Bank Reconciliation Basics
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Questions and Answers

What is the total adjusted balance reported?

  • ₱600,000
  • ₱410,000
  • ₱205,000
  • ₱570,000 (correct)

A debit memo increases the cash recorded in the accounting records.

False (B)

How much did Blue Sky Co. add as deposits in transit for the reconciliation?

₱205,000

The amount of credit memos recorded is _____?

<p>₱60,000</p> Signup and view all the answers

Match the following transactions with their corresponding effects on cash in the bank:

<p>Credit memo = Increases cash balance Debit memo = Decreases cash balance Outstanding checks = Decreases available cash Deposits in transit = Increases reported cash</p> Signup and view all the answers

What is the purpose of preparing a bank reconciliation statement?

<p>To compare cash balances and adjust them (A)</p> Signup and view all the answers

Bank reconciliations should be prepared on a quarterly basis.

<p>False (B)</p> Signup and view all the answers

What is added to the balance per bank statement when preparing a bank reconciliation?

<p>Deposits in transit</p> Signup and view all the answers

What does 'Balance per bank statement, end' refer to?

<p>Ending cash balance in the bank statement as of August 31, 2016 (A)</p> Signup and view all the answers

Credit memos are deductions made by the bank to the depositor’s account.

<p>False (B)</p> Signup and view all the answers

The adjusted cash balance is shown in the financial statements as _____ cash balance.

<p>correct</p> Signup and view all the answers

Match the following components of a bank reconciliation statement to their descriptions:

<p>Credit memos = Amounts credited to the bank account by the bank Outstanding checks = Checks issued but not yet cleared by the bank Debit memos = Amounts debited from the bank account by the bank Deposits in transit = Cash deposits made but not yet recorded by the bank</p> Signup and view all the answers

What are automatic debits in the context of bank transactions?

<p>Payments made automatically by the bank on behalf of the depositor.</p> Signup and view all the answers

Which item would be subtracted from the balance per bank statement during reconciliation?

<p>Outstanding checks (D)</p> Signup and view all the answers

Payments of __________ represents payment of loan made from the depositor's bank account.

<p>loans</p> Signup and view all the answers

A business with multiple bank accounts needs to prepare one bank reconciliation statement for all accounts.

<p>False (B)</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Credit Memos = Additions to a depositor's account Debit Memos = Deductions from a depositor's account NSF Check = Insufficient funds check Book Errors = Errors made by the depositor in their accounting books</p> Signup and view all the answers

Which of these examples qualifies as a credit memo?

<p>Collections made by the bank on behalf of the depositor (B)</p> Signup and view all the answers

Define 'balance per books' in the context of a bank reconciliation statement.

<p>The cash balance in the accounting records as of the end of the current month.</p> Signup and view all the answers

Book errors refer to inaccuracies made by the bank in transaction records.

<p>False (B)</p> Signup and view all the answers

What is a no sufficient funds (NSF) check?

<p>A check returned due to insufficient funds in the drawer's account.</p> Signup and view all the answers

What are deposits in transit?

<p>Deposits made but not yet received by the bank (A)</p> Signup and view all the answers

Outstanding checks are checks that have already been cashed by the bank.

<p>False (B)</p> Signup and view all the answers

What are the two types of bank reconciling items mentioned?

<p>Deposits in transit and outstanding checks</p> Signup and view all the answers

Certified checks are checks that the bank has __________, reducing the depositor's account balance.

<p>certified</p> Signup and view all the answers

Which of the following items is deducted from the balance during bank reconciliation?

<p>Outstanding checks (B)</p> Signup and view all the answers

Banks assume direct liability for certified checks.

<p>True (A)</p> Signup and view all the answers

What happens to stale checks in terms of bank reconciliation?

<p>They are reverted back to cash balance.</p> Signup and view all the answers

What is the balance after the deposit on May 11?

<p>₱1,390,000.00 (B)</p> Signup and view all the answers

A check was encashed on May 15 for ₱31,905.00.

<p>False (B)</p> Signup and view all the answers

What is the account type for the account number 8121-0008-48?

