Proof of Cash

OBJECTIVES
 To be able to prepare a two-date bank reconciliation.
 To know the computation of deposits in transit and
outstanding checks.
 To know the reconciliation of cash receipts per ledger with
cash receipts per bank statement.
 To know the reconciliation of cash disbursements per ledger
with cash disbursements per bank
 To understand the nature of proof of cash
 To be able to prepare a reconciliation showing proof of cash.
TWO-DATE BANK RECONCILIATION
• Reconciliation involving two dates
• Problems arise if there are missing information or
omitted data which is necessary for the reconciliation.
• Information needed:

a. Book Balance – beginning and ending

b. Bank Balance – beginning and ending
c. Deposits in Transit – beginning and ending
d. Outstanding Checks – beginning and ending
COMPUTATION OF BOOK BALANCE

Balance per book, Beginning of the month XXX

Add: Book Debits during the month XXX
Total XXX
Less: Book Credits during the month XXX
Balance per book, end of the month XXX
COMPUTATION OF BANK BALANCE

Balance per Bank, beginning of the month XXX

Add: Bank Credits during the month XXX
Total XXX
Less: Bank Debits during the month XXX
Balance per Bank, end of month XXX
COMPUTATION OF DEPOSITS IN TRANSIT
Deposit in Transit, beginning of the month XXX

ADD: Cash receipts deposited during the month XXX

Total deposits to be acknowledged by bank XXX

LESS: Deposits Acknowledged by bank during the month XXX

Deposits in Transit, end of month XXX

COMPUTATION OF OUTSTANDING CHECKS
Outstanding Checks, Beginning of month xxx
ADD: Checks drawn by depositor during the month xxx
Total Checks to be paid by bank xxx
Less: Checks paid by bank during the month xxx
Outstanding Checks, End of Month xxx
Proof of Cash

- An expanded reconciliation in that it includes

proof of receipts and disbursements.
- Also called four-column or two date bank
reconciliation
Forms of Proof of Cash

Bank to
Book
Adjusted Method
Balance
Method
Bank receipts and
disbursements for the current
Book receipts and month are adjusted to equal the
Book to
disbursements, and bank book receipts and
receipts and disbursements for Bank
disbursements for the current
the current month are adjusted Method month
to equal the correct receipts
and disbursements of the
current month
Book receipts and
disbursements are adjusted to
equal the bank receipts and
disbursements for the current
month
EXAMPLE
CASH IN BANK PER LEDGER
• Balance, January 31 50,000
• Book Debits for February, including January CM
for note collected of P15,000 200,000
• Book Credits for February, including NSF check
of P5,000 and service charge of P1,000 for January 180,000

BANK STATEMENT
• Balance, January 31 84,000
• Bank credits for February, including CM
for note collected of P20,000 and January
deposit in transit of P40,000 170,000
• Bank debits for February, including NSF check
of P10,000 and January outstanding check of P65,000 130,000
Pro-forma Proof of Cash for ADJUSTED BALANCE METHOD
xxx Company
Proof of Cash
For the month of February

January +Receipts -Disbursements February

31 28
Cash in bank account balance 50,000 200,000 180,000 70,000

Note collected
January 15,000 (15,000)
February 20,000 20,000

NSF Check
January (5,000) (5,000)
February 10,000 (10,000)

Service Charge
January (1,000) (1,000)
ADJUSTED BOOK BALANCE 59,000 205,000 184,000 80,000

Bank statement balance 84,000 170,000 130,000 124,000

Deposit in transit:
January 40,000 (40,000)
February 75,000 75,000

Outstanding Checks
January (65,000) (65,000)
February 119,000 (119,000)

ADJUSTED BANK BALANCE 59,000 205,000 184,000 80,000

BOOK TO BANK
Previous Receipts Disbursements Current Month
month
Balance per book XXX XXX
Credit Memo:
Previous month XXX (XXX)
Current Month XXX XXX
Debit memos
Previous month (XXX) (XXX)
Current Month XXX (XXX)
Deposit in Transit:
Previous month (XXX) XXX
Current month (XXX) (XXX)
Outstanding Checks
Previous month XXX XXX
Current month (XXX) XXX
Errors: XXX/
(XXX)
Balance per bank XXX XXX XXX XXX
Bank to Book
Previous Receipts Disbursements Current Month
month
Balance per bank XXX XXX
Credit Memo:
Previous month (XXX) XXX
Current Month (XXX) (XXX)
Debit memos
Previous month XXX XXX
Current Month (XXX) XXX
Deposit in Transit:
Previous month XXX (XXX)
Current month XXX XXX
Outstanding Checks
Previous month (XXX) (XXX)
Current month XXX (XXX)
Errors: XXX/(XXX) XXX/(XXX)
Balance per book XXX XXX XXX XXX
Pro-forma Proof of Cash for BOOK TO BANK METHOD
xxx Company
Proof of Cash
For the month of February

