RECONCILIATION STATEMENT

Hi Readers,

“Life is like a huge bank account that we deposit experiences, happy moments, achievements and even the worst thing that happened in our life and we transact our experience to use in our present stand and for our future so that we do not commit the same errors we did in the past. “

               As promised I’m back after a week of new learning from our professor of business math. Just like from the first chapter Profit and Loss we’ve learned how to get the gaining and losing part in business. Now this will be a new chapter concerning with cheques. Yes, cheques. Some of us only know what a cheque looks like, NIKE, I’m just joking the cheque that I’m telling is the one that’s being use on banks. A paper that carries an amount given by a person (the drawer) to another (the payee). Cheques were created to avoid bringing large amount of money , it is the safest way to transport an amount that a person usually don’t carry in his wallet. One other reason that a cheque is a safe money transfer device is that only the payee can receive the amount that the drawer wrote in due time. It takes a process before the payee receives the money. I usually pay my enrolment fees with cheques that my mom ordered from the bank so for me I’m comfortable and even if I lost the cheque it can never be used to get the transaction because it has the payee’s name on it. Okay let us start, the name of the lesson we tackled was Bank Reconciliation.

Bank Reconciliation is the process of bringing the bank's monthly report for each depositor showing deposits made, check written, cancelled checks, and service charges. Check book contains checks and check stubs. The checks are filled out by the depositors made, and of charges made by the bank. Reconciliation statement putting an agreement the bank statement balance and the check book balance.

TAKE NOTE: The difference in the balances may due to:

1. Outstanding checks. These are checks issued by the depositor but have not yet been presented to the bank for payment.

2. Deposits in transit. These are deposits made but late to be included in the monthly bank statement.

3. Service charges.

4. Errors in the check stub entries or in other term this is the deposit not recorded in the check book.

5. Cancelled checks. These are checks that have been paid by the bank.

FORMULA:

ADJUSTED BALANCE METHOD

Check book + Error = Total

Total – (Service charge + Cancelled check) = Adjusted check book balance

Bank Statement Balance + Deposit in transit = Total

Total – Outstanding check = Adjusted bank statement balance

NOTE: The adjusted bank statement balance and the adjusted check book balance must be equal.

Now let us try the formulas in a problem solving.

         When Mr Erwin Garcia received his bank statement, he had a balance of P 3,842.30. His check book balance was P 3,288.40. He found out that checks 14 and 21 were not yet cashed with the amounts of P 1,000 and P 557.30, respectively. His deposit of P 500 at the end of the month was late to be included in the bank statement. Upon inspecting his check book, he noted that P5.20 was deducted by the bank as a service charge. An error was made when he issued a check for P 1,002.40 which he deducted as P 1,004.20. The cancelled check of P500 was not deducted either from the check book balance.

SOLUTION:

Erwin Garcia

Reconciliation Statement

March 30, 2002

Check book Balance             P 3,288.40    

Add: Error                                         1.80

                                               P 3,290.20 

Less:                                                   

   Service Charge        P5.20                        

   Cancelled Check P500.00         505.20         

Adjusted check book             P 2,785.00   

     Balance

 Bank Statement Balance              P 3,842.30
 Add: Deposit in transit                        500.00
                                                    P  4,342.30
Less: Outstanding checks
 #14                      P 1000.00
#21                        P   557.30            1,557.30
Adjusted Balance                          P   2,785.00

NOTE: Solution must be presented like this for consistency

Now on your own try to solve the Reconciliation statement using the formula above and how it was solved. Remember the terms we’ve taken note of.

Prepare a reconciliation statement for Mr Jaime Santos for the month of October, 2002.

Check book Balance                 P 11,074.60

Bank statement Balance            P 10,662.30

Canceled Check                       P   4,900.00

Outstanding Check                   P   5,500.00

Service Charge                         P        12.30

Deposit not recorded

In Check book                         P   1,000.00

Deposit not recorded

In Bank statement                     P   2,000.00

So now you know how to get a reconciliation statement, this will be a big help when you have your own business and you are giving off or receiving a cheque and for you to monitor your balances on your account. So see you next week for the answer and for a new lesson with business math.

ANSWERS FOR PROFIT AND LOSS

1.          Beginning Inventory      P 8,070.00

   Purchase                          P 10, 721.00

   Ending Inventory            P 9,205.00

  Cost of Good sold                      ?

                                             P    8,070.00        Beginning Inventory

                                         +  P  10,721.00        Purchase 

                                                 18,791.00        goods for sale

                                               -  P     9,205.00        Ending inventory

                                                  P     9,586.00        Cost of Good Sold

2.           Gross Sale                    P 896,954.00

    Cost of good sold          P 577,320.40

    Operating expenses       P   49,285.98

    Refund                          P   25,520.49

    Net sale ?  Gross profit ? Net profit ?

Gross Sales                        P 896,954.00

Less: Refund                      P    25,520.49

   a.Net Sales                         871,433.51

     Less: Cost of good        P  577,320.40

                 Sold                   __________

   b. Gross Profit                P  294,113.11

   less: Operating                P    49,285.98

  expenses                           __________

  c. Net profit                     P  244,827.13

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checked by: Prof. Crisencio M. Paner

PROFIT AND LOSS OR MARGIN

Hi! Readers,

Well let us start on the easiest part of Business Math as our professor said. The first topic that our professor taught us is “Profit and Loss” or “Margin”. The topic will help you in knowing important terms and formulas in getting the Margin.

