INTERMEDIATE AACCOUNTING Ex: Nabigay mo na yung cash nung Nov 12 tapos

1 yung nakalagay sa check is Nov 18. So hindi mo

MIDTERMS sya pwede iencash yung check until Nov 18. So
hindi sya cash kasi hindi sya liquid.

To record:

Cash in the bank xx

Accounts Payable xx

(kasi hindi pa nag sya payment until Nov 18,

kaya hindi pa sya nababawasan)

Presentation of cash: line item, if current asset

ba sya ganon or noncurrent asset, etc.

Measurement of Cash – FACE VALUE is the

general rule of measurement (yung nakalagay
mismo sa document or sa pera)

2 periods of measurement:

 Initially – Magkano sya noon nung una

 for payment of operating expense, mong Nakita
current liabilities and current assets  Subsequently – magkano ang value nya
ngayon after makalipas ng panahon.
Definition of Cash
Exception the the rule: Reasonable
 Cash includes money and other negotiable
amount/estimated realizable amount
instrument that is payable in money and
acceptable by the bank for deposit and - Measurement if may problema yung cash (ex:
immediate credit. (tinatanggap ng bangko.) 100k yung dineposit mo sa bank tapos biglang
It includes cash on hand, demand deposits nabankcrupt si bank. Tas ang sabi ni bank is
and other items that are unrestricted for instead of 100k, 80k nalang yung mabibigay nila
use in the current operations. sayo so hindi sya mineasure at face value,
 To consider it as cash, it should be readily mineasure sya as estimated value lang.
available to use anytime (UNRESTRICTED).
 Postdated checks cannot be considered as a. Cash on hand
cash yet because these checks are 1. Undeposited dated customer’s checks or
unacceptable by the bank for deposit or customer’s checks awaiting deposit - Nasayo na
immediate encashment pero hindi mo pa nadedeposit (not funded)
 In POV of the company yung postdated
check na ibibigay mo is cash mo yun. But 2. Traveler’s check/ Cashier’s/ Treasurer’s and
the postdated checks na narereceive mo, Manager’s checks – postdated checks na hindi
hindi pa sya cash kasi hindi sya readily tatalbog (bounce back checks) kasi funded
available to encash anytime. sila/good as check. It is a deduction to the
outstanding considered as payment. Automatic
syang nababawas sa deposit account.
- Traveler’s check is check na funded na dala ni - the current account or checking account or
traveler. Manager’s check is funded check commercial deposit where deposits are covered
approved by the manager. Cashier’s check is by deposit slips and where funds are
funded check approved by the cashier. withdrawable on demand by drawing checks
against the bank (noninterest bearing)
4. Postal money orders - (a demand credit
instrument issued and payable by a post office)
2. Savings deposit (Savings Account-SA)
– yung credit is pinapadala ni/sa postal office
but it is unusual na because we already have * Generally non-interest bearing
bank transfers and over the bank counters. * Depositor is issued an ATM card or passbook
* Withdrawable in ATM station or within the
5. Undeposited cash collections - (currencies
bank.
such as bills and coins). Nasayo na pero hindi
- If mag iissue ng check, manggagaling sya lag
mo pa nadedeposit.
isa checking account (ex: nag issue ka ng 50k
6. Bank drafts – document na sinulat ni bank worth of check, dun sya matik manggagaling sa
(hindi tatalbog) kasi funded sya. Mas checking account.) And then yung checking
guaranteed sya kesa sa manager and cashier’s account manggagaling sya sa savings account
check kasi bank mismo ang nag iissue. (ex: pagka issue mo ng 50k from the check
account, papalitan agaad sya ni savings
7. Money order – can be from other financial aaccount.) This process is called automatic
institutions. Icoconvert yung pera mo into transfer. The reason why hindi dapat nageerror
check/ money order sa isang financial or nag boubounce back ang check na to kasi
institution na pwede mo na ipambayad (ex: funded sya.
GCash)
- the depositor is given a passbook upon the
initial deposit. It is required upon withdrawals
b. Cash in the bank – This includes demand and deposits. Withdrawals are made anytime
deposits or checking account and saving deposit but the bank may require notice of withdrawal
which are unrestricted as to withdrawal. (interest bearing)

