Analyzing the

effects of
Reconciling items

Ramil D. Jamin
Objectives

• 1. Discuss the book balance and bank

balance
• Discuss the Components of book balance
and bank balance
• Analyze the transactions that can affects in
reconciling items
Activity: Interpret the picture below:
Book Reconciling items:

• Credit memos
• Debit memos
• Errors
Bank Reconciling items:

• Deposit in transit
• Outstanding checks
• Errors
 Book Reconciling items:
Credit Memos – items not representing credited by the bank
to the account of the depositor but not yet recorded by the
depositor as cash receipts.
Ex: Notes receivables collected by the bank in favor of the
depositor and credited to the account of the depositor.
Proceeds of the bank loan credited to the account of the
depositor
Matured time deposits transferred by the bank to the
current account of the depositor
 Book Reconciling items:
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 cash disbursement.
Ex: NSF (No Sufficient Fund) or DAIF (Drawn Against
Insufficient Funds), Technically defective checks, bank
charges, reduction of loan.
 Book Reconciling items:
Book errors – common error by the depositors is
recording a check in the accounting records or cash
book at an amount that differs from the actual amount.
Ex: 1, 500 recorded as 5, 100
 Bank Reconciling items:
Deposit in transit – are collection already recorded by
the depositor as cash receipts but not yet reflected on
the bank statement.
Ex: 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 depositors.
 Bank Reconciling items:
Outstanding checks – Checks already recorded by the
depositor as cash disbursement but yet reflected on
the bank statement.
Ex: Checks drawn and already given to payees but not
yet presented for payment.
Certified checks – Accepted/Insufficient fund
 Bank Reconciling items:
Bank errors – Sometimes banks make error by
depositing or taking money out of the depositor’s
account in error..
The adjusted balance method format is used in
reconciling the book balance and the bank balance.
 Analyzing the effects of the reconciling items

Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021
12/31/2021
Less: Debit Memo
Less: Outstanding P 50,000 Service Charge P 100
Checks Error on checks with
Uncleared Checks difference of 1,000 P 1, 000
NSF P 5, 200
Add: Deposit in transit P 20,000 Add: Credit Memo P 3,000
Interest Income P 9,800
Adjusted Bank Balance P 270,000 Notes Receivable
12/31/22 Adjusted Boo Balance P 270,000
12/31/22
 Illustration:
XYZ company is closing its books and must prepare a bank
reconciliation for the following items
1. Bank statement contains an ending balance of P 300,000 on
December 31, 2021, whereas the company’s general ledger
shows an ending balance of P 263,500

Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
 Illustration:
2. Bank statement contains P 100 service charge for
operating the account
Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Debit Memo P 100
Service Charge
 Illustration:
3. Bank statement contains interest income of P 3,000

Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Debit Memo P 100
Service Charge
Add: Credit Memo P 3,000
Interest Income
 Illustration:
4. XYZ issued checks of P 50,000 that have not been cleared
by the bank
Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Outstanding Checks P 50,000 Less: Debit Memo P 100
Uncleared Checks Service Charge
Add: Credit Memo P 3,000 Add: Credit Memo P 3,000
Interest Income Interest Income
 Illustration:
5. XYZ deposited of P 20,000 but did not appear on the bank
statement
Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Outstanding Checks P 50,000 Less: Debit Memo P 100
Uncleared Checks Service Charge
Add: Deposit in transit P 20,000 Add: Credit Memo P 3,000
Interest Income
 Illustration:
6. A check for the amount of P 4, 700 issued to the office suppliers
was misreported in the cash payment journal as P 3,700
Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Outstanding Checks P 50,000 Less: Debit Memo
Uncleared Checks Service Charge P 100
Add: Deposit in transit P 20,000 Error on check P 1,000
Add: Credit Memo P 3,000
Interest Income
 Illustration:
7. A note receivable of P 9,800 was collected by the bank.

Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Outstanding Checks P 50,000 Less: Debit Memo
Uncleared Checks Service Charge P 100
Add: Deposit in transit P 20,000 Error on check P 1,000
Add: Credit Memo
Interest Income P 3,000
Notes receivables P 9,800
 Illustration:
8. A check of P 5,200 deposited by the company has been
charged back as NSF.
Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021 12/31/2021
Less: Outstanding Checks P 50,000 Less: Debit Memo
Uncleared Checks Service Charge P 100
Add: Deposit in transit P 20,000 Error on check P 1,000
NSF P 5,200
Add: Credit Memo
Interest Income P 3,000
Notes receivables P 9,800
 Analyzing the effects of the reconciling items

Bank Balance Book Balance

Ending Bank Balance P 300, 000 Ending Book Balance P 263, 500
12/31/2021
12/31/2021
Less: Debit Memo
Less: Outstanding P 50,000 Service Charge P 100
Checks Error on checks with
Uncleared Checks difference of 1,000 P 1, 000
NSF P 5, 200
Add: Deposit in transit P 20,000 Add: Credit Memo P 3,000
Interest Income P 9,800
Adjusted Bank Balance P 270,000 Notes Receivable
12/31/22 Adjusted Boo Balance P 270,000
12/31/22
Formative test
Ambitious Company is closing its books for the month ended April 30.
The company’s bookkeeper must prepare a bank reconciliation based on the
following information:

1. Bank statement contains an ending bank balance of ₱320,000

2. Book Balance shows ₱344,000
3. Bank statement contains ₱5,000 check printing charge for new checks
that the company ordered.
4. The bank statement contains ₱1,500 service charge for operating the bank
account.
5. The bank statement rejects a deposit of ₱5,000 due to not sufficient
funds,and charges the company ₱500 fee associated with the rejection.
6. The bank statement contains interest income of ₱3,000.
7. Ambitious Company issued ₱10,000 of checks that have not yet cleared by the
bank.
8. Ambitious Company deposited ₱25,000 of checks at month-end that were not
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