To arrive at an accurate balance on a bank reconciliation statement, a credit memorandum

Mission:

A. Rationale

B. Objective

C. Scope

D. Basis

A. General Policies

1.NFA Bank Accounts 1.1 Current Account

This is a non-interest earning account but affords the convenience and control of withdrawals thru check issuances. A monthly bank statement is furnished by the bank to the NFA for each current account. The bank statement is a monthly summary of the various financial transactions affecting the NFA's cash in bank account as reflected in the books of the bank resulting in a given cash balance at the end of the month.Collection except SALO and Disbursement Accounts of the Central/Regional/Provincial Offices are deposited as current accounts in the name of the NFA, The Imprest Funds for procurement and operating expenses in field offices are also deposited as NFA current accounts under or care of Regular/Special Disbursing Officers.RE: COMBO ACCOUNTSAll disbursement funds in field offices should be deposited as current accounts. However, there are instances wherein such funds remain idle as in the case of CPF when no procurement is being undertaken by the province for a certain period. In order to remedy such situation, a special arrangement was made with the bank wherein two accounts, namely: savings and current accounts, are opened for one disbursement fund. These accounts are the combo accounts of the fund. The amount deposited in the current account out of the disbursement fund is equal to the usual fund balance required by the bank for checking accounts. The rest of the disbursement fund is deposited in the savings account and is, therefore, interest earning. Once a check is drawn, the bank shall automatically effect fund transfer from the savings account to the checking account to which the check shall be charged. Interests earned in the savings account of the combo account are to be transferred/deposited in the NFA SALO account. For accounting purposes, combo accounts are classified under current accounts.

1.2 Savings Account

This is an interest-earning depository account. A passbook is issued by the bank to the NFA as depositor and all deposits to and withdrawals from this account are reflected in the passbook. Collections of miscellaneous and other service income of the NFA and interests realized out of savings and combo accounts are deposited in this account. Only authorized withdrawals from the account shall be honored by the bank as covered by special agreements between the NFA and PNB. For field offices, the only authorize withdrawal from the savings account is that representing remittances to Central Office of the deposited collections per approved remittance policies as evidenced by bank debit memorandum. For Central Office, withdrawals from the account consist of fund transfers to other bank account.

2. Bank Reconciliation Statement
This refers to the monthly statement prepared to bring into agreement the NFA's cash in bank balance as reflected in the records of the bank summarized in the bank statement/bank book and that reflected in the books of the NFA through its subsidiary ledgers which are detailed records maintained by the Accountant for each control account of the cash in bank account reflected in the general ledger. This is prepared on a per bank and bank account basis.The bank furnishes the NFA a monthly bank statement together with its attachments, namely: debit and credit memoranda and paid checks (checks issued and presented to the bank for payment. The validated duplicate deposit slips are given by the bank immediately to the Cashier when deposits are made. The duplicates are subsequently submitted to the Accountant as attachments to the Weekly Report of Collections and Deposits. A debit memorandum shows items not representing checks but are deducted or debited by the bank from the NFA account, e.g. bank service charges, and are not yet recorded by the NFA as disbursements. Whereas, a credit memorandum shows items not representing deposits which are added or credited to the NFA account but are not yet recorded by the NFA , e.g. proceeds of NFA loans from the bank. A fund remittance shall be recorded as a debit memo for the account of the sending office and as a credit memo for the account of the receiving office.

3. Accountant's Responsibility

Immediately after the closing of the books of accounts, the cash in bank account as per NFA records should be reconciled with that per bank records. The preparation of the monthly bank reconciliation statement shall be the responsibility of the NFA Corporate Accountant for Central Office Accounts or of the Regional/Provincial Accountant for field office accounts. Likewise, he/she shall be responsible for the collection and safekeeping of bank statements together with the corresponding bank debit and credit memoranda, cancelled/spoiled/stale/paid checks and validated deposits slips.The bank statement together with its attachments can either be picked-up by the Accountant or his/her duly authorized representative or mailed to the Accountant in which case, such should be handed to the Accountant unopened. Filing of the bank statements and the corresponding attachments should be on a per bank account basis to facilitate tracing of entries.The monthly bank reconciliation statement of all NFA bank accounts shall be submitted together with the monthly trial balance. Its copy distribution and time of submission shall follow those of the trial balance.This statement together with its attachments should be verified by the COA Auditor for Central/Regional/Provincial Office.

4. Prohibition Against Accountable Officers

Accountable officers such as Collecting and Disbursing Officers whether in a permanent or temporary capacity shall, in no case, have an access in the preparation of the monthly bank reconciliation statements. However, they may be furnished a copy of the reconciliation statement prepared by the Accountant.