Example: Nagbayad ka ng electricity/ utang by c. Cash fund

means of check: - Classification of a cash fund as current or non-
Electricity expense/ Acc Payable xx current should be parallel the classification of
the related liability.
Cash in the bank xx
- Cash fund is if there is a restriction for current
(nababawasan yung cash mo) operation. If it is for long term operation (Ex:
fund for PPE expansion), it is not cash.
1. Demand deposit/commercial
deposit/current account/checking account Ex: Kahit long term asset yan, basta ang liability
nya is mag due in 12 mos, current liability sya. If
* Generally non-interest bearing (walang
short term investment sya tapos ang due is
interest)
above 12 mos, long term liability sya.
* Withdrawable by checks against bank (pwede
iwithdraw by checks kahit not by cash) NOTE: EMERGENCY FUND IS NOT INCLUDED IN
CASH FUND BECAUSE IT IS FOR LONG TERM
1. Change fund - A set amount of money used  petty cash expenses recorded upon
by a department to make change for customers replenishment; replenishment usually
who are purchasing goods or services (fund or equal to the amount of disbursements
barya na iniiwan pangsukli)
IMPREST SYSTEM - all cash receipts deposited
2. Payroll fund – capital fund for employee intact, all cash payments via check
payroll
Procedures:
3. Purchasing fund (for purchasing of
a. A check is drawn to establish a fund
inventories) – Mostly used by manufacturing
businesses Petty cash fund xx
3. Revolving fund (fund that is used for limited Cash in the bank xx
or specific purpose set by management) –
capital fund na pinapaikot sa business. b. Payment of expenses out of fund (no formal
entry)
4. Interest fund – Fund for paying interests
c. Replenishment of petty cash payments
5. Petty cash fund (for small and miscellaneous (usually equal to the petty cash disbursements)
disbursements) – set aside for small expenses
which cannot be paid conveniently by checks. Expenses xx

Cash in – Receipts Cash in the bank xx

Cash out – Disbursements
d. Adjusting the replenished expenses at the
Replenishment – lalagyan ulit yung Nawala sa
end of the accounting period
petty cash funds for paying expenses (ni
custodian). Recorded the moment na nag Expenses xx
replenish ka.
Petty cash memorandum book – kung saan Petty cash fund xx
minemaintain/nirerecord ni custodian yung
(Adjusting is required to be reversed at the
petty cash.
beginning of the next accounting period)
 Imprest system - A system of control of
cash which requires that all cash receipts e. Increase in the fund
should be deposited intact, and all cash
disbursements should be made by means of Petty cash fund xx
check. However, there are sometimes that Cash in the bank xx
issuance of checks may be inconvenient or
impractical. With this instance, you may pay f. Decrease in the fund
in cash rather than checks.
Cash in the bank xx
 Hinihintay nya lahat ng mga collections
hanggang sa cut-off para sabay sabay or Petty cash fund xx
isahan nalang yung pagdedeposit so
that wala nang matitira na cash
collections.
 So para makabayad ng expenses, hindi
nya dapat sa cash collections kukunin,  Fluctuating fund system – the checks
sa cash in the bank (thru checks) drawn to replenish the fund do not
 necessarily equal the petty cash  Kapag yung cash sinet aside for use in
disbursements current operations (for short term), or
- Every movement of the fund is recorded for payment of short-term obligation,
(updated) cash fund is current asset (included in
- petty cash expenses immediately cash and cash equivalents)
recorded; replenishment may differ from  THE ONLY EXEMPTION THE RULE IN THE
petty cash disbursements. SHARES OF STOCKS: redeemable
shares. It is part of the cash & cash
a. Establishment of the fund – paglalabas ng
equivalents because it has maturing
pera/check from the bank para gawing bills and
date & is convertible to cash from the
coins
company anytime.
Petty cash fund xx Petty Cash Custodian – taga hawak/maintain ng
Cash in the bank xx petty cash funds (totoong pera: bills/coins)

