SHS

Fundamentals of Accountancy,
Business, and Management 2
Quarter 2: Week 3: Module 3
ABM/GAS • Fundamentals of Accountancy, Business and Management 2
Grade 12: Quarter 2: Week 3: Module 3
First Edition, 2020

Copyright © 2020
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form
without written permission from the copyright owners.

Development Team of the Module

Author: May Fatima Bie Bodestyne

Editor: SDO La Union, Learning Resource Quality Assurance Team

Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

Atty. Donato D. Balderas, Jr.

Schools Division Superintendent

Vivian Luz S. Pagatpatan, Ph. D

Assistant Schools Division Superintendent
German E. Flora, Ph. D, CID Chief

Virgilio C. Boado, Ph. D, EPS in Charge of LRMS

Lorna O. Gaspar, EPS in Charge of FABM2
Michael Jason D. Morales, PDO II
Claire P. Toluyen, Librarian II
 Fundamentals of
Accountancy,
Business, and
Management 2
Quarter 2: Week 3: Module 3
 Module
BANK RECONCILIATION
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Target
BANK RECONCILIATION
According to the Merriam-Webster Dictionary, reconcile means “to
cause people or groups to become friendly again after an argument or disagreement;
to restore friendship of harmony”. The same with the cash balances on the balance
sheet of an entity, it must be matched with the corresponding amount on the bank
statement to determine the difference and make changes on the accounting records
in case there is a need to resolve any inconsistencies and correct fraudulent deals.
In your previous lesson, you described the nature of a bank reconciliation
statement, and analyze the effects of the identified reconciling items.
This learning material will provide you the bank reconciliation process using
adjusted balance method, book to bank method and the bank to book method.
After going through this module, you are expected to:
1. prepare a bank reconciliation statement. (ABM_FABM12-IId-13)
Subtasks:
1. list the bank reconciliation process
2. locate the needed adjusting entries
3. prepare bank reconciliation

Jumpstart
Activity 1. SODUKO

Fill in the 9x9 grid with

digits so that each column, row, and 3x3
section contain the numbers between 1
to 9. The 9x9 grid have some of the
squares filled. Your job is to use logic to
fill in the missing digits and complete
the grid.

Bank reconciliation is like Soduko.

Everything must be in its proper place
to keep the balance between company
cash book and the bank book. There
should be no duplication of dates, and
figures should be accurate. All the
documents must reconcile with each
entity’s details.
In bank reconciliation, a single
mistake will ruin the balance that is why, it should be reconciled periodically.

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 Discover
THE BANK RECONCILIATION PROCESS

Step 1. Adjusting the Balance per Bank

The first step is to adjust the balance on the bank statement to the true,
adjusted, or corrected balance.
The items necessary for this step are listed in the following schedule:

Step 2. Adjusting the Balance per Books

The second step of the bank reconciliation is to adjust the balance in

the company's Cash account so that it is the true, adjusted, or corrected
balance.
Examples of the items involved are shown in the following schedule:

Step 3. Comparing the Adjusted Balances

After adjusting the balance per bank (Step 1) and after adjusting the
balance per books (Step 2), the two adjusted amounts should be equal.
If they are not equal, you must repeat the process until the balances
are identical. The balances should be the true, correct amount of cash as of
the date of the bank reconciliation. The adjusted cash balance will appear as
the Cash in Bank in the Statement of Financial Position (Balance Sheet).

For further explanation and additional information about bank reconciliation,

you may visit the links provided below:
https://www.investopedia.com/terms/b/bankreconciliation.asp
https://www.principlesofaccounting.com/chapter-6/bank-reconciliation/
https://accounting-simplified.com/financial/bank-reconciliation/

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 Explore
LET’S PRACTICE
Practice Set 1
For the month of May 2016, Leoni Company issued the following checks as
recorded in its Cash Disbursement Journal:

As per the bank statement received by Leoni, the following checks were
presented and paid by the bank:

Instruction: Identify outstanding checks as of end of May 2016

Answer: Check 1257 issued to May for P300
and Check 1528 issued to Nicole for P4,500
Practice Set 2
The cash receipts journal of Maya Merchandising reflected the following
collections for the month of May 2016:

It is the policy of the company to deposit collection within the following day from
the date of collection. The bank statement for May 2016 revealed following deposits
made:
Deposit Date Amount
5/3/2016 4,000
5/9/2016 2,000
5/10/2016 8,900
5/26/2016 7,800
5/26/2016 3,200
Instruction: Compute for the deposit in transit or undeposited collection as of
end of April 2016.
Answer: P4,780