January Receipts Disbursements February

31 28
Cash in bank account balance 50,000 200,000 180,000 70,000

Note collected
January 15,000 (15,000)
February 20,000 20,000

NSF Check
January (5,000) (5,000)
February 10,000 (10,000)

Service Charge
January (1,000) (1,000)
Deposit in transit:
January (40,000) 40,000
February (75,000) (75,000)

Outstanding Checks
January 65,000 65,000
February (119,000) 119,000

BALANCE PER BANK STATEMENT 84,000 170,000 130,000 124,000

Pro-forma Proof of Cash for BANK TO BOOK METHOD
xxx Company
Proof of Cash
For the month of February

January Receipts Disbursements February

31 28
Balance per bank statement 84,000 170,000 130,000 124,000

Deposit in transit:
January 40,000 (40,000)
February 75,000 75,000

Outstanding Checks
January (65,000) (65,000)
February 119,000 (119,000)

Note collected
January (15,000) 15,000
February (20,000) (20,000)

NSF Check
January 5,000 5,000
February (10.000) 10,000

Service Charge
January 1,000 1,000

BALANCE PER BOOK 50,000 200,000 180,000 70,000

Problem 9 – 3 Beehive Company
Provided the following information:

Balance per book October 31 600,000

Receipts per book for November (collection from customer,
100,000 recorded as 10,000) 2,200,000
Disbursements per book for November (check for 300,000
in payment of account recorded as 30,000) 1,800,000
Balance per bank statement November 30 930,000
Deposit in transit, October 31 300,000
Outstanding Checks, November 30 400,000
Bank receipts for November including an erroneous credit of
100,000 which should have been credited to Beeline Company 2,500,000
Bank disbursements for November including check of Beeline
Company, 200,000 1,970,000

REQUIRED:
• Prepare bank reconciliation on October 31 and November 30.
• Adjusting Entries on November 30.
Beehive Company Beehive Company
Bank Reconciliation Bank Reconciliation
October 31 November 30

Adjusted book balance 600,000 Balance per book 1,000,000

Add: Understated cash receipt
Balance per bank 400,000 BalanceCorrect
per book: 100,000
Add: Deposit in transit 300,000 October 31
Recorded as 600,00090,000
10,000
Total 700,000 Receipts or Book debits
Total 1,090,000 2,200,000
Less: Outstanding Checks 100,000 Disbursements
Less: or Book
Understated cash disbursement
Adjusted bank balance 600,000 credits
Correct (1,800,000)
300,000
November
Recorded30 as 1,000,000
30,000 270,000
Adjusted book balance 820,000

Balance per bank 930,000

Add: Deposit in transit 190,000
Erroneous bank
charge 200,000 390,000
Total 1,320,000
Less: Outstanding Checks 400,000
Erroneous bank
credit 100,000 500,000
Adjusted bank balance 820,000
Beehive Company Beehive Company
Bank Reconciliation Bank Reconciliation
October 31 November 30

Adjusted book balance 600,000 Balance per book 1,000,000

Add: Understated cash receipt
Balance per bank 400,000 Correct 100,000
Add: Deposit in transit 300,000 Recorded as 10,000 90,000
Total 700,000 BankTotal
statement balance:1,090,000
Less: Outstanding Checks 100,000 October 31
Less: Understated 400,000
cash disbursement
Adjusted bank balance 600,000 Receipts or Bank credits
Correct 300,0002,500,000
Disbursements
RecordedorasBank 30,000 270,000
debits book balance
Adjusted (1,970,000)
820,000
November 30 930,000
Balance per bank 930,000
Add: Deposit in transit 190,000
Erroneous bank
charge 200,000 390,000
Total 1,320,000
Less: Outstanding Checks 400,000
Erroneous bank
credit 100,000 500,000
Adjusted bank balance 820,000
Beehive Company Beehive Company
Bank Reconciliation Bank Reconciliation
October 31 November 30

