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Basic Documents and Transactions Related To Bank Deposits: Prepared By: Ray Allen H. Silva, CPA

A bank reconciliation statement reconciles the cash balances according to a company's records versus its bank statement. It does this by adding credits like deposits in transit to the bank balance, and subtracting debits like outstanding checks from the book balance. This reconciles any differences between the two records, such as errors, and determines the accurate adjusted cash balance.

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Sybelle Ibañez
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129 views

Basic Documents and Transactions Related To Bank Deposits: Prepared By: Ray Allen H. Silva, CPA

A bank reconciliation statement reconciles the cash balances according to a company's records versus its bank statement. It does this by adding credits like deposits in transit to the bank balance, and subtracting debits like outstanding checks from the book balance. This reconciles any differences between the two records, such as errors, and determines the accurate adjusted cash balance.

Uploaded by

Sybelle Ibañez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Basic Documents and Transactions

related to Bank Deposits


Prepared by:
Ray Allen H. Silva, CPA
What is a Bank Account?
• A bank account represents funds entrusted by a
depositor to a bank for safekeeping.
• The three basic types of bank accounts are:
• Savings account
• Current/Checking account
• Time deposit
What is a Savings Account?
• Savings account is a bank account that earns modest interest
rate and is intended to encourage savings.
• A savings account is normally evidenced by a “passbook”.
The passbook shows the depositor’s deposits and
withdrawals, the amount of interest earned by the deposit,
and the balance of the account.
• The depositor may also opt to receive an automatic teller
machine (ATM) card either in lieu of a passbook or together
with a passbook.
• Interest on a savings deposit is accrued daily but is
reflected on the account at the end of every quarter. The
interest is reduced by a 20% withholding tax.
• If the bank account becomes dormant, the bank charges
another penalty called “dormancy fee”
What is a Current/Checking Account?
• Current or Checking account is a bank account wherein
the depositor can write checks.
• A check is an instrument that orders a bank (drawee) to
pay the person named on the check or the bearer thereof
(payee) a definite amount of money from the drawer’s
bank account.
• A current or checking account can be either of the
following:
• Basic Checking Account- usually do not pay interest;
• Interest-Bearing Checking Account- pays interest just
like a savings account.
• Instead of a passbook, the depositor in a checking
account receives a “check book”.
• The bank issues a “bank statement” to the depositor
every month that shows the deposits and withdrawals
during the period and the cumulative balance in the
depositor’s bank account.
What is a Time Deposit?
• Time deposit refers to an interest-bearing fund
maintained at a bank for a fixed period of time.
• It is similar to a savings account but it earns higher
interest rate.
• Time deposit is denominated in fixed amounts and,
normally, cannot be withdrawn until its maturity date.
• A time deposit is evidenced by a “Certificate of Time
Deposit”.
Preparation of Checks
• A check is an instrument that orders a bank (drawee) to
pay the person named on the check or the bearer thereof
(payee) a definite amount of money from the drawer’s
bank account.
Who are the parties in a check?
1. Drawer– the one writing the check and also the one
whose signature appears on the check.
2. Payee– the one who is named on the check or the
bearer thereof and is entitled to payment from the
drawee.
3. Drawee– the bank in which the drawer’s bank account
is maintained.
What are the parts of a check?
1. Date
2. Amount in numbers and amount in words
3. Signature
What are the parts of a check?
Bank Reconciliation
Prepared by:
Ray Allen H. Silva, CPA
What is a Bank Reconciliation?
• A bank reconciliation statement is a report that is
prepared for the purpose of bringing the balances of
cash (a) per records and (b) per bank statement into
agreement.
• A bank reconciliation statement has he following format:
ABC Company
Bank Reconciliation
For the month ended, XX
   
Balance per bank statemenet,
Balance per books, end xx end xx
Add: Credit memos (CM) xx Add: Deposits in transit (DIT) xx
Less: Outstanding Checks
Less: Debit memos (DM) (xx) (OC) (xx)
Add/Less: Book errors xx/(xx) Add/Less: Bank errors xx/(xx)
Cash, Adjusted balance xx Cash, Adjusted balance xx
• Balance per books, end- the cash balance in the
accounting records as of the end of the current
month.
• Balance per bank statement, end- the ending cash
balance in the bank statement of the current month.
• Credit memos- These are additions (bank credits) made by
the bank to the depositor’s bank account but not yet recorded
by the depositor.
Examples:
a. Collections made by the bank on behalf of the depositor
b. Interest income earned by the deposit.
• Debit memos- These are deductions (bank debits) made by
the bank to the depositor’s bank account but not yet recorded
by the depositor.
Examples:
a. Bank service charges
b. NSF checks
• Deposits in transit- are deposits already made but not
yet received by the bank, or received by the bank but
not yet credited to the depositor’s bank account.

• Outstanding checks- These are checks drawn and


released to payees but are not yet encashed with the
bank.
Outstanding checks exclude the following:
• Certified checks
• Stale checks
• Book errors- errors committed by the depositor.
• Bank errors- errors committed by the bank.

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