5. Spoiled or Cancelled/Stale Checks

Spoiled or cancelled checks must be mutilated at the signature portion of the check and marked as "CANCELLED". Such checks must be noted by the Accountant for accounting and control purposes.Checks payable to outside creditors that remained unclaimed for six (6) months shall be considered stale and shall be reverted to the cash in bank account.Safekeeping of spoiled or cancelled/stale checks shall be the responsibility of the Accountant.

B. Specific Policies 1. Prescribed Format

The prescribed format for Bank Reconciliation Statement shall follow the adjusted balance method for book and bank balances. The monthly bank reconciliation statement should be prepared per bank/bank account from unadjusted ending bank/book balances going to adjusted ending bank/book balances.

2. Reconciling Items

The most common items of reconciliation are:a. Deposit in Transit This refers to the amount deposited by the NFA at the end of the month or period which was received by the bank too late to appear in the bank statement for the same month.b. Outstanding Checks These refer to the amounts of the checks issued by the NFA but not yet presented for payment to the bank by the holders thereof. These also refer to checks which are already recorded in the Check Register Journal but are still unclaimed by the payees. c. Errors and Omissions

Errors may be committed either by the bank or NFA in recording transactions affecting the account. These include erroneous postings of amounts to wrong accounts, recording of wrong amounts, and other errors which result into an overstatement or understatement of the accounts.Either the NFA or bank may have omitted the recording of certain transactions which should have been taken-up. These omissions include unrecorded deposits, receipt of interoffice fund transfers, check issuances, and fund transfers.Unrecorded deposits representing proceeds of NFA loans from the bank which were immediately credited by the bank to the NFA do not fall under omissions but are also considered as reconciling items. A credit memo is issued by the bank for this transaction.

d. Bank Charges/Interests

Bank charges are those deducted by the bank from NFA bank balance representing fees for checkbooks, interest, collections, penalty and other bank service charges. These are evidenced by debit memos issued by the bank and therefore, are not yet reflected in NFA records.Interests refer to the interests earned on NFA savings account including those out of the combo accounts and are added to NFA account balance in the bank.

e. Cancelled/Stale Checks These are checks already issued but are subsequently cancelled or made stale and are reverted to the cash in bank account on NFA books.f. Dishonored Checks Checks representing payments to the NFA which were deposited by NFA Collecting Officers but were subsequently dishonored due to insufficiency of funds, deficiency in the check accomplishment per bank standards, etc...These reconciling items result when debits on the depositor's records are not matched with corresponding credits on the bank's records and credits on the depositor's records have no corresponding debits on the bank's records, and vice-versa.Therefore, these can either be additions to or deductions from the book/bank balance, as follows:A. Additions to Book Balance Requiring Adjustment by the NFA

1)Error in recording a check resulting to an understatement of the book balance. Example: A check for P3,000 recorded as P4,000.00.2) Error in recording a deposit which resulted in the understatement of the book balance. Example: A deposit for P6,000.00 recorded as P5,000.00.3) Checks returned for cancellation including stale checks.4) Unrecorded receipt of inter-office fund transfers.

B. Deductions from Book Balance Requiring Adjustment by the NFA

1) Bank charges not yet recorded. Adjustment shall be based on debit memo received together with the bank statement.2) Error in recording a check which resulted in the overstatement of the book balance. Example: A check for P3,000.00 recorded as P2,000.00.3) Error in recording a deposit which resulted in the overstatement of the book balance. Example: A deposit for P2,000.00 recorded as P3,000.00.4) Dishonored checks not yet adjusted in the books of the NFA for which a bank debit memo is issued by the bank.5) Unrecorded check issuances/funds transfers.Book errors and other reconciling items affecting the book balance must be immediately taken-up in the books so as not to reflected same reconciling items in the succeeding reconciliation statement.

C. Additions to Bank Balance Requiring Adjustment by the Bank 1) Deposit not yet recorded by the bank, e.g. deposit in transit.

2) Bank error in recording the payment of a check which resulted in understatement of bank balance. Example: A check for P85.00 recorded as P95.00.3) Bank error in charging the account for a check drawn by another agency. Example: The withdrawal of NFA Employees Association was charged against the account of the NFA.4) Bank error in the charging of the check of another NFA bank account. Example - Field Office: A check drawn against CPF account was debited to KPF account (the account being reconciled). This error shall necessitate adjustment of the bank records for KPF account by crediting the check so as to correct the error and for CPF account by debiting the check so as to reflect the withdrawal.

