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Practical Accounting 1 b.

A two-month, 17% P60,000 customer’s note dated October 25, discounted on November 25,
was dishonored on December 25, and the bank charged the company P62,000, which
P1.014_Bank Reconciliation SMC 😊
included a protest fee of P2,000.

c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and the bank
Bank reconciliation but was later corrected by the bank.

The bank reconciliation, when properly prepared, proves that the cash balance per bank and d. Check no. 142 for P12,425 was entered in the cash disbursements journal at P12,245 and
the cash balance per book are in agreement. Periodic bank reconciliations can help identify any check no. 156 for P3,290 was entered as P32,900.
cash errors or irregularities that have occurred in accounting for cash, either by the entity or the
bank. Prepared by an individual who neither handles nor records cash. Most differences in bank e. Bank service charges of P1,830 for December were not yet recorded on the books.
and book balances for cash are “normal” and are the result of temporary timing lags.
f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had been
Deposits in Transit - Deposits recorded in the cash account in one period but not received collected on December 28; and the bank charged P500. (No entry was made on the books
by the bank until the next period. when the note was sent to the bank for collection).

Outstanding Checks - Checks written by the company that have yet to be presented at g. Receipts on December 31 for P24,000 were deposited on January 2.
the bank for collection.
h. The following checks were outstanding on Dec. 31:
Bank Charges - Charges by the bank for services that are deducted from the account by No. 123 P3,000 No. 154 P4,000
the bank and which the company learns of when it receives the bank statement. 143 * 2,000 157 6,000
144 7,000 159 7,000
Bank Credits - Collections or deposits in the company's account that the company is not 147 3,000 169 5,000
aware of until receipt of the bank statement. * Certified by the bank in December

Bank or Depositor Errors - Errors made by the company or the bank that must be corrected i. A deposit of P20,000 was recorded by the bank on December 5, but it should have been
for the reconciliation to balance. recorded for Dolor Company rather than Dollar Company.

Forms of bank reconciliation j. Petty cash of P10,000 was included in the Cash in Bank balance.

Two forms of bank reconciliation may be prepared. One form reconciles from the bank k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company expects to
statement balance to the book balance or vice versa. The other form is described as the recover this amount from the insurance company. The cash receipts were recorded in the
reconciliation of bank and book balances to corrected cash balance. This form is composed of books, but no entry was made for the loss.
two separate sections that begin with the bank balance and book balance, respectively.
Reconciling items that apply to the bank balance are added and subtracted to arrive at the l. The December 21 deposit included a check for P20,000 that had been returned on
corrected cash balance. Likewise, reconciling items that apply to the book balance are added December 15 marked NSF. Dollar Company had made no entry upon return of the check.
and subtracted to arrive at the same corrected cash balance. The corrected cash balance is The redeposit of the check on December 21 was recorded in the cash receipts journal of
the amount that should be shown on the balance sheet at the reconciliation date. Dollar Company as a collection on account.

Straight Problem REQUIRED:


1. Prepare a bank reconciliation using:
The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of December
a) Bank to book method;
31. The bank statement as of December 31 showed a balance of P106,000. Upon comparing
b) Book to bank method; and
the bank statement with cash records, the following facts were developed:
c) Adjusted balance method
a. The company’s account was charged on December 26 for a customer’s uncollectible check 2. Prepare adjusting entries as of December 31, 2012.
amounting to P30,000.
Illustrative Cases Balance per bank, May 31 P75,000
Add: Deposits in transit 12,000
1. The following data pertaining to the cash transactions and bank account of Mandirigma Total 87,000
Company for the month of May are available to you: Less: Outstanding checks P14,000
Bank credit recorded in error 5,000 19,000
Cash balance, per records, May 31 P17,194
Cash balance per books, 5/31 P68,000
Cash balance, per bank statement, 5/31 31,948
Bank service charge for May 109 The bank statement for the month of June contains the following data:
Debit memo for the cost of printed checks delivered by the bank 125 Total deposits P55,000
Outstanding checks, May 31 6,728 Total charges, including an NSF check of P4,000
Deposit of May 30 not recorded by bank until June 1 4,880 and a service charge of P200 48,000
Proceeds of a bank loan of May 30, net of interest of P300 5,700
Proceeds from a customer's promissory note, including interest of P100 8,100 All outstanding checks on May 31, including the bank credit, were cleared in the bank in June.
Check No. 2772 issued to a supplier entered in the accounting records at
There were outstanding checks of P15,000 and deposits in transit of P19,000 on June 30.
P2,100 but deducted in the bank statement at an erroneous amount of 1,200
Stolen check lacking an authorized signature, deducted from Mandirigma's 4. Cash receipts per books in June is
account by the bank in error 800
Customer's check returned by the bank marked NSF; no entry has been 5. Cash disbursements per books in June is
made in the accounting records to record the returned check 760
Use the following information for the next two questions.
What is the correct cash balance at May 31?
Banaue Company deposits all receipts and makes all payments by check. The following
2. The information below is from the books of the Seminole Corporation on June 30: information is available from the cash records:
Balance per bank statement P11,164 May 31 Bank Reconciliation
Receipts recorded but not yet deposited in the bank 1,340 Balance per bank P262,460
Bank charges not recorded 16 Add: Deposits in transit 21,000
Note collected by bank and not recorded on books 1,120 Deduct: Outstanding checks ( 38,000)
Outstanding checks 1,100 Balance per books P245,460
NSF checks - not recorded on books nor redeposited 160
Assuming no errors were made, compute the cash balance per books on June 30 before any
Month of June Results Per Bank Per Books
reconciliation adjustments.
Balance June 30 P279,950 P303,550
June deposits 107,840 158,890
3. The cash in bank account of S-mart, Inc. for April showed an ending balance of P129,298.
June checks 111,000 100,800
Deposits in transit on April 30 was P18,200. Outstanding checks as of April 30, were P59,435,
June note collected (not
including a P5,000 check which the bank had certified on April 27. During the month of April,
included in June deposits) 30,000 -0-
the bank charged back NSF checks in the amount of P3,435 of which P1,835 had been
June bank service charge 350 -0-
redeposited by April 20. On April 23, the bank charged S-Mart’s account for a P2,200 items
June NSF check of a customer
which should have been charged against K-mart, Inc., the error was not detected by the
returned by the bank
bank. During April, the proceeds from notes collected by the bank for S-Mart, Inc. was P7,548
(recorded by bank as a
and bank charges for this services was P18.
charge) 9,000 -0-
How much is the unadjusted balance per bank on April 30?
6. The deposits in transit as of June 30 is
Use the following information for the next two questions.
7. The outstanding checks as of June 30 is
Shown below is the bank reconciliation for YOUR Company for the month of May: