Ever wondered how businesses keep track of their money and... Show more
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Paul Daniel Eduarte
12/18/2025
FABM
FABM 2
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Dec 18, 2025
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FABM 2: Understanding Bank Reconciliation - Quarter 2 Guide
P
Paul Daniel Eduarte
@pauldanieleduar
1 / 3
Bank Reconciliation Basics
Think of bank reconciliation as detective work for your money! When your company's records don't match what the bank says you have, you need to figure out why. A bank statement is like a monthly report card from your bank showing all deposits, withdrawals, and fees.
The goal is simple: make your company's cash records match the bank's records perfectly. You'll work with two columns - book balance (what your company recorded) and bank balance (what the bank shows). Once you adjust both sides, they should be equal.
There are six main types of items that cause differences. Bank reconciling items include deposits in transit (money you deposited but the bank hasn't processed yet), outstanding checks (checks you wrote but haven't been cashed), and bank errors. Book reconciling items include NSF checks (bounced checks), credit memos (money the bank added that you didn't record), debit memos (bank charges you didn't record), and book errors.
Pro Tip: NSF stands for "No Sufficient Funds" - basically a bounced check that can either hurt or help your balance depending on whether you wrote it or received it!
Creating Bank Reconciliation Statements
Ready to become a reconciliation pro? The process is straightforward once you get the hang of it. Start by comparing your cash ledger with the bank statement line by line to spot differences.
Next, categorize each difference as either a book or bank reconciling item. Set up your reconciliation statement with two sides: one starting with your book balance, the other with the bank balance. Add credit memos and subtract debit memos from your book side, while adding deposits in transit and subtracting outstanding checks from the bank side.
The magic moment happens when both adjusted balances match exactly - down to the last centavo! Once they're equal, you'll need to prepare adjusting entries for all the book reconciling items. Remember, you only make journal entries for items that affect your company's records, not the bank's mistakes.
Key Rule: You can only make adjusting entries for book reconciling items - never for bank reconciling items since those are the bank's responsibility to fix!
Banking Documents and Financial Analysis
Why do businesses use banks instead of keeping cash in a vault? Simple - cash is the most vulnerable asset to theft and fraud. Banks offer various account types including savings accounts (earn interest), checking accounts (for daily transactions), time deposits , and credit/debit accounts.
Essential banking documents include deposit slips (for putting money in), withdrawal slips (for taking money out), and checks (written orders to pay someone). When writing a check, you're the drawer, the person getting paid is the payee, and the bank is the drawee. Checks are valid for six months from the date written.
Financial statement analysis helps businesses understand their performance through two main techniques. Horizontal analysis (trend analysis) compares data across different time periods using formulas to calculate peso and percentage changes. Vertical analysis (common size analysis) shows how each item relates to a base amount - total assets for balance sheets or net sales for income statements.
Money Fact: A single check transaction involves three parties, and understanding this relationship is crucial for proper accounting treatment!
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
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You can download the app in the Google Play Store and in the Apple App Store.
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
FABM 2: Understanding Bank Reconciliation - Quarter 2 Guide
P
Paul Daniel Eduarte
@pauldanieleduar
Ever wondered how businesses keep track of their money and make smart financial decisions? This lesson dives into the essential skills of bank reconciliation and financial statement analysis - two critical tools that help companies manage their cash and understand... Show more
Bank Reconciliation Basics
Think of bank reconciliation as detective work for your money! When your company's records don't match what the bank says you have, you need to figure out why. A bank statement is like a monthly report card from your bank showing all deposits, withdrawals, and fees.
The goal is simple: make your company's cash records match the bank's records perfectly. You'll work with two columns - book balance (what your company recorded) and bank balance (what the bank shows). Once you adjust both sides, they should be equal.
There are six main types of items that cause differences. Bank reconciling items include deposits in transit (money you deposited but the bank hasn't processed yet), outstanding checks (checks you wrote but haven't been cashed), and bank errors. Book reconciling items include NSF checks (bounced checks), credit memos (money the bank added that you didn't record), debit memos (bank charges you didn't record), and book errors.
Pro Tip: NSF stands for "No Sufficient Funds" - basically a bounced check that can either hurt or help your balance depending on whether you wrote it or received it!
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Creating Bank Reconciliation Statements
Ready to become a reconciliation pro? The process is straightforward once you get the hang of it. Start by comparing your cash ledger with the bank statement line by line to spot differences.
Next, categorize each difference as either a book or bank reconciling item. Set up your reconciliation statement with two sides: one starting with your book balance, the other with the bank balance. Add credit memos and subtract debit memos from your book side, while adding deposits in transit and subtracting outstanding checks from the bank side.
The magic moment happens when both adjusted balances match exactly - down to the last centavo! Once they're equal, you'll need to prepare adjusting entries for all the book reconciling items. Remember, you only make journal entries for items that affect your company's records, not the bank's mistakes.
Key Rule: You can only make adjusting entries for book reconciling items - never for bank reconciling items since those are the bank's responsibility to fix!
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Banking Documents and Financial Analysis
Why do businesses use banks instead of keeping cash in a vault? Simple - cash is the most vulnerable asset to theft and fraud. Banks offer various account types including savings accounts (earn interest), checking accounts (for daily transactions), time deposits , and credit/debit accounts.
Essential banking documents include deposit slips (for putting money in), withdrawal slips (for taking money out), and checks (written orders to pay someone). When writing a check, you're the drawer, the person getting paid is the payee, and the bank is the drawee. Checks are valid for six months from the date written.
Financial statement analysis helps businesses understand their performance through two main techniques. Horizontal analysis (trend analysis) compares data across different time periods using formulas to calculate peso and percentage changes. Vertical analysis (common size analysis) shows how each item relates to a base amount - total assets for balance sheets or net sales for income statements.
Money Fact: A single check transaction involves three parties, and understanding this relationship is crucial for proper accounting treatment!
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
Where can I download the Knowunity app?
You can download the app in the Google Play Store and in the Apple App Store.
Is Knowunity really free of charge?
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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Most popular content: Trend
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Can't find what you're looking for? Explore other subjects.
Students love us — and so will you.
4.9/5
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4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user