CHAPTER 9:

The Bank Account

Presented by : group 3
 Learning objectives
By the end of this chapter, the students should be able to:
• Identify the bank accounts normally maintained by a business.
• Identify and understand the contents of bank statement.
• Identify checks
• Understand the bank reconciliation statement.

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Different Kinds of
Bank Accounts

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 Savings account
▸ The simplest bank account.
▸ The account earns minimal interest and may have minimum balance
requirement.
▸ Passbook- a booklet used to record bank transactions on savings
account.
▸ ATM card- used for making transactions in Automated Teller
Machine
▸ Withdrawals from savings account maybe made over-the-counter,
ATM’s, online payments and debit card transaction.
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 CHECKING ACCOUNT
 A checking account is like a savings account with an added feature-the
depositor can issue bank checks.
 Bank checks provide additional control feature that prevent
misappropriation of cash.
 A check can be “crossed ” or “restricted for payee’s account only”
 Checking accounts rarely earn interest.
 There are ATM passbook checking account.
 Hybrid account- combination of savings account and checking account.
It earn high interest rate but limit check withdrawal to a few checks a
month such as premium deposit account.
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 TIME DEPOSIT ACCOUNT
 The depositor agrees not to withdraw the funds over the contracted period in
exchange for fixed interest rate that are higher than deposit rate.
 Time deposit account are investment placement.
 Time deposit are evidenced by certificates of time deposits (CTD).

Other investment account.

 Bank also offer unit investment trust fund( UITF). This allows the investor to
gain the benefit and suffer the losses of investments in stocks and bonds without
directly investing in those securities. Basically, investors purchase units of
pooled funds.

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Bank Forms

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Bank forms
There is a corresponding bank form for almost every transaction with
the bank. Take for example the opening of a bank account. The forms to
be filled and signed are numerous. There are account opening forms,
signature cards, investor suitability forms and indemnity forms.
Moreover, we will only look at the basic format of these forms. Most
banks have their own formats which are tailored to their needs.
Deposit Slip
Is use to document deposit transactions. It is a bank form filled up by the
depositor. The depositor will indicate the account name as well as the account
number. There are two kinds of deposit slip, namely cash deposit slip and
check deposit slip but some banks merge these two into one.

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 Withdrawal Slip
▸ Withdrawal slip documents the withdrawal
from a passbook account.
▸ It is a bank form filled up by the account
holder.
▸ A withdrawal slip is used only for passbook
savings account

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 Bank Check
▸ It is a bank form filled up by the account holder
that instructs the bank to pay the designated
payee indicated on the check on or after the date
specified on the check.
▸ The check expires six months from the date of
the check.
▸ Safer form of payment.
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“

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 BANK STATEMENTS

▸ Is a detailed transaction history of the account over the

reporting period. It is a report prepared by the bank for
those accounts that do not have passbook.
▸ frequency of reporting is generally monthly.

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Cancelled Checks
▸ All issued checks that the bank honored or paid.
Auto Debit Transaction
- A contractual agreement between the bank, the account holder,
and the supplier, wherein the supplier can claim payment from
the bank and the bank will automatically charge the payment to
account holder's account.
Auto Credit Facilities
- The account holder can designate his savings or checking
accounts as settlement account for his investment transaction
with the bank.
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 Bank Reconciliation
It is the process of matching the balances in an
entity’s accounting records for a cash account
to the corresponding information on a bank
statement. It determines whether the cash
record agrees with our inventory cash in the
bank.

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Bank Reconciliation Format

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 Timing Differences
A. Reconciling items on the bank side
▸ Outstanding checks
▸ Deposit in transit
B. Reconciling items on the book side
▸ Collection received by the bank
▸ Debit and credit memo
▸ Non-sufficient fund (NFS) check

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Outstanding checks are checks that have been written and recorded in the
company's Cash account but have not yet cleared the bank account or
presented to the bank by the payee.

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Deposit in transit refers to two items.
(1) Amount that is deposited in the bank after
the cut-off time; and
(2) Amount that is received by the company
for deposit but not yet deposited in the bank.

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Example 1 : Amount that is deposited in the bank after the cut-off
time.
June 30, 20X1

1:00 PM ABC Company received a ₱5,000 check from a customer.

Collection was promptly recorded in the accounting books.

2:30 PM ABC Company deposited the ₱5,000 check in GHI bank. The
teller informed you that their cut-off time for check deposit is
11:00 AM. Late deposit was stamped on the deposit slip.

July 1, 20XI Check deposit was credited in ABC Company’s bank

account.
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Example 2 : Amount that is received by the company but not yet
deposited in the bank.

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 Collection received by the bank
In some cases, customer deposits their payment directly to the
supplier’s bank. However, the customer may not have informed
the supplier. In this case, the deposit is already recorded in the
bank account but not in the accounting books. Since cash was
appropriately received, it was correctly added to the bank
account.

Cash xxx
Accounts Receivable xxx
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 Debit and credit memo
A debit entry in the bank account is a deduction. On
the other hand, a credit entry is an addition.
 Debit memo refers to deductions made by the bank
that are not initiated by the account holder through
withdrawal slips or bank checks such as bank
service charge.

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 The journal entry to adjust for the debit memo is given below:
Accounts Payable / Accrued Expenses xxx
Cash xxx

 The direct opposite of debit memo is credit memo. Examples

are interest income and other collections made by the bank on
your behalf. This means that the bank have already recorded the
additions to your account.

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 The journal entry to record the credit memo
in the accounting books is given below:

Cash xxx
Accounts Receivable xxx

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 Non-sufficient fund (NSF) check

NSF checks refer to checks received and deposited by the

account holder that are dishonored by the issuing bank because
the issuer does not have enough funds on his checking account to
cover the check.

Accounts Receivable xxx

Cash xxx

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Figure 9: Summary of Reconciling Items Resulting from Timing
Differences
Per accounting book
Unadjusted balance xxx

Add:
Credit memo xxx
Interest income
Collection received by the xxx
bank

Less:
Debit memo xxx
Bank fees xxx
NSF check received xxx

Adjusted balance xxx

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 Errors
▸ It is common for either or the company’s accountant to
make an erroneous entry in their books.
▸ These errors should be carefully analyzed and adjustment
should be made on the side that committed the error.
▸ If the bank committed an error in recording, the adjustment
for the correction should be made on the side of the bank.

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 End of chapter summary
1. Cash is an important asset of the company. It is one that easily
misappropriated if not properly safeguarded.
a. All cash receipt should be deposited in the back at the end of the day.
b. Cash payments should be made through bank checks and processed through
the voucher system.
2. The following are different kinds of bank account.
a. Savings account
b. Checking account
c. Time deposit account
d. Unit investment trust fund
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3. The following are different kinds of bank forms.
a. Deposit slip
b. Withdrawal slip
c. Bank checks
d. Kinds of bank checks
4. A bank statement is a detailed transaction history of the bank
account over the reporting period.

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▸ 5. Bank reconciliation is the procedure to reconcile the unadjusted bank and
book balances to the correct cash balance.
a. Reconciling items that result from timing differences occurs when
transaction are recorded on the bank’s and the company’s accounting book at
different rates.
i. Outstanding checks refer to checks issued and delivered to designated
payee but has not yet cleared the bank.
ii. Deposit transit refers to deposit that did not meet the bank’s cut-off time
and is not recorded in bank statement until the following period.
iii. Collections received directly by the bank are added to the unadjusted book
balance.
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iv. Debit and credit memo refers to additions and deductions from
the account that were not instructed by the depositor.
v. NSF checks are checks dishonored by the bank because the
balance of the issuer’s checking account is not enough to cover
the amount of the checks. It should be deducted from unadjusted
book balance.
b. Errors are unintentional mistakes. It should be carefully
analyzed to determine the proper adjustment to the bank
reconciliation.

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ANNANG, MARK GILBERT PALENTINOS, IYA KATRINA
MENDOZA, ANDREA PANGILINAN, ALECXANDRA
MENDOZA, SHERYLL RAGUNTON, LAUREN
MERCADO, ANREA ROBLES, RIZZA
MORILLO, SOPHIA
12 ABM-DIRECTOR

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THANK
YOU!

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quiz

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1. It is the simplest bank account.
2. It refers to additions and deductions from the account that were not
instructed by the depositor.
3. are checks dishonored by the bank because the balance of the
issuer’s checking account is not enough to cover the amount of the
checks. It should be deducted from unadjusted book balance.
4. are unintentional mistakes. It should be carefully analyzed to
determine the proper adjustment to the bank reconciliation
5. It is a bank form filled up by the account holder that instructs the bank
to pay the designated payee indicated on the check on or after the date
specified on the check.

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▸ 6. In the investor earns income not through interest but on the
increase in the fair market value of the shared pooled funds.
▸ 7. What type of account rarely earn interest because of the fast turnover of
transactions.
▸ 8. It is use to document deposit transactions.
▸ 9. It refer to checks issued and delivered to designated payee but has not yet
cleared the bank.
▸ 10. is the procedure to reconcile the unadjusted bank and book
balances to the correct cash balance.

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▸ 11. An expired check referred to as .
▸ 12. A contractual agreement between the bank, the account holder, and the
supplier, wherein the supplier can claim payment from the bank and the bank will
automatically charge the payment to account holder's account.
▸ 13. What slip documents the withdrawal from a passbook account?
▸ 14. Is a detailed transaction history of the account over the reporting period. It is a
report prepared by the bank for those accounts that do not have passbook.
▸ 15. It refers to deposit that did not meet the bank’s cut-off time and is not
recorded in bank statement until the following period.

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▸ 16-17. What are the two parts of timing differences.
▸ 18. It is an important asset of the company. It is one that easily
misappropriated if not properly safeguarded.
▸ 19. What refers to deductions made by the bank that are not
initiated by the account holder through withdrawal slips or bank
checks such as bank service charge.
▸ 20. The account holder can designate his savings or checking
accounts as settlement account for his investment transaction with
the bank.
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▸ 1. Savings account 11. Stale checks
▸ 2. Debit and credit memo 12. Auto Debit transaction
▸ 3. NSF checks 13. Withdrawal slip
▸ 4. Errors 14. Bank statement
▸ 5. Bank checks 15. Deposit transit
▸ 6. UITF 16. Reconciling items on ban
side
▸ 7. Checking account 17. Reconciling items on book sid
▸ 8. Deposit slip 18. Cash
▸ 9.Cancelled checks 19. Debit memo
▸ 10. Bank reconciliation 47
20. Auto Credit Facilities