D. Deductions from Bank Balance Requiring Adjustment by the Bank1) Outstanding checks.

2) Bank error in recording a deposit which resulted in the overstatement of the bank balance. The error may be attributed to erroneous recording of the deposit. Example: A deposit of P900.00 recorded as P1,000. This may also be attributed to error in crediting NFA for deposits made by other agency/client. Example: A deposit of P900.00 recorded as P1,000. This may also be attributed to error in crediting NFA for deposits made by other agency/client. Example: Deposit of NFA Employees Association credited to the NFA.3) Bank error in recording the payment of a check which resulted in an overstatement of the bank balance. Example: A check for P15,000.00 recorded as P5,000.00.4) Bank error in the charging of the check to another NFA bank account. Example - Field Office: A check drawn against CPF account (the account being reconciled) was debited to KPF account. The error shall be adjusted by debiting the CPF account for the withdrawal, and on the other hand, crediting the KPF account for the erroneous charge against the KPF account.Bank errors must be immediately reported to the bank for proper adjustment of bank records:

3. Books of Accounts UsedThe books of accounts where the various cash in bank transactions are being recorded, and are, therefore, used in the reconciliation process are as follows: a. Journal of Collections and Deposits (JCD)

This is the book of original entry where collections and deposits of NFA collecting officers are recorded. Entries recorded in this journal shall be compared with the bank credit entries reflected in the bank statement for possible items of reconciliation such as unrecorded deposits, deposits in transit, mispostings, and other errors.

b. Kadiwa Sales Journal (KSJ) This is a special journal where Kadiwa sales transactions are recorded. Kadiwa sales collections can either be remitted to the Provincial Cashier or deposited directly to the bank as authorized. Under the first scheme, the remittance shall form part of the Cashier's collections and, therefore, the corresponding deposit shall be reflected in t he JCD. Under the latter scheme the direct deposit shall be recorded in the KSJ. The entries recorded in the KSJ shall be compared with the bank credit entries for possible items of reconciliation.c. Check Register Journal (CRJ) This book records all check disbursements of the NFA. Entries for check issuances recorded in this journal shall be compared with the bank debit entries. Outstanding checks, mispostings, and other errors may result from the comparison made.d. Advise Register Journal (ARJ) This book records inter-office transactions involving the cash in bank account of the Central/Regional/Provincial Offices. Advices representing remittances to Regional/Central Office shall be compared with the bank debit entries for current and savings accounts in the provincial offices. Advices representing remittances from Regional/Central Office shall be compared with the bank credit entries for current accounts (disbursement/drawing accounts) in the provincial offices.e. General Journal (GJ) This book records all other transactions involving the cash in bank account which could not be properly entered in the special journals such as entries to take-up cancelled/stale check and field offices entries to record transactions based on bank debit and credit memos. Subsequent adjustments of the cash in bank accounts as disclosed in the reconciliation process shall also be recorded in this journal.f. Bank Analysis Journal (BAJ)This is maintained in the Central Office only and is used to record all C.O. bank transactions involving cash inflow/outflow and transfer from one bank to another or from one fund account to another. Entries in the journal are based on bank tickets (debit/credit memos) sent by the bank together with the monthly bank statements. These debit/credit entries by the bank may be further verified against communications from the Fund Management Division, DTFM.

4. List of Outstanding Checks

The bank reconciliation statement for current accounts is supported by a schedule which shows the total amount of checks that still remain outstanding as of the end of the month. This is known as the List of Outstanding Checks. The amount of check, date of check, and the corresponding check number are presented in the list individually. This is prepared on a per bank account basis.The procedures for the preparation of the list are as follows:a. Compare the bank debit entries in the bank statement with the paid checks to see to it that all paid checks are returned by the bank.b. Arrange the paid checks for the month according to series per bank account and add
the total paid checks per bank account.c. Determine the outstanding checks as of the month by comparing the paid checks with the list of outstanding checks of the proceeding month and with the check issuances for the current month per CRJ. Mark those checks which had been paid during the month. Unmarked checks are those which are still outstanding as of the end of the month. The comparison should not only be limited to the amount but to the corresponding date of check and check number for there are possibilities that different checks maybe drawn for the same amount on the same date.d. Prepare the list of outstanding checks indicating individually the date of check, check number and corresponding amount of checks and adding the total of these checks.e. Check the accuracy of the total reflected on the list by using this formula: Outstanding checks as of the beginning
of the month xxx
Add: Checks issued during the month xxx
Total xxx
Less: Checks paid during the month xxx
Outstanding checks as of the end of month xxx
===f. The amount arrived at in letter e should equal the total reflected on the list. Otherwise, reconcile the two for possible errors such as under/over footing of CRJ, unrecorded check issuances and mispostings.

