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One statement being made before computing the total amount of cash both on hand in bank is the
statement of bank reconciliation. This statement is not one of the basic financial reports that every
company must make annually but this statement is necessary to reach the true amount of cash.
This article is not intended to discuss about Bank Reconciliation because this was discuss in a
different page. This write up is consist of the lists of formulas being used in computing for adjusted
cash on hand or in bank, the total amount of outstanding check and the total amount of deposits
in transit.
Before going further let’s meet the three basic formats used in reconciling the book balance and
the bank balance.
Adjusted balance Method
Both book and bank balance is brought to correct the cash balance that must appear in the
statement of position under this method.
Book to Bank Method
This method allows the book balance to be reconciled with the bank balance. Meaning the book
balance is adjusted to equal the bank balance.
Bank to Book Method
This is just similar with the book to bank method but in this method instead of the book being
reconciled with the bank balance, the bank balance is being reconciled with the book or the bank
balance is adjusted to equal the amount of the cash in the book balance.
Adjusted Balance Method
Book balance
Add: Credit memos
———————
Total
Less: debit memos
———————
Adjusted book balance
Bank balance
Add: Deposit in transit
———————
Total
Less: Oustanding checks
———————
Adjusted bank balance
Book balance
Add: Credit memos
Outsatanding checks
———————-
Total
Less: Debit memos
Deposit in transit
———————-
Bank balance
Bank balance
Add: Deposit in transit
Debit memos
———————–
Total
Less: Credit memos
Outstanding checks
———————–
Book balance
The proforma computations above are all used in solving the adjusted cash in bank reconciliation.