Assessment Task 2- Bank Reconciliation

QUESTIONS
1. What is a bank reconciliation?
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2. What are credit memos and discuss the treatment in the preparation of bank
reconciliation.
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3. What are debit memos and discuss the treatment in the preparation of bank reconciliation.
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4. Explain the three forms of bank reconciliation.

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5. Explain book debits and book credits, bank debits and bank credits.
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6. What is proof of cash and its purpose?

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1. It is a report that is prepared for the purpose of bringing the balances of cash per records and
per bank statement into agreement.
a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
d. Bank deposit slip

2. These are deposits made but not yet credited by the bank to the depositor’s bank account.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
3. These are deductions made by the bank to the depositor’s bank account but not yet recorded
by the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

4. These are additions made by the bank to the depositor’s bank account but not yet recorded by
the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

5. These are checks drawn and released to payees but are not yet encashed with the bank.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

6. Which of the following is added to the cash balance per books when preparing a bank
reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit

7. Which of the following is added to the cash balance per bank statement when preparing a
bank reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit

8. Which of the following represents a debit memo?

a. Collections made by the bank on behalf of the depositor.
b. Interest income earned by the deposit.
c. Loan proceeds directly credited or added by the bank to the depositor’s account.
d. Interest expense on a loan that is directly deducted from the depositor’s account.

9. Which of the following is not a debit memo?

a. Bank service charges
b. No sufficient funds checks (NSF)
c. Automatic debits representing payments of bills by the bank on behalf of the
depositor
d. Direct deposits of customers to the depositor’s account
10. As an internal control, bank reconciliation statements are usually prepared
a. on a daily basis.
b. on a monthly basis.
c. annually every year-end.
d. whenever the accountant feels like it.

11. In preparing its August 31, 2019 bank reconciliation, Hope Company has made available the
following information.
Balance per bank statement 1,805,000
Deposit in transit 325,000
Return of costumer’s check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000
On august 31, 2019, what is the adjusted cash in bank?
a. 1,855,000
b. 1,795,000
c. 1,785,000
d. 1,755,000

11. In preparing its bank reconciliation on December 31, 2019, Salvador Company has made
available the following data:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously credited by the bank to Case’s account 40,000
Bank service charge for December 5,000
Outstanding checks 675,000
What is the adjusted cash in bank on December 31, 2019?
a. 2,685,000
b. 3,645,000
c. 3,600,000
d. 3,605,000

12. During the audit of LuzVi Company on December 31, 2019, the following data are gathered:
Balance per bank 4,000,000
Bank charges 10,000
Outstanding checks 950,000
Deposit in transit 1,200,000
Costumer note collected by bank 1,500,000
Interest on costumer note 60,000
Costumer check returned NSF 250,000
Depositor’s note charged to account 1,000,000
What is the adjusted cash in bank on December 31, 2019?
a. 4,300,000
b. 5,300,000
c. 4,250,000
d. 4,000,000
13. Aris Company keeps all its cash in a checking account. An examination of the entity’s
accounting records and bank statement for the month ended June 30, 2019 revealed the
following information:
• The cash balance per book on June 30 is P8, 500,000.
• A deposit of P1,000,000 that was Placed in the bank
• The bank statement shows on June 30, the bank collected note for Aris Company and
credited the proceeds of P950,000 to the Company’s account.  Checks outstanding on
June 30 amount to P300,000.
• Aris Company discovered that a check written on June for P200,000 in payment of an
account payable, had been recorded in entity’s records as P20,000.
• Included with the June bank statement was NSF check for P250,000 that Aris Company
had received from a costumer on June 26.
• The bank statements show a P20,000 service charge for June.
What is the cash in bank to be reported in the statement of financial position on June 30, 2019? a.
9,180,000
b. 9,360,000
c. 9,000,000
d. 3,300,000

14. Letty Company’s bank statement for the month of April included the following information:

Bank service charge for April 15,000

Check deposited by Letty during April was not collectible and has been marked
“NSF” by the bank and returned 40,000
In comparing the bank statement to its own records, Letty Company found the following:
Deposits made but not yet recorded by bank 130,000
Checks written and mailed but not yet recorded by bank 100,000

All deposits in transit and outstanding checks have been properly recorded in Letty Company
books. Letty company found a check for P35,000 payable to Letty Company that had not yet
been deposited and had not been recorded. The general ledger of Letty Company showed a
bank account balance of P920,000.
What is the adjusted cash in the bank on April 30?
a. 900,000
b. 865,000
c. 930,000
d. 965,000

15. While checking the cash accounts of Gabu Company on December 31, 2020, the following
information is available:

Balance per book 6,500,000

Balance in checking account (outstanding checks
 per book of P1,660,000)
7,000,000 Deposit in bank closed by BSP
1,500,000
Deposit in transit 1,200,000
Currency and coins on hand 400,000
Petty cash fund 50,000
Bank charges not yet taken up in the book 10,000
Bond sinking fund cash 1,000,000
Receivables from employees 100,000
Error in recording a check in the book. The correct
amount as paid by the bank is P100,000 instead
of P150,000 as recorded in the book or a difference of 50,000
What is the total amount of cash to be reported under current assets on December 31, 2020?