b. Payment of expenses out of the petty cash Fund For Non-Current Operations
fund (immediately recorded)  If the cash is set aside for non-current
purpose or payment of noncurrent
Expenses xx
obligation, cash fund is shown as long
Petty cash fund xx term investment (Ex: sinking fund,
preference share redemption,
c. Replenishment/ increase of the fund (may or contingent fund, fund for PPE
may not be the same as petty cash acquisition etc.)
disbursements)
1. Pension fund – if related liability is current,
Petty cash fund xx then pension fund is current, thus part of cash.
Cash in the bank xx 2. Preferred redemption fund - noncurrent
investment (unless the preferred share capital
d. No adjustment is necessary at the end of the
has a mandatory redemption, and the
period because the petty cash expenses are
redemption is already within one year from the
recorded outright
reporting period in which case this fund is
e. Decrease of the fund already part of cash equivalent)

Cash in the bank xx 3. Acquisition of Property, plant and

equipment – always noncurrent even if
Petty cash fund xx
expected to be disbursed next year.
6. Dividend fund – Fund set aside for the 4. Contingent fund – noncurrent investment
dividend declarations (retained Earnings)
5. Insurance fund – Noncurrent investment
7. Travel fund – Fund set aside for employee
transportation 6. Sinking fund – if the related bonds payable is
current, then sinking fund is current, thus part
8. Tax fund – Fund set aside for tax payments of cash.
CASH FUND FOR A CERTAIN PURPOSE: - Classification of cash fund as current or non-
current should parallel the classification applied
to the related liability. Thus, an entity should yun before mo ma encash pero dapat within 3
classify such non-current asset if the related months lang.
liability becomes current.
3-month money market
- fund na iniipon para hindi ka malubog sa
3-month commercial paper – same concept
utang/pondo na iniipon pambayad ng utang.
with t-bills except hindi sya galing sa BSP. Galing
sya sa private entities so instead of t-bills,
commercial paper ang tawag.
Cash Equivalents
TAKE NOTE:
- short term and highly liquid investments that
are readily convertible in cash and so near their  If three months or less = cash & cash
maturity that they present insignificant risk of equivalents
changes in value because of changes in interest  If more than 3 months but within 1 year
rates. = short term investment
 If more than year = long term
- If cash is convertible within 3 months, it is
investments
considered as cash equivalents. If more than 3
mos, it is long term investments (strictly 3 Redeemable preference shares - specified
months from the date of acquisition/purchase redemption date and acquired three months
to the maturity date) before maturity date are classified as cash
equivalents
Time deposit – evidenced, however by
formal agreement instrument called certificate
of deposit. May be predetermined or
Investment of Excess Cash
withdrawn on demand or after a certain period
of time agreed upon. The control and proper use of cash is an
important aspect of cash management. Any
Examples:
accumulated in excess of that needed for
3-month BSP Treasury bill – galling kay BSP/ current operations should be invested even
ininvest mo sa BSP, kumbaga parang may utang temporarily in some type of revenue earning
sayo si BSP tapos babayaran ka nya with investment (cash equivalents)
interest.
Equity securities – cannot qualify as cash
3- year BSP treasury bill purchased three equivalents because shares do not have a
months before date of maturity – Ex: 5 years maturity date.
yang maturity ng t-bill tapos 3 months nalang
Preference shares – with specified redemption
natira before maturity date saka mo binilli,
date, acquired 3 mos before redemption date
considered as cash equivalents sya. It doesn’t
can qualify as cash equivalents
matter kelan or gano kahaba yung investment
basta binili mo sya 3 mos before the maturity - If an item cannot be included as cash
date (date or purchase matters) equivalent because it did not qualify the cut-off
time period (ie three months), it will always be
3-month time deposit – Nagdedeposit ka pero
classified as investments (short term or long
hindi mo pwedeng withdraw in a certain period
term) depending on the period up to maturity.
of time. Kelangan mo ng antayin yung time na
If the problem is silent with regard to:
1. Treasury note – assumed investment Example 1: Bank A – may overdrawn na 10,000
si bank B may debit balance na 100,000. Bale
2. Cash in money market account – cash and
ang net cash balance ni company is 90,000 kasi
cash equivalent
liability nga si overdraft which is yung bank A
3. Time deposit – cash and cash equivalent (see bank draft under cash on hand)

