December 2,000
Outstanding check, December 31 475,000
Bank balance, December 31 892,000
Edward Ha Co’s mark-up on sales

1. What is the total collection from sales? 6,235,200 – 165,400 =

6,069,800

a. P6,114,9 b. P4,119,2 c. P6,235,2 d. P6,069,8

67 40 00 00

2. What is the total payment for merchandise purchases?

CGS = 70% x 6,235,200 = 4,364,640
Total purchases = CGS + EI = 4,364,640 +69,000 = 4,433,640
Total payment = = TP – AP end 4,433,640 – 389,650 = 4,043,990

a. P3,905,9 b. P4,649,1 c. P4,043,9 d. P5,914,5

90 40 90 50
 3. What s the total cash receipts per books?
Collection + OCR = 6,069,800 + 2,150,000 = 8,219,800

a. P7,819,8 b. P8,169,8 c. P8,219,8 d. P8,069,8

00 00 00 00

4. What is the total cash disbursement per books?

4,043,990 + 1,000,000 + 1,400,000 + 367,000+ 605,150 =
7,416,140

a. P7,816,1 b. P7,416,1 c. P8,021,2 d. P7,278,1

40 40 90 40

5. What is the cash balance per books on December 31?

8,219,800 – 7,416,140 = 803,660

a. P653,66 b. P803,66 c. P1,203,66 d. P707,06

0 0 0 0

6. What is the adjusted cash balance on December 31?

803,660 – 2,000 = 801,660

a. P801,66 b. P651,66 c. P1,201,66 d. P803,66

0 0 0 0

ACTIVITY 7
The following bank reconciliation is presented for Chris Company for the
month of November of the current year
Balance per bank statement , 3,600,0
November 30 00
Add: Deposit in transit 800,000
Total 4,400,0
00
Less: Checks outstanding 1,200,0
00
Bank credit recorded in error 200,000 1,400,0
00
Balance per book, November 30 3,000,0
00

Data per bank statement for the month of December follow:

December deposits (including note collected of P1,000,000 for Chris) 5,500,0

December disbursements (including NSF check, P350,000 and service 4,400,0

charge, P50,000

All items that were outstanding on November 30 cleared through the bank in
December, including the bank credit. In addition checks amounting to
P500,000 were outstanding and deposits of P700,000 were in transit on
December 31.
1. What is the cash balance per ledger on December 31?
Balance per bank 12/31 = 3,600, 000 + 5,500,000 – 4,400,000 =
4,700,00
Adjusted balance per bank = 4,700,000 + 700,000 – 500,000 =
4,900,000
Balance per book 12/31 = 4,900,00 – 1000,000 + 400,000 =
4,300,000
a. P4,100,000 c. P4,700,000
b. P4,900,000 d. P4,300,000
2. What is the amount of cash receipts per book in December?
DIT end = DIT beg + Per book – Per bank
700,000 = 800,000 + Per book – 4,500,000
Per book = 4,400,000
a. P5,400,000 c. P5,500,000
b. P4,400,000 d. P6,400,000
3. What is the amount of cash disbursements per book in December?
OC end = OC beg + per book – per bank
500,000 = 1,200,000 + per book – 400,000 = 3,300,000

a. P3,700,000 c. P3,100,000
b. P3,300,000 d. P3,500,000

ACTIVITY 8
Your audit of the cash account of Junie Corp. disclosed the following
information
Cash in bank balance per books, December 31, 2010 35,000
Bank statement balance, December 31, 2010 60,000
Note collected by bank in December (principal plus 27,600
interest of P800 less collection fee of P200)
Debit memo for a checkbook ?
Deposit in transit, December 31, 2010 15,200
Transposition error made by bank in recording deposit of
December 28
Correct Amount P45,000 9,000
Recorded as 54,000
Included in cash in bank account is petty cash fund of
P10,000. Your count on December 31, 2010, revealed
the following fund items
Currency and coins P 3,000
Supplies 2,400
Transportation 100 9,500
IOU’s 4,000
Erroneous bank debit 26,700
Erroneous bank credit 11,000
Outstanding check (including a certified check of 39,400
 P10,000)