a. 6,540,000
b. 6,990,000
c. 7,990,000
d. 8,490,000

PROBLEM SOLVING

Problem 1
Entity A is preparing its November 30, 2019 bank reconciliation statement. The following
information was determined:
 Cash balance per accounting books, Nov. 30, 2019 ₱600,000
 Cash balance per bank statement, Nov. 30, 2019 ₱860,000
 Credit memo ₱380,000
 Debit memo ₱60,000
 Deposits in transit ₱100,000
 Outstanding checks ₱40,000
Requirement: Prepare the bank reconciliation.

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Problem 2
Entity A is preparing its February 28, 2019bank reconciliation statement. The following
information was determined:
• Cash balance per accounting books, Feb. 28, 2019
₱260,000
• Cash balance per bank statement, Feb. 28, 2019
₱205,000 When investigating the difference, the accountant determined
the following:

a. A customer deposited ₱30,000 to Entity A’s bank account as payment for an account
receivable. This is not yet recorded in the books of accounts.
b. A ₱102,500 check deposited by Entity A during the month is not yet credited to Entity
A’s account.
c. A check drawn in the amount of₱22,500 is not yet presented to the bank for payment.
d. The bank returned a check deposit amounting to₱5,000 because of insufficiency in the
funds of the drawer. The check was received from a customer as payment for accounts
receivable. Requirements:
a. Prepare the bank reconciliation.
b. Prepare the adjusting (reconciling) entries.
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Problem 3
The bank reconciliation of Foronda Company as of January 31 of the current year is shown below:
Bank balance 300,000
Add: Deposit in transit 600,000 Total 900,000
Deduct Outstanding checks:
No. 114 240,000
115 160,000
116 60,000 460,000
Adjusted bank balance 440,000

All receipts of cash are deposited in the bank account. The bank statement for the month of
February is presented below:
PHILIPPINE BANK

Checks Deposits Date Balance

Balance forwarded Jan. 31 300,000

240,000 600,000 Feb. 1 660,000

2,000,000 3 2,660,000

200,000 5 2,460,000

900,000 400,000 7 1,960,000

 160,000 9 1,800,000

1,000,000 10 2,800,000

500,000 13 2,300,000

1,200,000 16 3,500,000

1,300,000 21 4,800,000

550,000 23 4,250,000

5,000 SC 24 4,245,000

1,000,000 550,000 27 3,795,000

800,000 270,000 CM 28 3,265,000

The following information was taken from the credit memo of February 28:
Face of the note 250,000
Interest on the note 30,000
Maturity value of the note 280,000
Collection charge 10,000
Credit to your account 270,000

The data below were taken from the cash journals of Foronda Company.
Cash Receipt Journal Cash Disbursement Journal
Date Debit Cash Check No. Credit Cash
Feb. 2 2,000,000 117 200,000
6 400,000 118 900,000
9 800,000 119
800,000
10 200,000 120
500,000
15 1,200,000 121 550,000
20 1,300,000 122 180,000
24 550,000 123 1,000,000
28 450,000 124 120,000
125 250,000
6,900,000 4,500,000
Required:
a. Prepare the bank reconciliation on February 28, showing the book balances before and
after adjustment.
b. Prepare general journal entries to record the adjustments that are indicated by the bank
reconciliation.
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Problem 4
Data concerning the cash records of Peter Company for the months of September and October
follow

September 30 October 31
Book balance 1,900,000 ?
Total cash receipts per book 1,400,000
Total cash disbursement per book 2,400,000
Bank balance 2,100,000 ?
Total charges in bank statement 2,500,000
 Total credits in bank statement 1,200,000
NSF check 60,000 40,000
Collections of accounts receivable
not recorded by entity
(corrected in subsequent month) 30,000 50,000
overstatement of check in payment of salaries(corrected in
subsequent month) 90,000 120,000
Deposit in transit 130,000 260,000
Outstanding checks 270,000 30,000
Required:
a. Prepare a four-column reconciliation showing adjusted balances.
b. Prepare the adjusting entries on October 31.
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Problem 5
Reconciliation of Jazz Company’s bank account at May 31 of the current year is:
Balance per bank statement 2,600,000
Deposit outstanding 300,000
Checks outstanding (100,000)
Correct cash balance 2,800,000

Balance per book 2,810,000

Bank service charge (10,000)
Correct cash balance 2,800,000

June data as follows:

Bank Book
Checks recorded 2,200,000 2,500,000
Deposits recorded 1,600,000 1,800,000
Service charges recorded 60,000
Collection by bank, P500, 000 note plus
interest 550,000
NSF check returned with June 30 statements
(will be redeposited) 100,000
 Balances 2,400,000 2,100,000

Compute for the cash in the bank that should be reported in the statement of financial
position on June 30.
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