Example 2: Nagbigay ka ng cash na 1.2M kaso

ang naka deposit lang sa bank is 1M. Ang
Measurement Issues in Cash and Cash maeencash nya lang is to the extent of 1M.
Equivalents However, pinapayagan lang ang bank overdraft
1. Cash - measured at face value or nangyayari lang sya kapag halimbawa,
maganda ang relationship ni bank and
2. Cash in foreign currency - translated to company. Ang mangyayari jan, ipapaencash ni
Philippine Peso (measured at the current bank yung 1.2M kumbaga aabonohan muna ni
exchange rate) bank yung 200k, tapos magkakautang ng
3. Deposit in foreign bank - unrestricted deposit of 200k si company sakanya.
(included as cash) Restricted (if material, - Pwede ka lang mag offset/ ideduct sa total
classified separately among noncurrent assets cash in the bank kapag same bank or same bank
as receivables.) but different account no. (ex: tatapalan ni BPI
- Deposits in foreign countries which are not (A) yung kulang sa balance ni BPI (B) ganon.)
subject to any foreign exchange restriction are Pero if different bank, ang general rule is that
included in cash. hindi ka pwede mag offset ng bank drafts in diff
banks.
4. Cash in closed bank/banks In bankruptcy -
noncurrent asset. If a bank or financial - Excepption: pwede mo lang ioffset yung hindi
institution holding the funds of an entity is in same bank kapag immaterial which will be
bankruptcy or financial difficulty, cash should be stated sa problem. However, if no mentioned,
written as estimated realizable value different banks = offsetting not allowed.