<p>BPI Checking account</p> Signup and view all the answers

The beginning balance is ______.

<p>₱560,000.00</p> Signup and view all the answers

Match the check numbers with their respective amounts:

<p>Check #1109 = ₱109,000.00 Check #1110 = ₱200,000.00 Check #1111 = ₱80,000.00 Check #1112 = ₱280,000.00</p> Signup and view all the answers

What is the total amount of deposits made on May 10 and May 11 combined?

<p>₱830,000.00 (A)</p> Signup and view all the answers

The final balance for the account at the end of the period is ₱881,000.00.

<p>True (A)</p> Signup and view all the answers

What date was Check #1111 issued?

<p>May 21</p> Signup and view all the answers

What is the amount of the outstanding checks for Blue Sky Co. as per the bank reconciliation?

<p>₱80,000 (B)</p> Signup and view all the answers

The balance per books for Blue Sky Co. at the end is ₱939,095.

<p>False (B)</p> Signup and view all the answers

What is the total amount of deposits in transit for the month ended May 31, 2020, for Blue Sky Co.?

<p>₱160,000</p> Signup and view all the answers

ABC Co. had a returned NSF check amounting to _____ that needs to be recorded.

<p>₱150,000</p> Signup and view all the answers

Match the following items with their respective definitions:

<p>Outstanding Checks = Checks issued but not yet cleared the bank Deposits in Transit = Deposits recorded but not yet reflected in the bank statement Debit Memos = Deductions in the bank statement reflecting fees or charges Credit Memos = Additions in the bank statement reflecting collections or deposits</p> Signup and view all the answers

What was the cash balance per books for ABC Co. as of November 30, 2020?

<p>₱500,000 (B)</p> Signup and view all the answers

The bank collected ₱640,000 from a customer, comprising ₱600,000 principal and ₱40,000 interest for ABC Co.

<p>True (A)</p> Signup and view all the answers

What was the amount of credit memos added to the adjusted balance for Blue Sky Co.?

<p>₱90,000</p> Signup and view all the answers

Flashcards

Bank Reconciliation Statement

A report that matches the cash balance in a company's accounting records (books) with the balance shown on the bank statement.

Credit Memos (CM)

Items added to the bank balance that increase the cash balance. These could be deposits made by the bank on the company's behalf, like interest earned.

Debit Memos (DM)

Items deducted from the bank balance that decrease the cash balance. This could be bank charges, service fees, or checks returned unpaid.

Deposits in Transit (DIT)

Deposits made by the company but not yet recorded by the bank. These are deposits that are already in the company's books but not yet reflected in the bank statement.

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Outstanding Checks (OC)

Checks issued by the company but not yet cashed by the payee and thus not yet deducted by the bank. These are checks that are already in the company's books but not yet reflected in the bank statement.

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Purpose of Bank Reconciliation

To explain the difference between the cash balance in the company's accounting records (books) and the balance shown on the bank statement. It also helps determine the correct cash balance for the financial statements and identifies any necessary journal entries.

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Book Errors

Mistakes made in recording transactions in the company's books. These could be errors in recording deposits, payments, or other transactions.

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Bank Errors

Mistakes made by the bank in handling transactions. These could be errors in recording deposits, payments, or other transactions.

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Balance per books, end

The cash balance recorded in the company's accounting records at the end of a period.

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Balance per bank statement, end

The ending cash balance shown on the bank statement for the current month.

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Credit memos

Additions made by the bank to a depositor's account that are not yet recorded by the depositor.

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Debit memos

Deductions made by the bank from a depositor's account that are not yet recorded by the depositor.

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Bank service charges

Fees charged by the bank for services like account maintenance, check processing, etc.

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NSF check

A check that is returned unpaid because the drawer (the person who wrote the check) does not have enough funds in their account.

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Automatic debits

Payments made directly from a depositor's bank account to pay bills or debts as agreed upon with the bank.

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Beginning Balance

The amount of money in an account at the start of a period.

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Deposit

Money added to an account, increasing the balance.

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Check

A written order to a bank to pay a specific amount to someone.