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Practice Set 3.
Identify whether the following independent transaction is a book or a bank
reconciling. In addition, determine the amount of the error and state whether the
amount will be added or deducted in the preparation of the bank reconciliation
(use adjusted method):
1. Eagle Repairs received P1,500 from Jane. The bookkeeper recorded the
amount as P500.
Answer: Book. P1,000 will be added to the books.
2. Nation Bank collected from the customer of Eagle the sum of P5,000
representing payment of the said customer to Eagle. No entry was made in
the books of Eagle.
Answer: Book. P5,000 will be added to the books.
3. The bank teller deducted CK 123 for P3,500 from the account of Eagle. The
said check was issued by EGLES Company a different depositor of the bank.
Answer: Bank. P3,500 will be added to bank records. Hint: The teller had
deducted the amount to the account of eagle which should not be,
thus the amount is returned or added.
4. The bookkeeper of Eagle recorded Check No. 345 in the Cash Disbursement
Journal as P5,205. The correct amount of the check was P5,250.
Answer: Book. P45 will be deducted in the book records. The bookkeeper
should have deducted P5,250 deductions to cash however he
deducted P5,205 only, thus the difference should be deducted.
5. The deposits of Eagle earned interest of P100 for the month. Eagle does not
have knowledge of interest earned until it receives the bank statement.
Answer: Book. P100 is added to the book records. Interest income will
increase the cash in bank of Eagle.

Practice Set 4
Item 1: The bank statement for August 2014 shows an ending balance of
Php3,490.
Item 2: On August 31, the bank statement shows charges of Php35 for the service
charge for maintaining the checking account.
Item 3: On August 28, the bank statement shows a return item of Php100 plus a
related bank fee of Php10. The return item is a customer's check that was
returned because of insufficient funds.
Item 4: The bank statement shows a charge of Php80 for check printing on August
20.
Item 5: The bank statement shows that Php8 was added to the checking account
on August 31 for interest earned by the company during the month of
August.
Item 6: The bank statement shows that a note receivable of Php1,000 was collected
by the bank on August 29 and was deposited into the company's account.
On the same day, the bank withdrew Php40 from the company's account
as a fee for collecting the note receivable.
Item 7: The company's Cash account at the end of August shows a balance of
Php967.
Item 8: During the month of August the company wrote checks totalling more than
Php50,000. As of August 31, Php3,021 of the checks written in August
had not yet cleared the bank and Php200 of checks written in June had
not yet cleared the bank.
Item 9: The Php1,450 of cash received by the company on August 31 was recorded
on the company's books as of August 31. However, the Php1,450 of cash
receipts was deposited at the bank on the morning of September 1.

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Item 10: On August 29, the company's Cash account shows cash sales of P145.
The bank statement shows the amount deposited was really, P154. The
company reviewed the transactions and found that Php154 was the
correct amount.

Given the above information, prepare a bank reconciliation statement.

Answer:
BANK RECONCILIATION STATEMENT

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 Deepen
Exercise 1: Comprehensive Problem

Bank reconciliation problem:

➢ The bank statement for Juan Company shows a balance per bank of
P15,907.45 on April 30,2015.
➢ On this date the balance of cash per books is P11,589.45.
➢ Additional information are provided below:
▪ Deposits in transit:
April 30 deposit (received by the bank on May 1) P2,201.40
▪ Outstanding checks:
No. 453-P3,000.00
No. 457-P1,401.30
No. 460-P1,502.70
➢ Errors: Juan wrote check no. 443 for P1,226.00 and the bank correctly paid
that amount.
▪ However, he recorded the check as P1,262.00.
➢ Bank memoranda:
▪ Debit– NSF check from Pedro P425.60 .
▪ Debit– Charge for printing company checks P30.00
▪ Credit – Collection of note receivable for P1,000 plus interest earned of P50,
less bank collection fee of P15.00.
❖ Required: Prepare a bank reconciliation statement using the adjusted method.
❖ Hint: Bank Debit Memo are deductions made by the bank to the account of
the depositor and Bank Credit Memo are additions made by the bank
to the account of the depositor

Use a separate paper as an answer sheet.

Write your NAME: _____________________________ DATE: _____________________
FABM2/(section)______________ Deepen: Q2W2M13=Bank Recon.

Bank Reconciliation Statement (Show your solution)

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 Gauge

I. Prepare a bank reconciliation statement based on the following business

transactions between FAITH Company and its depository bank then answer the
multiple choice questions that follows.

Use separate sheet to write your answer.

Write your NAME: _____________________________ DATE: _____________________
FABM2/(section)_______________ Deepen: Q2W2M13=Bank Recon.

1. The bank statement for May 2019 shows an ending balance of P13,490.
2. On May 31, the bank statement shows charges of P135 for the service charge
for maintaining the checking account.
3. On May 28, the bank statement shows a return item of P1,100 plus a related
bank fee of Php10. The return item is a customer's check that was returned
because of insufficient funds.
4. The bank statement shows a charge of P180 for check printing on May 20.
5. The bank statement shows that Php18 was added to the checking account on
May 31 for interest earned by the company during the month of May.
6. The bank statement shows that a note receivable of Php10,700 was collected
by the bank on May 29 and was deposited into the company's account. On the
same day, the bank withdrew P550 from the company's account as a fee for
collecting the note receivable.
7. The company's Cash account at the end of May shows a balance of P1,967.
8. During the month of May, the company wrote checks totalling more than
P150,000. As of May 31, P13,021 of the checks written in May had not yet
cleared the bank and Php1,200 of checks written in April had not yet cleared
the bank.
9. The P11,450 of cash received by the company on May 31 was recorded on the
company's books as of May 31. However, the P11,450 of cash receipts was
deposited at the bank on the morning of June 1.
10. On May 29, the company's Cash account shows cash sales of P2,145. The
bank statement shows the amount deposited was really, P2,154. The company
reviewed the transactions and found that P2,154 was the correct amount.

