BANK RECONCILIATION

Bank Statement - a statement which shows the balance of the depositors account at the beginning
of the month,, the deposits made and checks paid during the month as well as
other bank transaction supported by the banks memoranda.
Credit memorandum - a document issued by the bank to the depositor to indicate having credited
a depositors account such as collections made by the bank, etc.
Debit memorandum - a document issued by the bank to the depositor to indicate having debited a
depositors account such as bank charges, NSF Checks, etc.
Bank Reconciliation - the process of reconciling the difference between a depositors records and
the banks records about the depositors bank account.

Items recorded by the depositor but not yet recorded by the bank: (BANK RECONCILING ITEMS)
1. Deposit in Transit - a deposit recorded by the company but not yet recorded by the bank.
2. Outstanding Check - a check issued by the company and recorded on its books but not yet paid
by its bank.

Items recorded by the Bank but not yet recorded by the Depositor: (BOOK RECONCILING ITEMS)
1. Bank collection - collection made by the bank in behalf of the depositor.
2. Non-Sufficient Fund Check (NSF Check) - the payers bank account has insufficient money to
pay the check.
3. Bank Service charge - banks fee for processing a depositors transactions.
4. Interest earned on savings account or time deposits- interest is credited by bank to the account
of the depositor.

Steps in preparing bank reconciliation:

1. Determine the balance per bank and balance per books.
2. Compare the deposits made by the company against the deposit column of the bank statement.
3. Compare the checks issued and recorded by the company against the check column of the
bank statement.

Company Name
Bank Reconciliation Statement
Name of Bank
Date
Unadjusted balance per books xxx
Add: Unrecorded bank credits
Interest earned xxx
Notes collected by bank xxx
Miscellaneous credits xxx
Book errors xxx xxx
Sub-total xxx
Less: Unrecorded bank debits xxx
Service charges
NSF Checks xxx
Dishonored note xxx
Miscellaneous debits xxx
Book errors xxx xxx
Adjusted balance per books xxx
Unadjusted balance per bank xxx
Add: Deposit in transit (Undeposited receipts) xxx
Bank errors xxx xxx
Sub-total
Less: Outstanding checks xxx
Bank errors xxx xxx
Adjusted balance per bank xxx

PETTY CASH FUND

Petty Cash Fund a specified amount of cash used in making small cash payments.
Petty cash voucher form used for payment of petty cash fund.
Involves:
1. establishing the fund,
2. making payments from the fund, and
3. Replenishing the fund.

TWO FORMS OF PETTY CASH SYSTEM:

1. Imprest system a system of petty cash fund operation where a fixed amount of cash can always be
accounted for by a count of cash plus the value of expenditure vouchers issued.
2. Fluctuating system there is no fixed amount of petty cash established.

Sandra Trading uses an imprest petty cash system. The fund was established on March 1 with a balance
of P1,000. During March the following petty cash receipts were found in the petty cash box.
The fund was replenished on March 15 when the fund contained P50 in cash. On March 20, the amount
in the fund was increased to P1,500.
Instructions: Journalize the entries in March that pertain to the operation of the petty cash fund.

The fund was established on March 1 with a balance of P1,000

March 1 Petty cash 1,000
Cash 1,000

The fund was replenished on March 15 when the fund contained P50 in cash.
March 15 Repairs expense 390
Freight-out 210
Miscellaneous expense 110
` Travel expense 240
Cash 950

On March 20, the amount in the fund was increased to P1500.

March 20 Petty cash 500
Cash 500
 VOUCHER SYSTEM

Voucher system - a way to record cash payments that enhances internal control by formalizing the
process of approving and recording invoices for payment.
Voucher Register - special journal used to record all expenditures in a voucher system similar to but
more comprehensive than the purchase journal.
Voucher - document authorizing a cash disbursement.
Unpaid Voucher File- after recording the voucher in the voucher register , unpaid vouchers are filed
until it is paid.
Check Register - special journal used to record all checks issued in a voucher system. This replaces the
cash payments journal.
Paid Voucher File - after payment vouchers are filed to avoid payment of the same bill twice.

VOUCHER SYSTEM

Supporting A voucher is A check is

documents are prepared and issued
carefully approved for
reviewed payment

ADVANTAGES OF USING VOUCHER SYSTEM:

1. There is greater control over cash since one person reviewed and approved all disbursements.
2. Responsibility for an obligation can easily be traced.
3. The rightful party will receive the payment.
4. There is a written evidence of payment in form of check.
5. Unpaid vouchers can be arranged according to its due dates and payments can be prioritized.

JOURNAL ENTRIES:

Example:

1. Bought merchandise for P120,000. Terms: 2/10 n/30.

In the voucher register:

Purchases 120,000
Voucher payable 120,000

In the check register

 Voucher payable 120,000
Cash in bank or Cash 120,000

2. Received electric bill from MERALCO, P5,200.

In the voucher register:

Light and Water expense 5,200

Voucher payable 5,200

In the check register

Voucher payable 5,200

Cash in bank or Cash 5,200