5. Bank overdraft - Different banks (current - BANK OVERDRAFTS IS A CURRENT LAIBILITY

liabilities) Same bank (netted against the 6. Compensating balance - is the minimum
account with positive balance but cannot be checking or demand deposit account balance
offset against restricted account. that must be maintained in connection with a
- a written order addressed to the bank to pay borrowing agreement with a bank not legally
an amount of money to the order of the make restricted – part of cash legally restricted
(for book purposes only: wala tayong kinalaman  short term- presented as “cash held as
sa error or records ni bank) – illegal in the PH compensating balance”, current
- Cash in the bank account has a credit balance. (Receivable)
This results from the issuance of checks in  long term- presented as “cash held as
excess of the deposits compensating balance”, non-current
(Receivable). If the problem is silent
- classified as current liability and should not be with regard to compensating balance, it
offset against other bank accounts with debit is assumed not legally restricted.
balances
- generally, takes form of minimum checking or practice, a check becomes stale if not encashed
demand deposit account balance that must be within 6 months from the time of issuance.
maintained in connection with borrowing
- If the number of stale checks is immaterial, it
arrangement with a bank.
is simply accounted for as miscellaneous
- Ex: May loan ka na 5M tapos nag agree kayo ni income:
creditor na yung 5% sa inutang mo na 5M is
magiging maintaining balance. Or kapag nagpa Cash xx
open ka ng bank account, may maintaining Miscellaneous income xx
balance ka which is hindi withdrawable
(restricted), meaning, hindi sya part ng cash mo - however, if the amount is material, and
kasi hindi sya pwedeng galawin. liability is expected to continue, the cash is
restored, and liability is set up again.
 Not legally restricted – withdrawable
because of an informal compensating Cash xx
balance agreement (it is part of cash)
AP/ Appropriate account xx
 Legally restricted – because of forma
compensating balance agreement, it is - If nabigay mo na yung check tapos Nawala nila
part of “cash held as compensating (means hindi pa nababawasan cash mo kasi
balance” under current asset kapag hindi pa naeencash), tapos nanghingi ng bagong
related si asset sa short-term liability. check sayo, wala yung damage sayo. Pero
 If related na sa long-term liability, pwede ka tumanggi sabi ng batas kasi kasalanan
compensating balance is classified as naman daw nila yun.
noncurrent investment.
9. Postdated checks - checks dated after
reporting period
7. Undelivered/unreleased check - Reverted
back to cash. Check is one that is merely drawn  Company’s check – reverted back to
and recorded but not given to the payee before cash. Cash disbursements book/ cash
the end of the reporting period. Subject parin sa payments journal (hawak ni payee)
control ni entity so pwede icancel anytime  Customer’s check – not yet cash (A/R).
before delivery. Ibibigay mo sana, kaso hindi Cash receipt book/ cash receipt journal
mo naibigay sa dapat na mabibigyan mo non, so (hawak ni payer)
hindi mopa nababayaran Postdated checks delivered – check drawn,
Adjusting entry is required to restore the cash recorded and already given to the payee but it
balance and set up the liability: bears a date subsequent the end of reporting
period.
Cash/ cash in bank XX
Original entry recording a delivered postdated
AP/ appropriate account XX check shall also be reversed and therefore
restored to the cash balance:
8. Stale checks/Checks outstanding - for more
than six months from the date of check - Cash xx
Reverted back to cash
AP/Appropriate account xx
- check not encashed by the payee within
relatively long period of time. In banking
10. IOUs (I owe you) - Part of receivable. A - An authorization that a payment be made
written acknowledgement of debt that one from a public treasury, usually in the form of a
party owes another. In business transactions, an check. Government disbursements are paid
IOU may be followed by a more formal written with treasury warrants.
contract.
19. Escrow deposit - restricted amount held in
11. Equity securities - cannot be classified as trust for another party, ie deposit required by
cash equivalents because shares do not have court of law for a pending case (other current or
maturity a date (except redeemable preference noncurrent)
shares)
- money held in an account by a third party
13. Callable preference shares - shareholder’s while other parties complete a transaction.
equity Often, a contract outlines the conditions that
must be met in order for the money to transfer
14. NSF/DAUD/DAIF - Reverted back as part of
from one party to the other.
receivables (bounceback checks.) Tumalbog na
checks dahil hindi pala funded/walang laman 20. Unrecorded cash disbursements - increase
recording of disbursements (Mga cash outflows
 NSF – no sufficient funds (maintaining
na hindi pa narerecord)
balance lang yung natira, yung cash
wala na talaga) 21. Unrecorded cash collections - increase
 DAUD – drawn against uncleared recording of receipts (mga cash inflows na hindi
deposits (hindi pa cleared tas dineposit pa narerecord)
mo agad, so tatalbog sya kasi lalabas na
22. Certificate of deposits - Invested 3 months
walang fund.
before maturity – cash equivalents
 DAIF – drawn against insufficient funds
(may cash ka pa don pero kulang lang Invested for more than three months –
talaga. Ex: 150 yung iiissue mot as 50k investment (short or long term)
lang yung cash in the bank mo ganon)
- A certificate of deposit (CD) is a savings
15. Expenses advances - Receivable or prepaid product that earns interest on a lump sum for a
expenses fixed period of time. CDs differ from savings
accounts because the money must remain
16. Temporary investments in shares of stock -
untouched for the entirety of their term or risk
either FVTPL or FVTOCI
penalty fees or lost interest. CDs usually have
17. Unused credit line - Disclosed in the notes. higher interest rates than savings accounts as
Nirerequest ni company kay bank (parang credit an incentive for lost liquidity.
card) – requirement for import/export abroad.
23. Postage stamps on hand - office supplies
Pag may natire (unused) pwede mong
gamitin/ubusin, pero hindi mo sya pera utang - Postage stamps on hand are considered as
sya. Prepaid expenses. Prepaids are any expense the
business pays for in advance, such as rent,
18. Treasury warrants - a warrant for the
insurance, office supplies, postage, travel
payment of money into or from public treasury.
expense, or advances to employees
(Included as part of cash)
24. Window dressing: opening the books of
accounts beyond the close of the accounting
period to show better financial position and However, if reasonable efforts fail to disclose
performance the cause of the shortage the adjustment is:

