Core Text

Module 2 Session 3
Prepare Reconciliation Statements
Introduction
From the previous session, you were taught how to prepare the statement of
accountability. In a perfect setting, the balance in the statement of accountability
will equal the balance in the books and ledger. But such is not the case. In this
session, we will discuss the preparation of reconciliation statements, particularly the
Reconciliation Statement of Accountability and Bank Reconciliation Statement.
Module 2 Map

The terms reconciliation and bank reconciliation, as used in this session, will be
defined. Likewise, the items that not to be reconciled will be explained.

Learning objectives
By the end of the session, you will be able to
Prepare reconciliation statements in conformity with the Revised Cash
Examination Manual.

Core text
The following pages contain sections of the Handbook on Cash Examination. You are
required to read all of the pages for your understanding of the common procedures
and techniques in preparing reconciliation statements as well as other relevant
information regarding this session in Module 2.
Basic Concepts
Reconciliation
In accounting, reconciliation refers to the process of ensuring that two sets of records
(usually the balances of two accounts) are in agreement.
Reconciliation Statement of Accountability
In Reconciliation Statement of Accountability, we reconcile the discrepancy between
the statement of accountability, as shown in General Form 74-A, to the balance per
Accountings Subsidiary Ledger and the cash book of the AO at the date of cash
examination.
Reconciliation statement is needed because some of the transactions of the AO may
not have yet been recorded in the accounting books thus not taken into account in
the balance of the AOs account given by the Accountant, and vice versa.
Procedures in Reconciliation Statement of Accountability
1. Obtain certification from the accountant as to the latest balance of the
accountability of the AO.
2. Obtain a copy of the latest reconciliation statement of accountability.
3. Compare the entries per book of accounts. Take note of differences and verify.

4. Determine whether all reconciling items in the previous reconciliation statement

have been adjusted/corrected. Consider items not recorded to be reconciling
items in the reconciliation.
5. Prepare the reconciliation statement by considering all differences as reconciling
items.
6. Compare the reconciled balance with the balance of the accountability of the
accountable officer. In case of discrepancy, review the reconciliation statement
and/or the Statement of Accountability of the Accountable Officer. Balances of
these reports should always be equal.
Other procedures that you have to observe concern the following:
Make sure the Balance per Statement of Accountability equals the back portion of
your GF 74-A.
Make sure the Balance per subsidiary ledger equals the Certification by the
Accountant and the Subsidiary Ledger as verified by you.
Make sure the Balance per Cashbook equals the Balance in the Cash book certified
by the AO.
Bank Reconciliation
Is a process that explains the difference between the bank balance shown in an
organization's bank statement, as supplied by the bank, and the corresponding
amount shown in the organization's own accounting records at a particular point in
time.

Objectives of Bank Reconciliation

To prove integrity of all cash records.

To determine the actual balance of agencys bank accounts.
To detect bank/book errors.
To detect tampering of records and checks drawn/deposited.
To prove that collection is deposited intact and daily.

To adjust errors committed and to update records.

Procedures in Bank Reconciliation

1. Determine the balance per books of the Agency and the balance per bank
statement of the bank. See to it that the beginning balance is the same as the
previous months ending balance.
2. Trace the deposits per general ledger to the bank statement to ascertain whether
there are deposits not yet acknowledged by the bank. List them down in your
working papers.
3. Trace the checks issued per general ledger to the bank statement to ascertain
whether there are checks not yet presented to the bank for payment. List these
outstanding checks in your working papers.
4.

Examine the bank statement to determine whether there are bank credits and
bank debits not yet recorded by the agency. List them down in your working
papers.

5. Review the previous months BRS to check whether the reconciling items requiring
corrections by the agency or the bank were adjusted. If not yet adjusted, list
down in your working papers all items not corrected.
6. Review the previous months BRS to check whether or not outstanding checks were
already paid by the bank. List down in your working papers all checks still
outstanding.
7. Watch out for errors and other reconciling items.
8.

Examine and analyze all items in your working papers and prepare the
reconciliation statement.

Other procedures that you have to observe concern the following:

The Balance per bank should equal the balance in the cut-off bank statements.
The Balance per CDR/Cashbook should equal the balance in the AOs book as
certified by him/her.
The Balance per ledger should equal the certification by the accountant and the
ledger as verified by you.

Summary
In this session, you were taught how to prepare reconciliation statements, particularly
the Reconciliation Statement of Accountability and Bank Reconciliation Statement.
The terms reconciliation and bank reconciliation, as used in this session, were
defined. The objectives of doing a bank reconciliation was likewise discussed.

Reference:
1. Revised Cash Examination Manual