QUESTIONS.
______ 1. What is the principal amount of the note collected
by bank in December?
Proceeds = Principal + Interest – Withholding
27,600 = x +800 – 200
Principal = 27,000
a. P27,600 c. P28,200
b. P26,800 d. P27,000
______ 2. What is the adjusted cash in bank balance at
December 31, 2010?
Per book = 35,000 + 27,600 = 62,600 – 10,000 =
52,600 – 100
Per bank = 60,000 + 15,200 – 9,000 + 26,700 –
11,000 – 29,400 =
a. P52,500 c. P53,000
b. P52,700 d. P51,900
______ 3. The cost of checkbook is
a. P600 c. P-0-
b. P300 d. P100
______ 4. What is the amount of petty cash shortage at
December 31, 2010?
a. P400 c. P100
b. P500 d. P-0-
______ 5. What is the adjusted petty cash balance?
a. P9,500 c. P3,000
b. P3,500 d. P10,000

ACTIVITY 9
The accountant of NARCISA CO. provided the following data in reconciling
the April 30 cash in bank balance:

Balance per bank, April 30 130,35

0
Balance per books, April 30 85,000
Bank service charge 2,000
Deposits in transit 49,000
Outstanding checks 17,650
Notes collected by bank including P11,200 interest
(Narcisa Co. not yet informed) 136,00
0
Check drawn by XYZ Co. erroneously charged by 54,600
bank to Narcisa’s account
A transposition error was made in recording a sale
and deposit in the sales journal and cash receipts
 journal. Correct amount P13,658, recorded as –
P16,358
______ 1 What is the adjusted cash balance on April 30?
85,000 – 2,000 + 136,000 – 2,700 = 216,300
a. P219,000 c. P216,300
b. P221,700 d. P161,700
2. What is the journal entry to adjust the cash
account?

Cash 131,300
BSC 2,000
Sales 2,700
NR 124,800
Interest income 11,200

ACTIVITY 10
The following information was obtained in connection with the audit of
BLINKY Company’s cash account as of December 31, 2011
Outstanding checks , 11/30/11 P16,2
50
Outstanding check, 12/31/11 12,50
0
Deposit in transit, 11/30/11 12,50
0
Cash balance per general ledger, 12/31/11 37,50
0
Actual company collections from its customers 152,5
during December 00
Company checks paid by bank in December 130,0
00
Bank service charge recorded on company books in 2,500
 December
Bank service charge per December bank statement 3,250
Deposits credited by bank during December 145,0
00
November bank service charge recorded on company books in 1,500
December
Cash receipts per book of December is underfooted
by P2,500
The bank erroneously charged the company’s
account for P3,750 check of another company. The
bank error was corrected in January 2012
1. How much is the deposit in transit on
December 31, 2011?
DIT end = DIT beginning + Deposits per book –
Deposits per bank
DIT end = 12,500 + 152,500 – 145,000
DIT end = 20,000
a. P5,000 c. P22,500
b. P20,000 d. P17,500
2. The total unrecorded bank service charges as of December 31, 2011 is
1,500 + 3250 – 2500 = 2250
a. P750 c. P1,750
b. P2,250 d. P4,250
3. What is the total book receipt in December?
Actual collections + CM last month = 152,500
a. P150,000 c. P155,000
b. P152,500 d. P147,500
4. What s the total amount of company checks issued in December?
OC end = OC beg + Checks issued per book – Checks recorded per
bank
12,500 = 16,250 + x – 130,000
= 126,250
a. P130,000 c. P133,750
b. P123,000 d. P126,250
5. What is the total book disbursement in December?
Total disb per book = Checks issued this month + DM last month
= 126,250 + 2,500 = 128,750
a. P123,750 c. P126,250
b. P128,500 d. P128,750
6. What is the book balance on November 30, 2011?
Cash end + total book disbursement – total book receipts = Cash
beginning
40,000 + 128,750 – 152,500 = 16,250
a. P16,250 c. P37,500
b. P21,250 d. P35,000
7. What is the bank balance on November 30, 2011?
Per book = 16,250 – 1,500 = 14,750
14,750 + 16,250 – 12,500 = 18,500
a. P23,000 c. P43,500
 b. P18,500 d. P16,250
8. What is the total bank receipt in December?
= Total deposits + CM this month + Error
=145,000 +
a. P120,000 c. P145,000
b. P140,000 d. P150,000128,750
9. What is the total bank disbursement in December?
= Total checks recorded by bank + DM this month + error
=130,000 + 3,250 + 3,750 = 137,000
a. P154,500 c. P129,500
b. P132,500 d. P137,000
10. What is the bank balance on December 31, 2011?
Nov balance + Total receipts – Total disbursements
18,500 + 145,000 – 137,000 = 26,500
a. P21,500 c. P31,000
b. P26,500 d. P33,250