 Record subsequent collections in the Loss from cash shortage xx

current period
 Record current payments in the subsequent Cash short over xx
period

25. Lapping: misappropriating collections from Accounting for cash overage

one customer and concealing this by recording
subsequent collections from other customers as Where the cash account show cash, which is
a collection from the previous customer more than the balance per book, there is a cash
overage to be recorded as follows:
26. Kiting: transfer of cash from one bank to
another bank; usually drawing a large amount Cash xx
against the first bank and depositing the same
Cash short over xx
check in a second bank to cover the shortage in
the latter bank. The cash overage is treated as miscellaneous
income if there is no claim on the same
Deposit in transit – dineposit pero hindi abot sa
cutoff. Cash short over xx
Undeposit in transit – nasayo pa, hindi mo pa Miscellaneous income xx
nadedeposit.
If the cash overage if properly found to be the
Outstanding check – hindi pa nadedeposit pag money of the cashier, the journal entry is:
hawak mo yung check = cash (nasa company pa)
Cash short over xx

Accounting for cash shortage Payable to cashier xx

Where the cash account shows cash, which is
less than the balance per book, there is a cash NOTES: (non-cash)
shortage to be recorded as follows: Current account (deficit) – current liability
Cash short/over xx
Travel advances – Advances for liquidation
Cash xx
Travel advances xx
The cash short over account is only
temporary/suspense account. When financial Cash xx
statements are prepared the same should be Accounts Receivable – Customer’s post-dated
adjusted. check
If the cashier is held responsible for the NFS/DAIF – bounce checks
shortage the adjustment should be:
NCA/CA – compensating Balance
Due from cashier xx
Advances to Stockholders (a check drawn) -
Cash short over xx Post Dated check

Bank Balance 620,000

Outstanding Balance 820,000 required when making deposits and
Adjusted (Deficict) (20,000) withdrawals.
 Withdrawals are made anytime but the
bank sometimes may require notice of
BANK RECONCILATION withdrawal.
- is a statement which bring into agreement the  Interest- bearing
cash balance per book and cash balance per
bank. This usually prepared monthly because 3. Time Deposit – May restriction (depende sa
the provides the depositor with the bank time given yung classification nya to be a
statement at the end of every month. cash equivalent – 3 months)
- may mistake sa records kaya need  Interest-bearing
ipagkasundo (meet halfway)  Evidenced, however by a formal
- Kung nakanino yung book reconciling items, agreement embodied in an instrument
sya yung magcocorrect (pero tayo POV lagi ni called certificate of deposit
company, if si bank ang nagkamali, hindi natin  May be predetermined or withdrawn in
sya papakielamanan) demand or after a certain period of
- Usually, si bank ang laging tama. time agreed upon

