PROOF OF CASH

Proof of Cash
- Expanded reconciliation in that it included proof of receipts and disbursements
- Two-date bank reconciliation

Computations:
Book balance Bank balance
Balance per book – beginning xx Balance per bank – beginning xx
Add: Book debits during the month xx Add: Bank credits during the month xx
Total xx Total xx
Less: Book credits during the month xx Less: Bank debits during the month xx
Balance per book – ending xx Balance per bank – ending xx

Book debits refer to cash receipts or all items debited Bank credits refer to all items credited to the
account of the
to the cash in bank account. depositor acknowledged by bank and credit
memos.
Book credits refer to cash disbursements or all items Bank debits refer to all items debited
to the account of the
credited to the cash in bank account. depositor which include checks paid by the
bank and debit
memos.

Deposits in transit Outstanding checks

DIT – beginning xx OC – beginning
xx
Add: Cash receipts during the month xx Add: Checks withdrawn during the month
xx
Total deposits to be acknowledged by bank xx Total checks paid by bank
xx
Less: Deposits acknowledged by bank xx Less: Checks paid by bank during the month
xx
DIT – ending xx OC – ending xx

Forms of Proof of Cash:

1. Adjusted balance method
2. Book to bank method
3. Bank to book method

Rules: ERROR
1. Who made the error?
2. Impact of error?
3. Correct the error.

Proof of Cash: Error (Bank)

1. Bank erroneously credited Prior Month Receipts Disbursement Current
the amount during the current s Month
period but subsequently
corrected the amount in the next
period. (20)
January (10) (20)
February (10)

2. Bank erroneously charge the

amount during the current period
but subsequently corrected the
amount in the next period.
January 30 (30)
February (20) 20

3. Bank erroneously credited

the amount during the current
period and corrected the amount
in the same period. (10) (10)
February

4. Bank erroneously charge the

amount during the current period
and corrected the amount in the
same period 20 20
February

Proof of Cash: Error (Book)

1. Collection of Accounts
Receivable not recorded by
company (corrected next month) 10 (10)
January 20 20
February

2. Overstatement of check in
payment of salaries (corrected
next month) 20 (20)
January (10) 10
February

3. Note recorded as cash receipts

by company when placed with
bank for collection (collected and
credited by bank next month)
January (30) 30
February (20) (20)

Problem 1

Unilever Company provided the following data for the month of July:

Cash in bank

Balance June 30 1,000,000

Book debits for July including June CM
for note collected, P300,000 4,000,000
Book credits for July including June NSF
of P100,000 and service charge of P4,000 3,600,000

Bank statement for July

Balance June 30 1,650,000

Bank debits for July including service
charge of P1,000 and June outstanding
checks of P854,000 2,500,000
Bank credits for July including CM for
bank loan of P500,000 and June deposit
in transit of P400,000 3,500,000

Prepare bank reconciliation on June 30 and July 31 and adjusting entries on July 31.
ASSIGNMENT! (1 whole sheet)
Problem 2

Watson’s Company provided the following data for the month of December:

November 30 December 31
Book balance 1,900,000 ?
Total cash receipts per book 1,400,000
Total cash disbursements per book 2,400,00

Bank balance 2,100,000 ?

Total charges in bank statement 2,500,000
Total credits in bank statement 1,200,000

NSF check 60,000 40,000

Collections of accounts receivable not
recorded by entity (corrected in
subsequent month) 30,000 50,000
Overstatement of check in payment
of salaries (corrected in subsequent
month) 90,000 120,000
Deposit in transit 130,000 260,000
Outstanding checks 270,000 30,000

Prepare a four-column reconciliation showing adjusted balances. Prepare adjusting entries on December
31.

Problem 3

Clear Company prepared the following bank reconciliation on March 31:

Balance per bank statement, March 31 4,650,000

Add: Deposit in Transit 1,000,000
Total 5,650,000
Less: Outstanding checks 1,250,000
Balance per book, March 31 4,400,000

Data per bank statement for the month of April follow:

Deposits 6,000,000
Disbursements 5,000,000

All reconciliation items on March 31 cleared through the bank in April. Outstanding checks on April 30
totaled P750,000 and deposits in transit amounted toP1,500,000.

1. What is the adjusted cash in bank on April 30?

2. What is the cash balance per ledger on April 30?
3. What is the amount of cash receipts per book in April?
4. What is the amount of cash disbursements per book in April?