November Receipts Disburseme December

30 nts 31
Per book 16,250 152,500 128,750 40,000
BSC - Nov (1,500) (1,500)
BSC - Dec 2,250 (2,250)

Adjusted 14,750 152,500 129,500 37,750

balances
Per bank 18,500 145,000 137,000 26,500
OC – Nov (16,250) (16,250)
OC – Dec 12,500 (12,500)
DIT - Nov 12,500 (12,500)
DIT – Dec2 20,000 20,000
Bank error (3,750) 3,750
Adjusted 14,750 152,500 129,500 37,750
balances

Outstanding checks , 11/30/11 P16,2

50
Outstanding check, 12/31/11 12,50
0
Deposit in transit, 11/30/11 12,50
0
Cash balance per general ledger, 12/31/11 37,50
0
Actual company collections from its customers 152,5
during December 00
Company checks paid by bank in December 130,0
00
Bank service charge recorded on company books in 2,500
December
 Bank service charge per December bank statement 3,250
Deposits credited by bank during December 145,0
00
November bank service charge recorded on company books in 1,500
December
Cash receipts per book of December is underfooted
by P2,500
The bank erroneously charged the company’s
account for P3,750 check of another company. The
bank error was corrected in January 2012
11. How much is the deposit in transit on
December 31, 2011?
DIT end = DIT beginning + Deposits per book –
Deposits per bank
DIT end = 12,500 + 152,500 – 145,000
DIT end = 20,000
e. P5,000 g. P22,500
f. P20,000 h. P17,500

D. Assessment1
PART 1 - MULTIPLE CHOICE – THEORIES
Instruction: Shade the letter1 of the correct answer

1. A bank reconciliation is
a. A formal statement that lists all of the bank account balances of an
enterprise
b. A merger of two banks that previously were competitors
c. A statement sent by the bank to depositor on a monthly basis
d. A sche1dule that accounts for the differences between an enterprise’s
cash balance shown on its bank statement and the cash balance
shown in its general ledger

2. Which of the following items must be added to the cash balance per ledger
in preparing a bank reconciliation which ends with the adjusted cash
balance?
a. Note receivable collected by bank in favor of the depositor a4nd
credited to the account of the depositor
b. NSF customer check
c. Service charge
d. Erroneous bank debit

3. Which of the following must be deducted from the bank statement balance
in preparing a bank reconciliation which ends with adjusted cash balance?
a. Deposit in transit
b. Outstanding check
c. Reduction of loan charged to the account of the depositor
d. Certified check
4. If the balance shown on company’s bank statement is less than the correct
cash balance and neither the company nor the bank has made any errors,
there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding check
c. Deposits in transit
d. Bank charges not yet recorded by the company
5. If the balance shown on company’s accounting records is less than the
correct cash balance and neither the company nor the bank has made any
errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding check
c. Deposits in transit
d. Bank charges not yet recorded by the company

