Bank Recon

• Bank Reconciliation


  A statement which brings into agreement the two reciprocal accounts/records: the cash balance per book and the cash balance per bank as shown in the bank statement provided by the bank at the end of each month
• Kinds of Bank Deposits

  • Demand Deposit
  • Savings Deposit
  • Time Deposit
  • Current account / Checking Account / Commercial Deposit
• Demand Deposit


  Where deposits are covered by deposit slips and where funds are withdrawable on demand by drawing checks against the bank
• Savings Deposit


  Depositor is given a passbook upon initial deposit; passbook is required when making deposits and withdrawals
• Time Deposit


  Evidenced by a formal agreement embodied in an instrument called Certificate of Deposit; may be pre-terminated or withdrawn on demand or after a certain period of time agreed upon
• Time Deposit


  • Non-interest bearing
  • Interest-bearing
• Bank Statement


  A monthly report of the bank to the depositor showing: 1. The cash balance per bank at the beginning, 2. The deposits made by the depositor and acknowledged by the bank, 3. The checks drawn by the depositor and paid by the bank (canceled checks), 4. The daily cash balance per bank during the month
• Reconciling Items

  • Book Reconciling Items
  • Bank Reconciling Items
• Credit Memos


  Items not representing deposits CREDITED by the bank to the account of the depositor but not yet recorded by the depositor as cash receipts. Have the effect of increasing the bank balance.
• Credit Memos


  • Notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor
  • Proceeds of bank loan credited to the account of the depositor
  • Matured time deposits transferred by the bank to the current account of the depositor
• Debit Memos


  Items not representing checks paid by the bank which are CHARGED or DEBITED by the bank to the account of the depositor but not yet recorded by the depositor as a cash disbursement. Have the effect of decreasing the bank balance.
• Debit Memos


  • NSF or No Sufficient Fund Checks / DAIF or Drawn Against Insufficient Fund Checks
  • Technically Defective Checks
  • Bank Service Charges
  • Reduction of Loan
• Deposits in Transit


  Collections already recorded by the depositor as cash receipts but not yet reflected on the bank statement
• Deposits 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/ cash on hand awaiting delivery to the bank for deposit
• Outstanding Checks


  Checks already recorded by the depositor as cash disbursements but not yet reflected in the bank statement
• Outstanding Checks


  • Checks drawn already given to payees but not yet presented for payment
• Certified Checks


  One where the bank has stamped on its face the word "accepted" or "certified" indicating sufficiency of funds. When the bank certifies a check, the account of the depositor is immediately debited or charged to insure the eventual payment of check.
• Certified Checks should be deducted from the total outstanding checks (if included therein) because they are no longer outstanding for bank reconciliation purposes.
• Some Errors and Their Correction


  • Understatement of Cash Receipts on the books of Depositor
  • Understatement of Checks Drawn by the Depositor
  • Deposit of another entity credited by the bank to depositor's account
  • Check of another entity charged to the depositor's account
• Errors are reconciling items of the party which committed them.
• Forms of Bank Reconciliation

  • Adjusted Balance Method
  • Book to Bank Method
  • Bank to Book Method
• Adjusted Balance Method


  Book balance and bank balance are brought to a correct cash balance that must appear on the SFP.
• Book to Bank Method


  Book balance is reconciled with the bank balance or the book balance is adjusted to equal the bank balance.
• Bank to Book Method


  Bank balance is reconciled with the book balance or the bank balance is adjusted to equal the bank balance.
• General Procedures for Bank Reconciliation

  1. Determine the balance per book and the balance per bank

  2. Trace the cash receipts to the bank statement to ascertain whether there are deposits not yet acknowledged by the bank (Deposit in Transit)

  3. Trace the checks issued to the bank statement to ascertain whether there are checks not yet presented for payment (Outstanding Checks)

  4. Examine the bank statement to determine whether there are bank credits (Credit Memo) or bank debits (Debit Memo) not yet recorded by the depositor

  5. Watch out for errors. Errors are reconciling items of the party which committed them.