A BANK STATEMENT: monthly report of the * If naka collect ka, and nilagay mo na sa
bank to the depositor showing cash balance per bangko after mo pagsama samahin para
bank, deposits, withdrawals, checks paid, other icollect:
charges and credits, and daily cash balance per
bank during the month is a monthly report of Book
the bank to the depositor showing: Cash/ Cash in the bank xx
a. The cash balance per bank at the Accounts Receivable xx
beginning (dahil may utang sayo si bank since nilagay mo
b. The deposits made by the depositor and nga dun yung collections mo)
acknowledged by the bank
c. The checks drawn by the depositor and Bank
paid by the bank
d. The daily cash balance per bank during Cash xx
the month
Demand Deposit/Company Y xx
TYPES OF BANK DEPOSITS: (May utang sila sayo kaya credited, kasi nga
1. Demand Deposits – Current nagdedeposit ka)
account/checking account/commercial
deposit (disbursement payments; * If nag issue ng checks in payment of your
withdrawable anytime) payables:
 Covered by deposit slips and where
funds are withdrawable on demand by Book
drawing checks against the bank
Accounts Payable xx
 ONLY BANK RECONCILATION IS
Cash in the bank xx
NECESSARY
Bank
2. Savings deposits – Ipon; savings na Company Y/Demand Deposit xx
kumikita ng interest na maliit Cash xx
 The depositor is given passbook upon
the initial deposit. The passbook is
(Since nagbayad ka, it means mababawasan Cash xx
yung cash mo sa bank and also the payables.) Time Deposit xx

>> Both accounts have equal or same balance  Collection of notes Receivable (sa bank
because they are reciprocal accounts. So when nagbyad ng AR si customer)
one account is debited, the other account is Cash xx
credited or vise versa Notes Receivable xx
>> There are items on the depositor’s book
which do not appear on the bank records as of
2. Debit memo – items not representing checks
the same date and vise versa kaya nagkakaroon
paid by the bank which are charged or debited
ng book reconciliation.
by the bank to the account of the depositor by
not yet recorded by the depositor as cash
BOOK RECONCILING ITEMS
disbursements. Decreasing the bank balance.
1. Credit Memo – items not representing
- credited in book and debited in the bank
deposits credited by the bank to the account of
(nababawasan yung cash mo);
depositor but not yet recorded by the depositor
- CASH IS ALWAYS CREDITED
as cash receipts. Increasing the bank balance.
- Since nakatanggap ka ng memo na
- memo na binibigay ni bank kay company for
madedecrease yung cash mo, you have to
the changes of credits.
adjust your cash account by crediting your cash
- Cash is debited in the book and credited in the
bank (meaning nadadagdagan yung cash in the
 Bank Service Charge – Service charge para
bank mo and credited from the bank itself kasi
kay bank na automatic na binabawas sa
may pera tayo sakanila)
bank mo
- increasing the cash account by the bank
Service charge (expense) xx
(credited) > deposit
Cash in the bank xx
- Since nakatanggap ka ng memo na
maiincrease yung cash mo, you have to adjust
 Auto debit/payment of loans (automatic na
your cash account by debiting your cash
nababawas sa bank mo yung bayarin (ex:
- CASH IS ALWAYS DEBITED
netflix and spotify)
 Proceeds of a loan – nangutang ka tas
di agad na approved due to the Loans Payable xx
clearance tas naging okay na after Cash in the bank xx
several days kaso hindi mo pa alam, so
bibigyan ka nila ng (credit) memo na  NSF Checks/DAIF – tumalbog na checks
naiincrease nga yung cash mo (reverse lang yung original entry kasi nga
Cash xx tumalbog lang sya, meaning no effect
Loans Payable xx dapat)
(depends on transaction) Accounts Receivable xx
Cash xx

 Matured Time Deposit – Time Deposit  Reduction of Loan – amount deducted from
na nag arrive na yung time (after 3 the current account of the depositor in
months)
 payment for loan which the depositor owes but hindi pa naeencash so not yet recorded kay
the bank and which has already matured bank

