11.3 Bank Rec Book Adjustments & Assessment Tips

11.3 Bank Rec Book Adjustments & Assessment Tips

Quick Answer: After the reconciliation ties, prepare journal entries only for items that adjusted the book balance—service charges, NSF checks, interest, notes collected by the bank, and book errors. Do not journalize deposits in transit or outstanding checks. Post the entries so Cash in Bank equals the adjusted cash balance, then carry that figure into the trial balance and statements.

Section 11.2 produced a tied reconciliation. The next competency is to update the books. Candidates who stop at the schedule leave Cash in Bank misstated; candidates who journalize bank-side timing items double-count cash movements. This section separates the two and maps the entries to the Mabuhay Trading example.

Items That Require Book Journal Entries

Mabuhay Trading — May 31 Book Adjustments

From Section 11.2, book-side items totaled a net decrease that moved books from ₱178,900 to ₱181,800 after adds and deducts. Journalize each item (compound entry allowed if your assessor accepts one memo referencing the bank reconciliation):

1. Interest earned ₱480

2. Note collected by bank ₱8,200

3. Bank service charge ₱350

4. NSF check — Dela Cruz ₱5,250

Re-establish the receivable so collection effort continues; do not expense NSF as “bad debts” automatically unless policy and evidence support write-off.

5. Book error — Check #1039 understated by ₱180

Proof After Posting

Cash in Bank movement: +480 + 8,200 − 350 − 5,250 − 180 = +₱2,900.
Ledger balance: ₱178,900 + ₱2,900 = ₱181,800, matching the adjusted reconciliation balance.

Items That Do NOT Get Book Entries

Journalizing a deposit in transit again would double cash. Deducting outstanding checks again on the books would understate cash. These are the highest-frequency written and practical traps in bank-rec assessment items.

Petty Cash vs Bank Rec — Keep the Models Separate

• Petty cash replenishment credits Cash in Bank and debits expenses (± Over/Short); Petty Cash G/L stays imprest.
• Bank rec book adjustments also credit or debit Cash in Bank, but the supporting documents are bank memos and error analyses—not petty cash vouchers.
• Do not credit Petty Cash for a bank service charge, and do not treat an NSF check as a petty cash shortage.

Common Assessment Traps

1. Adding deposits in transit to books — wrong side; books already include them.
2. Deducting outstanding checks from books — double deduction.
3. NSF debited to Bad Debts Expense immediately — usually restore AR first.
4. Interest credited to Sales or Capital — use Interest Income unless the chart says otherwise.
5. Note collection credited only to Notes Receivable for the full credit memo — split principal and interest when the memo includes both.
6. Forcing a plug to make sides equal — fails the accuracy standard; find the missing outstanding check or transposition.
7. Replenishing petty cash by debiting Petty Cash — expenses disappear from the income statement.
8. Reporting unadjusted bank balance as Cash on the balance sheet — ignore deposits in transit and outstanding checks at your peril.

Accuracy Checklist — Journalize → Post → TB → FS → Bank Rec

Use this chain on the work-related project (and as a mental checklist for written items that describe a cycle):

If step 5 disagrees with step 4, stop and repair before submitting. Assessors often sample Cash first because it links IC unit HCS412305 to the entire accounting cycle (HCS412301–HCS412304).

Written vs Practical Emphasis

Written items stress classification: which side, add or deduct, and whether a journal entry exists. Practical projects demand the full peso schedule, supporting check list, memo-driven journal entries, posting, and statement agreement. Study both: memorize the item map, then rehearse one complete reconciliation-to-entry set under time pressure (45–60 minutes) before assessment day.

Closing Link to Chapter 10

Document in the IC manual who prepares the bank reconciliation (preferably someone without check-signing and deposit custody), who reviews it, and how long statements and outstanding-check lists are retained. Policy compliance checks can include “bank rec prepared within X days of statement” and “adjusted cash agrees to GL.” Cash controls are not complete until the reconciliation is done, the books are updated, and the manual’s segregation rules are followed.