TAKE NOTE:

     1.Profit – Something you earn, something you gain in business. The amount by which the sales are greater than the cost of goods sold and the operating expenses.

     2. Loss – Something you lose when it comes to business or when the Sales is less than the Cost of Goods Sold

FORMULAS IN GETTING THE PROFIT:

Net Sales = Gross Sales – Refunds and Allowances

Net Profit = Gross Profit – Operating Expenses

The formulas can either be shown in the following forms:

For Net Sales                                              For Gross Profit                             For Net Profit

              GROSS SALES                                               NET SALES                                  GROSS PROFIT

          -   REFUNDS AND ALLOWANCES        -     COST OF GOOD SOLD       -      OPERATING EXPENSES

______________________________               ____________________         _____________________

              NET SALES                                                    GROSS PROFIT                           NET PROFIT

TAKE NOTE:

1. Gross Sales  - is the actual amount received for selling the goods.

2. Refunds -  are amounts returned usually if goods are defective.

3.  Net sales -  are obtained when refunds are being deducted from the gross sales.

4. Costs of goods sold or buying price -  is the amount paid for articles bought including the buying expenses.

FORMULAS IN GETTING THE COST OF GOODS SOLD:

Available Goods = Beginning Inventory + Purchases

Costs of Goods Sold = Available Goods – Ending Inventory

The formulas can either be shown in the following forms:

For Available of Goods                                                              For Costs of Goods Sold

              BEGINNING INVENTORY                                                             AVAILBALE GOODS

+            PURCHASES                                                                            -      ENDING INVENTORY

____________________________                                                 ______________________

GOODS FOR SALE / AVAILABLE GOODS                                         COSTS OF GOODS  SOLD

TAKE NOTE:

1. Inventory - is an itemized lists of goods on hand.

2. Gross Profit - is the difference between the net sales and the cost of goods sold.

3. Operating expenses or overhead - are selling expenses such as salaries or wages, traveling expenses, rentals, water, electric bills, commissions, taxes.

4. Net Profit - is the amount obtained when all the selling expenses or other cost of doing business are deducted from the gross profit.

FORMULAS IN GETTING THE LOSS:

Gross Loss = Costs of Goods Sold – Net Sales

Net Loss = Gross Loss + Operating Expenses

The formulas can either be shown in the following forms:

For Gross Loss                                                                    For Net Loss

            COSTS OF GOODS SOLD                                        GROSS LOSS

_          NET SALES                                                         +     OPERATING EXPENSES

__________________________                              ________________________

             GROSS LOSS                                                             NET LOSS

Now let us try the formulas you have learned with these problems:

Problem 1.

       Mr. Aldwin Leynes had net sales amounting to P 10,085.75. The cost of goods sold was P 4,033.45. The operating expenses amounted to P 2,445. Find the net profit , or net loss, as the case maybe.

                                  Net Sales         P    10,085.75

                 Cost of Goods Sold   -             4,033.45

                                                    ________________

                                                                    6,052.30                 Gross Profit

                                                  -                 2,445.00                 Operating Expenses

                                                    ________________

                                                            P      3,607.30                  Net Profit

Problem 2.

         A bookstore owner had a stock of goods worth P 5,039.80 on June 30. His purchases after that date amounted to P 3,450. On July 31, his stock of goods on hand was P 4,100.50. How much was the cost of goods sold?

                          Beginning Inventory       P           5,039.80

                          Purchases                       +             3,450.00

                                                                  _________________

                                                                                   8,489.80          goods for sale

         -             4,100.50          Ending Inventory

       _________________

          P           4,389.30           Cost of Goods Sold

Now on your own solve these following questions and see if your answers are correct next week.

      1.At the beginning of the year the merchandising inventory of Almaric’s store was P 8,070. Purchase for 6 months amounted to P 10,721. At the end of 6 months, the inventory stood P 9,205. Find the cost of goods sold.

      2. A department store had gross sales amounting to P 896,954. The cost of goods sold was P 577.320.40, the operating expenses was P 49,285.98, and refund for defective goods amounted to P 25, 520. 49. Find a. Net sales b. Gross profit c. Net profit.

Knowing the terms and formulas makes math easy to understand hope you learned something

Thank you and have a nice day blogger J. See you next week

We will make math Easy!

_____________________
checked by prof. Crisencio M. Paner

MEANING OF MATHALINHAGANG MATH

Hi! Readers,

First of all, I want to explain my blog title “MATHalinhagang Math”. The word MATHalinhagang came from the Filipino word “Matalinhaga” meaning deep or something that cannot be understand by just reading it once or looking at it. You have to go deeper to fully understand something. If you translate “Matalinhaga” in English, the translated word is Idiomatic.

Why did I use the word “MATHalinhaga” and partnering it with Math? Well first of all, I know math as adding, subtracting, dividing, and multiplying numbers but then again those topics are for those who are in grade school. As you go on with your school life you’ll encounter MATH as a big problem. Yes and it did became my problem, so you were I know it don’t deny it except if you’re a geek or the so called “nerd” of the class, especially Trigonometry and Calculus it made my life miserable. So anyway some math topics are not that complicated but some could be and can be problematic which in any case you need to go deeper to fully understand how to get the correct answer.

Well what can we do Math is one big part of our daily lives. YES one BIG part of your life, like the English language it is universal. It is use in teaching, measuring, weighing, business, cooking and many other. But for now let us talk about business math. Business math is use in areas such as accounting, inventory management, marketing, sales forecasting, and financial analysis. So to put it in simple term business math is use in solving financial problems, money.