6. Which will not require an adjusting entry on the depositors books?

a. NSF check from customer
b. Check in payment of account payable amounting to P50,000 is
recorded by the depositor as P5,000
c. Deposit of another entity is credited to the account of the depositor
d. Bank service charge

7. Which statement is true?

a. Bank service charge will cause the cash balance per ledger to be
higher than that reported by the bank, all other things being equal
b. Outstanding checks will cause the cash balance per ledger to be
greater than the balance reported by the bank, all other thins being
equal
c. An error made by a bank by charging an amount to the depositor’s
account requires a correcting entry in the depositor’s own records
d. The cash amount shown in the balance sheet must be the balance
reported in the bank statement

8. Which of the following statement is false?

a. A certified check is a liability of the bank certifying it
b. A certified check will be accepted by many persons who would not
otherwise accept a personal check
c. A certified check is one drawn by a bank upon itself
d. A certified check should not be included in the outstanding checks
9. A proof of cash
a. Is a physical count of currencies on hand on balance sheet date
b. Is a formal statement showing the total cash receipts during the year
c. Is a four-column bank reconciliation showing reconciliation of cash
balance per book and per bank at the beginning and end of the current
month and reconciliation of cash receipts and cash disbursements of
the bank and the depositor during the current month
d. Is a summary of cash receipts and cash payments
 1 A proof of cash would be useful for
0. a. Discovering cash receipts that have not been recorded in the journal
b. Discovering time lag in making deposits
c. Discovering cash receipts that have been recorded but have not been
deposited
d. Discovering an inadequate separation of incompatible duties of
employees

PART 2 - MULTIPLE CHOICE – PROBLEM SOLVING

Instruction: Shade the letter of the correct answer

1. In preparing its bank reconciliation at December 31, 2010, Base Company

provided the following data:
Balance per bank statement 3,800,00
0
Deposit in transit 520,000
Amount erroneously credited by bank to Base’s 40,000
account
Bank service charge for December 5,000
Outstanding checks 675,000

What is the adjusted cash in bank on December 31, 2011?

3,800,000 + 520,000 – 40,000 – 675,000 = 3,605,000
a. P3,685,000 c. P3,600,000
b. P3,645,000 d. P3,605,000
2. On July 7, 2010, Brian Company received its bank statement for the month
ending June 30. The statement showed a P209,500 balance while the cash
account balance on June was P35,000. In reconciling the balances, the
auditor discovered the following:
 The June 30 collections amounting to P176,000 were recorded on the
books but were not deposited until July.
 The bank charged the company for a DAIF check of a customer.
 A paid check for P24,300 was entered incorrectly in the cash
disbursement journal as P42,300.
 Outstanding checks as of June 30 totaled P354,400
What is the amount of customer’s DAIF check?
35,000 - ? + 18,000 = 31,100
DAIF = 21,900
 a. P14,100 c. P21,900
b. P3,900 d. P334,900
3. Refer to No. 2, The adjusted cash balance is
209,500 + 176,000 – 354,000 = 31,100
a. P31,100 c. P38,900
b. P387,900 d. P4,900
4. Refer to No. 2, The cash balance per ledger should be increased (decreased) by
31,100 – 35, 00 = (3,900)
a. P3,900 c. P(3,900)
b. P178,400 d. P(178,400)
5. In preparing the August 31, 2011 bank reconciliation, Belmar Company
provided the following information: Balance per bank statement –
P1,805,000, Deposit in transit – P325,000, Return of customer’s check for
insufficient fund – P60,000, Outstanding check – P275,000, Bank service
charge for August – P10,000. On August 31, 2011, what is the adjusted
cash in bank ?
1,805,000 + 325,000 – 275,000 = 1,855,000
a. P1,855,000 c. P1,785,000
b. P1,795,000 d. P1,755,000
6. The information below relates to Allison Company’s cash n bank:
Balance per bank statement – December 31, 2011 P27,910
Deposit in transit 1,950
NSF Check – not recorded on books nor re- 2,000
deposited
Bank service charge for December 40
Outstanding checks 3000
Note collected by bank and recorded on books 2,800