- Bank Adjustment
 Technically defective checks – checks
deposited but are returned by the bank This includes:
because of technical defects such as
absence of signature, erasures not  Checks drawn and already given to payees
countersigned, mutilated checks and but not yet presented for payment
conflict between amount in words and  Certified checks – where the bank has
amount in figures. stamped on its face the word "accepted" or
 Reverse entry lang kasi lalabas na hindi "certified" indicating sufficiency of fund.
nga pumasok yung transaction o When bank certifies the check, the
account of the depositor is immediately
debited or charged to insure the
BANK RECONCILING ITEMS eventual payment of the check
o Certified checks should be deducted
1. Deposit in Transit/Outstanding Deposits –
Collections already recorded by the depositor as from the total outstanding check
cash receipts but not yet reflected on the bank because they are no longer outstanding
statement. May deposits ka na or for bank reconciliation purposes.
nakapagdeposit ka na pero hindi pa narerecord; 3. Errors – Treatment depends on the error
this includes: basta lagi dapat same si bank and book, kung
 Collections already forwarded to the ano ginawa sa isa dapat gawin mo rin para mag
bank for deposits but too late to appear same ng ending value.
in the bank statements
 Undeposited collections or those still in
the hands of the depositor (Cash on FORMS OF BANK RECONCILATION
hand) awaiting delivery to the bank ADJUSTED BALANCE METHOD – The book balance
deposit (Checks na hindi pa and the bank balance are brought to correct cash
dumadating) balance that must appear on the balance sheet-
 Matagal na panahon na or nasa clearing PREFFERED
stage pa.
- book and bank balance brought to the
 Nag cut off na and then hindi na correct cash balance to be reported in the
nakaabot si deposit FS
POV ni book >> deposited na Unadjusted book balance xx
POV ni Bank >> not yet recorded Credit memos xx
No adjusting records here kasi si bank ang dapat TOTAL xx
mag adjust Debit memos (xx)
2. Outstanding checks – Checks already Adjusted Book Balance xx
recorded by the depositor as cash
disbursements but not yet reflected on the
Unadjusted bank balance xx
bank statement. Naibigay na sa tao, nabawasan
Deposits in transit xx
na yung cash ni book; naissue na/nabayad na
TOTAL xx
Outstanding checks (xx) 3. Trace the checks issued to the bank
Adjusted Bank Balance xx statement to ascertain whether there
are checks not yet presented for
payment (outstanding checks)
BOOK TO BANK METHOD – The book balance is
4. The bank statement should be
reconciled with the bank balance or book balance is
examined to determine whether there
adjusted to equal the bank balance
are bank credits or bank debits not yet
- reconcile book balance to bank recorded by the depositor.
5. Watch out for errors.
Unadjusted Book Balance xx
Credit memo xx
Preparation of adjusting entries
Outstanding Checks xx xx
- you can only adjust your books, wala tayong
TOTAL xx
pakielam sa bank.
Debit memo xx
Deposit in Transit xx (xx)
a. To record the note collected by bank:
Unadjusted Bank balance xx
Cash in the bank xx
Notes Receivable xx
BANK TO BOOK METHOD – the bank balance is
reconciled with the book balance or the bank b. To record the NSF check:
balance is adjusted equal to the book balance.
Accounts Receivable xx
- reconcile bank balance to book Cash in the bank xx

Unadjusted Bank Balance xx

c. To record the bank service charge:
Deposit in Transit xx
Bank service charge xx
Debit memo xx xx
Cash in the bank xx
TOTAL xx
Outstanding checks xx
Credit memo xx (xx)
Unadjusted Book balance xx
In computing bank reconciliation, errors are
excluded because no definite rule can be made
whether these are to be added or subtracted. It
has to be analyzed for proper treatment.
However, it is a reconciling item of the party
which committed them.

General Procedures In preparing the

reconciliation:
1. Determine the balance per book and
the balance per bank
2. Trace the cash receipts of the bank
statement to ascertain whether there
are deposits not yet acknowledged by
the bank. (Deposits in transit)