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Credit

An increase in the balance due to a deposit or other transaction.

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Debit

A decrease in the balance due to a withdrawal or other transaction.

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Balance

The current amount of money in an account.

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Payment

Money paid to someone in exchange for goods or services.

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Check Encashment

The process of converting a check into cash.

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Deposits in Transit

Deposits made by a company but not yet recorded by the bank. This happens when deposits are mailed, placed in an overnight depository, or made after the bank's cutoff time.

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Outstanding Checks

Checks written by a company and sent out but not yet cashed by the recipient. These checks haven't yet been deducted from the bank's balance.

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Certified Checks

Checks guaranteed by the bank. The bank takes responsibility for payment, and the check amount is immediately deducted from the depositor's account.

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Stale Checks

Checks that are old and likely won't be cashed. These are no longer considered outstanding and are added back to the cash balance per books.

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Book Reconciling Items

Items that need to be adjusted on the company's books to reconcile with the bank statement. These include credit memos, debit memos, and book errors.

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Bank Reconciliation

A process that compares the bank statement balance with the company's cash balance in its accounting records to identify and explain any discrepancies.

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What is Bank Reconciliation?

A process that matches the cash balance in a company's records (books) with the cash balance shown on the bank statement.

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What are Outstanding Checks?

Checks written by the company but not yet cashed by the recipient, so they haven't been deducted from the bank's balance.

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What is a Deposit in Transit?

Deposits made by the company, but not yet recorded by the bank.

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What are Credit Memos?

Items added to the bank balance, increasing it. These could be interest earned.

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What are Debit Memos?

Items subtracted from the bank balance, decreasing it. These could be bank charges.

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What are NSF Checks?

Checks returned by the bank because the account doesn't have enough funds.

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What are Bank Errors?

Mistakes made by the bank in handling transactions.

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What are Book Errors?

Mistakes made by the company in recording transactions in their accounting records.

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Study Notes

Course Information

  • Course Title: Fundamentals of Accountancy, Business and Management 2
  • Grade Level/Section: ABM-12
  • Subject Teacher: [Name not available]
  • University: University of the Cordilleras
  • Location: Baguio City

Bank Reconciliation Statement

  • Purpose: To reconcile cash balances per bank statement and company books
  • Objectives:
    • Explain reasons for bank reconciliation
    • Analyze bank and book reconciling items
    • Prepare bank reconciliation statement and journal entries
  • Monthly Preparation: Reconciliations are done monthly when bank statements are received.
  • Multiple Accounts: Separate reconciliations are done for each account.
  • Format:
    • Beginning balance per books
    • Add: Credit memos
    • Less: Debit memos
    • Add/less: Book errors
    • Balance per bank statement
    • Add: Deposits in transit
    • Less: Outstanding checks
    • Add/less: Bank errors
    • Adjusted balance
  • Credit memos: Additions to account not yet recorded by company (e.g., collections, interest)
  • Debit memos: Deductions to account not yet recorded by company (e.g., service charges, NSF checks)
  • Deposits in transit: Deposits made but not yet recorded by the bank
  • Outstanding checks: Checks written but not yet cashed by the recipient
  • Book Errors: Errors on company books
  • Bank Errors: Errors on bank's records
  • Reconciling items: Items used to reconcile bank and book balances.
    • Book reconciling items: Credit memos, debit memos, book errors
    • Bank reconciling items: Deposits in transit, outstanding checks, bank errors

Additional Information

  • Payment of loans: Direct payments from bank account
  • Book errors: Clerical errors on the company's books
  • Bank Errors: mistakes made by the bank
  • Outstanding checks: Exclude certified checks and stale checks
  • Stale checks: Already recorded and excluded as outstanding from the company's records
  • Certified checks are already deducted from the account

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Related Documents

Bank Reconciliation Statement PDF

Description

Test your knowledge on the essentials of bank reconciliation. This quiz covers key concepts such as adjusted cash balances, deposits in transit, and the importance of preparing bank reconciliation statements. Perfect for students and professionals looking to refresh their understanding of banking transactions.

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