The cash balance in the books of Allison Company on December 31, 2011,
is:
27,910 + 1,950 – 3000 = 26,860
26,860 +2,000 + 40 – 2,800 = 26,100
a. P26,020 c. P22,200
b. P32,100 d. P26,100
7. Item 7-12 are based on the following given:
The following data are assembled by the accountant of the BOARD
Company
November 30, December 31,
2011 2011
Cash account balance 41,175.00 100,712.50
Bank statement 267,705.00 344,542.50
balance
Deposit in transit 20,502.50 32,200.00
Outstanding check 69,295.00 75,280.00
Bank service charges 1,800.00 1,500.00
NSF check* 20,625.00
Company’s notes 179,537.50 202,250.00
receivable collected by
bank
 *Redeposited in the same month. No entries made to take up the return
and redeposit
The bank statement and the company’s cash records shows the following
totals
Cancelled checks and debit memos per bank 545,932.
statement 50
Cash receipts per cash book 411,592.
50
Checks written per cash book 529,792.
50
Deposits and credit memos per bank statement 622,770.
00

What is the total book receipt in December?

Collections per book + CM last month = 411,592.50 + 179,537.50 =
591,130
a. P613,842.50 c. P411,592.50
b. P591,130.00 d. P580,330.00
8. What is the total book disbursement in December?
Checks issued + DM last month =529,792.50 + 1,800 = 531,592.50
a. P531,592.50 c. P533,092.50
b. P529,792.50 d. P531,292.50
9. What is the adjusted book balance on November 30?
Balance – Nov 30 + CM Nov – DM Nov +(-) Errors Book
= 41,175 + 179,537.50 – 1,800 = 218,912.50
a. P220,712.50 c. P218,912.50
b. P222,512.50 d. P217,412.50
1 The adjusted bank receipts in December should be
0. 622,770 – 20,502.50 + 32,200 = 634,467.50
a. P634,168.50 c. P632,667.50
b. P622,770.00 d. P634,467.50
1 The adjusted book disbursements in December should be
1. 531,592.50 – 1,800 + 1,500 + 20,625 = 551,917.50
a. P545,932.50 c. P548,917.50
b. P552,517.50 d. P551,917.50
1 What is the adjusted book balance on December 31?
2. 100,712.50 – 1,500 – 20,625 + 202,250 = 280,537.50
a. P301,462.50 c. P322,087.50
b. P302,662.50 d. P280,537.50

For Item No. 13-22

Jairus Company provided the following bank reconciliation on May 31:

Balance per bank statement 2,100,000

Deposits in transit 300,000
Outstanding checks (50,000)
 Adjusted cash balance 2,350,000

Balance per book 2,360,000

Bank service charge (10,000)
Adjusted cash balance 2,350,000

Book end = 2,360,000 – 10,000 + 1,800,000 – 2,400,000 = 1,750,000

Bank end = 2,100,000 – 2,300,000 + 1,700,000 + 550,000 – 100,000 = 1,950,000

Data for the month of June:

Bank Book
Checks recorded 2,300,000 2,400,000
Deposits recorded 1,700,000 1,800,000
Collection by bank, P50,000 notes plus interest 550,000
NSF check returned with June 30 statement 100,000
Balances 1,950,000 1,750,000