II. Based on the bank reconciliation of FAITH COMPANY, answer the questions. Read
each item carefully then choose the letter of your answer from the given choices.
1. The bank reconciliation process that executed FIRST on FAITH COMPANY.
A. Adjusting the balance per bank C. Comparing the Adjusted balances
B. Adjusting the balance per books D. Comparing the managers
2. Identify the bank reconciliation process that the bookkeeper of FAITH
COMPANY should perform periodically.
A. Adjusting the balance per bank C. Comparing the Adjusted balances
B. Adjusting the balance per books D. Comparing the Accountants
3. What is the bank reconciliation process where the company bookkeeper’s
record and the bank statement are equal or have the same balance?
A. Adjusting the balance per bank
B. Adjusting the balance per books
C. Comparing the Adjusted Balances
D. Comparing the Bookkeepers

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4. What is the cash account of FAITH COMPANY at the end of May, 2019?
A. 180 B. 1,967 C. 10,700 D. 11,450
5. What is the original balance per bank before the bank reconciliation?
A. 135 B. 1,100 C. 10,700 D. 13,490
6. What adjusting entries corrected the cash recorded on the company’s book on
May 31 but deposited at the bank on the morning of June 1?
A. Deposit in Transit
B. Errors in company’s Cash account
C. Interest earned
D. Notes receivable collected less fees
7. Which of the following adjusting entries rectified the P2,145 cash sales
recorded on the book but supposed to be P2,154?
A. Bank Service charges
B. Check printing charges
C. Deposit in Transit
D. Errors in company’s Cash account
8. If the bank statement shows charges of P135 for the service charge for
maintaining the checking account, what is the adjusting entries to be made?
A. Add interest earned
B. Bank Service Charges
C. Notes receivable collected less fees
D. Outstanding checks should be noted
9. How much is the Deposit in Transit?
A. 10,719 B. 10,917 C. 11,450 D. 12,204
10. How many checks were not yet cleared in the bank by the end of May?
A. 1 B. 2 C. 4 D. 9
11. How much is the Outstanding checks of FAITH COMPANY?
A. 13,490 B. 13,940 C. 14,221 D. 19,967
12. How much is the NSF checks and fees?
A. 18 B. 135 C. 180 D. 1,110
13. How much is the adjusted cash balance per bank and books?
A. 10,150
B. 10,719
C. 12,144
D. 14,221
14. How will you demonstrate the computation of FAITH COMPANY’s Adjusted
cash balance per bank?
A. Add Deposit in Transit and subtract Outstanding checks to book balance
B. Add Interest earned and subtract Outstanding checks to bank balance
C. Less Deposit in Transit and add Intest earned to book balance
D. Less Interest earned and subtract Outstanding checks to bank balance
15. How would you solve the situation where the bank statement shows that a
note receivable of P10,700 was collected by the bank for the company and
withdrew P550 fro company’s account as fee for collecting the note
receivablee?
A. Add Notes receivable collected less fees on the balance per bank statement
B. Add Notes receivable collected less fees on the balance per books
C. Less Notes receivable collected less fees on the balance per bank statement
D. Less Notes receivable collected less fees on the balance per books

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Answer Key

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References

Printed Material(s)

1. Department of Education. (2016). Fundamentals of Accountancy, Business and

Management 2. Analysis and Interpretation of Financial Statements 2. Teacher’s
Guide developed by Commission on Higher Education (CHED) in collaboration
with Philippine Normal University (PNU). (pp. 130-138). Pasig City, Philippines

Book(s)

1. Josefina L. Beticon, James Cristopher D. Domingo, Fermin Antonio D. Yabut

(Authors), Ma. Gina T. Manaligod (Editor). 2016. Fundamentals of Accountancy,
Business and Management 2 Textbook. Bank Reconciliation. (pp.114-156). 1253
Gregorio Araneta Avenue, Quezon City: Vibal Group, Inc.

2. Josefina L. Beticon, James Cristopher D. Domingo, Fermin Antonio D. Yabut

(Authors), Ma. Gina T. Manaligod (Editor). 2016. Fundamentals of Accountancy,
Business and Management 2 Teacher’s Manual. Bank Reconciliation. (pp.168-
183). 1253 Gregorio Araneta Avenue, Quezon City: Vibal Group, Inc.

Website

1. https://www.investopedia.com/terms/b/bankreconciliation.asp

2. https://www.principlesofaccounting.com/chapter-6/bank-reconciliation/

3. https://accounting-simplified.com/financial/bank-reconciliation/

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