5, Adjusting EntriesImmediately after the preparation of the bank reconciliation statement, entries to take-up the various reconciling items affecting the NFA books of accounts should be recorded in order to reflect the correct balance of cash in bank account. Adjusting entries shall be supported by Journal Vouchers. The adjustment is either a debit or a credit to the cash in bank account with a corresponding credit or debit to the other affected account.

1. Regional/Provincial Accountant [RACNT-02/PACNT-05] 1.1 Collection Accounts Deposited in Current/Savings Accounts

a.Determines unadjusted ending balances per subsidiary ledger and per bank statement/bank book.b. Compares bank credit entries with the recorded deposits per Journal of Collections and Deposits (JCD) based on the Weekly Report of Collections and Deposits (RCD)/Kadiwa Sales Journal (KSJ) together with the validated deposit slips, and notes for reconciling items such as unrecorded deposits, deposits in transit, and mispostings. c. Compares bank debit entries with the Advice Register Journal (ARJ) for Advices recorded representing remittances to Regional/Central Office, and notes for unrecorded remittances.d. Proceeds to the preparation of the bank reconciliation statement to be typed and attached to the trial balance.e. Prepares the necessary journal voucher for unrecorded bank charges/interests earned on savings accounts including combo accounts, and forwards same to the Bookkeeper for recording in the General Journal (GJ).f. Prepares advices for unrecorded remittances, and forwards same to the Bookkeeper for recording in the ARJ.g. Makes appropriate postings to the subsidiary ledgers.h. Adjusts book errors accordingly, if any.i. Advises the bank immediately for errors committed by the bank, if any.

1.2 Disbursement Accounts Deposited in Current Account

a. Determines unadjusted ending balances per subsidiary ledger and per bank statement.b. Compares bank credit entries with ARJ for advices recorded representing remittances from Regional/Central Office, and notes for unrecorded remittances.c. Compares bank debit entries with paid checks, checks accuracy of bank postings, and sees to it that all checks paid appearing on the bank statement are returned. Also, traces the paid checks to check issuance per Check Register Journal (CRJ), and notes for outstanding checks and other reconciling items.d. Proceeds to the preparation of the bank reconciliation statement to be typed and attached to the trial balance.e. Prepares the necessary journal voucher for unrecorded bank charges, and forwards same to the Bookkeeper for recording in the GJ.f.-i. same as in 1.1 letters f - 1.

1.3 Disbursement Accounts Deposited in Current Accounts Under the Imprest Fund ofRegular/Special Disbursing Officers a. Determines unadjusted ending balances per subsidiary ledger and per bank statement.

b. Compares bank credit entries with debit entries on account "Cash with RDO/SDO-Name of Disbursing Officer" per CRJ representing replenishment of the fund. Replenishing check in the possession of the RDO/SDO represents undeposited receipt or deposit in transit.c. Compares bank debit entries with Abstract of Purchases/List of Daily Paid Vouchers, and notes four outstanding checks. Paid checks returned by the bank are also verified for accuracy of bank postings. All paid checks appearing on the bank statement should be returned by the bank.d.-i. Same as in 1.2 letters d - i.NOTE: For combo accounts, verifies the fund transfer from the savings account of the disbursement fund to the corresponding current account of the same fund.

2.2 Disbursement Accounts Deposited in Current Accounts

a. Determines unadjusted ending balances per subsidiary ledger and per bank statement.b. Compares bank credits with the recorded entries per ARJ representing fund remittances from the Regional/provincial Office and per BAJ representing fund transfers from another bank account.c. Compares bank debit entries with the recorded entries per ARJ representing fund remittances to Regional/Provincial Office and per BAJ representing fund transfers to another bank accountd.-i. Same as in 1.2 letters d - i.

2.3 Disbursement Accounts Deposited in Current Accounts Under the Imprest Fund ofRegular/Special Disbursing Officers a.-i. Same as in 1.3 letters a - i.

Which of the following items will require an addition to the bank statement balance in a bank reconciliation statement?

For which of the following items on a bank reconciliation statement would a firm record a journal entry after completing the bank reconciliation process?

Which of the following are adjustments to the book balance in a bank reconciliation?

What is a form received from the bank showing all transactions recorded in the depositor's account during the month?