13. What is the amount of checks outstanding on June 30?

OC end = OC beginning + Checks per book – Checks per bank
OC end = 50,000 +2,400,000 – 2,300,000 = 150,000
14. What is the amount of deposits in transit on June 30?
DIT end = DIT beg. + Deposits per book – Deposits per bank
DIT end = 300,000 + 1,800,000 – 1,700,000 = 400,000
15. What is the amount reported as adjusted cash in bank balance on June 30?
Per book = 1,750,000 + 550,000 – 100,000 = 2,200,000
Per bank = 1,950,000 – 150,000 + 400,000 = 2,200,00
16. What is the total disbursement per book on June?
= Total checks issued + DM last month = 2,400,000 + 10,000 = 2,410,000
17. What is the total disbursement per bank on June?
= Total checks paid by bank + DM this month
= 2,300,000 + 100,000 = 2,400,000
18. What is the total receipt per book on June?
= Total deposits this month + CM last month = 1,800,000 + 0 = 1,800,000
19. What is the total receipt per bank on June?
= Total deposits per bank + CM this month
= 1,700,000 + 550,000 = 2,250,000
20. What is the total adjusted cash receipt on June?
Per book Total receipts – CM last month + CM this month = 1,800,000 – 0 + 550,000 =
2,350,000
Per bank = Total bank receipts – DIT beg + DIT end = 2,250,000 – 300,000 + 400,000
= 2,350,000
21. What is the total adjusted cash disbursement on June?
Per book total disb – 2,410,000 – dm last month + dm this month = 2,410,000 – 10,000
+ 100,000 = 2,500,000
Per bank = 2,400,000 – 50,000 + 150,000 = 2,500,000
22. What is the adjusting entry needed on June 30?
Cash 450,000
AR 100,000
NR 500,000
Interest income 50,000

For items 23-32

The following are data taken from the books and bank statement of San Jose Copra
Company:

Balance per bank statement, February 28 218,020

Balance per bank statement, March 31 206,330
Balance per books, February 28 214,660
Balance per books, March 31 25,325
Actual cash received during March 1-31 1,083,045
Actual cash deposits during March 1-31, per bank 1,104,060
statement
Actual checks issued March 1-31 1,272,080
Actual checks paid by the bank during March 1-31 1,142,450
Undeposited collections, February 28 124,630
Undeposited collections, March 31 ?
Outstanding checks, February 28 128,290
Outstanding checks, March 31 ?
Bank service charge, February 300
Bank service charge, March 800
 NSF check returned by the bank on March 28 23,000
30-day, 12% note for P50,000 collected by the bank from 50,500
a customer on March 30

Determine the following:

23. Adjusted cash balance, February 28
Per book = 214,660 – 300 = 214, 360
Per bank = 218,020 +124,630 – 128,290 = 214,360
24. Deposits in transit, March 31
DIT end = DIT beginning + Actual collections per book – Actual deposits per bank
DIT end = 124,630 + 1,083,045 – 1,104,060 = 103,615
25. Outstanding checks, March 31
OC end = 128,290 + 1,272,080 – 1,142,450 = 257,920
26. Adjusted cash balance, March 31
Per book = 25,325 + 50,500 – 23,800 =52,025
Per bank = 206,330 + 103,615 – 257,920 = 52,025
27. Total bank credits, March 1-31
Actual deposits per bank = 1,104,060 + 50,500 = 1,154,560
28. Total bank debits, March 1-31
1,142,450 + 23,800 = 1,166,250
29. Total book debits, March 1-31
1,083,045
30. Total book credits, March 1-31
1,272,080 + 300 = 1,272,380
March 31, balance =25,325
214,660 + 1,083,045 – 1,272,380 = 25,325
31. Adjusted total receipts
Per bank = 1,154,560 – 124,630 + 103,615 = 1,133,545
Per book = 1,083,045 – CM last + CM this month = 1,083,045 + 50,500 = 1,133,545
32. Adjusted total disbursements
Per bank = 1,166,250 – 128,290 + 257,920 = 1,295,880
Per book = 1,272,380 – 300 + 23,800 = 1,295,880