Adjusted book balance 600,000 Balance per book 1,000,000

Add: Understated cash receipt
Balance per bank 400,000 Correct 100,000
Add: Deposit in transit 300,000 Recorded as 10,000 90,000
Total 700,000 Total 1,090,000
Less: Outstanding Checks 100,000 Less: Understated cash disbursement
Adjusted bank balance 600,000 Correct 300,000
Recorded as 30,000 270,000
Adjusted book balance 820,000
Outstanding Checks, May 31 100,000
Add: Checks drawn by depositor during the month:
Balance per bank 930,000
Book credits 1,800,000
Add: Deposit in transit 190,000
Understated Cash disbursement 270,000 2,070,000
Erroneous bank
Total checks to be paid by bank 2,170,000
charge 200,000 390,000
Less: Checks paid by bank during the month:
Total 1,320,000
Bank debits 1,970,000
Less: Outstanding Checks 400,000
Erroneous bank charge (200,000) 1,770,000
Erroneous bank
Outstanding Checks, November 30 400,000
credit 100,000 500,000
Adjusted bank balance 820,000
Beehive Company Beehive Company
Bank Reconciliation Bank Reconciliation
October 31 November 30

Adjusted book balance 600,000 Balance per book 1,000,000

Add: Understated cash receipt
Balance per bank 400,000 Correct 100,000
Add: Deposit in transit 300,000 Recorded as 10,000 90,000
Total 700,000 Total 1,090,000
Less: Outstanding Checks 100,000 Less: Understated cash disbursement
Adjusted bank balance 600,000 Correct 300,000
Recorded as 30,000 270,000
Adjusted book balance 820,000

Balance per bank 930,000

Add: Deposit in transit 190,000
Erroneous bank
charge 200,000 390,000
Deposit in transit, May 31 300,000
Total 1,320,000
Add: Cash receipts deposited during the month:
Less: Outstanding Checks 400,000
Book debits 2,200,000
Erroneous bank
Understated Cash receipt 90,000 2,290,000
credit 100,000 500,000
Total deposits to be acknowledge by bank 2,590,000
Adjusted bank balance 820,000
Less: Deposits credited by bank during the month:
Bank credits 2,500,000
Erroneous bank credit (100,000) 2,400,000
Deposit in transit, November 30 190,000
Adjusting entry:
2015

Nov. 30 Cash in Bank 90,000

Accounts Receivable 90,000

Collected from customer 100,000

Recorded as 10,000

Understated Cash Receipts 90,000

Accounts Payable 270,000

Cash in Bank 270,000

Check written in payment of account 300,000

Recorded as 30,000

Understated Cash Disbursement 270,000

Problem 9 – 8 Bedlam Company
The following data are for the month of December:
November 30 December 31
Cash in bank account balance 2,032,000 3,160,000
Bank statement balance 1,890,000 2,900,000
Bank debits 1,080,000
Bank credits ?
Book debits ?
Book credits 1,440,000
Outstanding Checks 180,000 592,000
Deposit in transit 80,000 498,000
Check erroneously charged by the bank against
entity’s account (corrected in subsequent month) 40,000 50,000
Bank service charge 2,000 4,000
Note recorded as cash receipt by the entity when
placed with bank for collection
(Note is actually collected by bank in subsequent
month and credited by bank to entity’s account
in same month) 200,000 300,000
Bedlam Company
Proof of Cash
For the month of December
November Receipts Disbursements December
30 31
Cash in bank account balance 2, 032,000 2,568,000 1,440,000 3,160,000

Bank service charge:

Cash in bank account balance:
November (2,000) (2,000)
December November 30 2,032,000 4,000 (4,000)
Receipts or Book debits 2,568,000
Note recorded as cash receipt by
Disbursements
entity when placed with bank for or Book
collection credits 1,440,000
November December 31 (200,000)
2,900,000 200,000
December (300,000) (300,000)
ADJUSTED BOOK BALANCE 1,830,000 2,468,000 1,442,000 2,856,000

Bank statement balance 1,890,000 2,090,000 1,080,000 2,900,000

Deposit in transit: Bank statement balance:

November 80,000 (80,000)
December 498,000 November 30 1,890,000
498,000
Receipts or Bank credits 2,090,000
Erroneous bank charge
November 40,000 (40,000) Disbursements or Bank
December debits (50,000) 1,080,000
50,000
Outstanding Checks December 31 2,900,000
November (180,000) (180,000)
December 592,000 (592,000)

ADJUSTED BANK BALANCE 1,830,000 2,468,000 1,442,000 2,856,000

Problem 9 – 13 Frivolous Company
Provided the following information for the bank reconciliation:

Checks and charges returned by bank in June

including a June service charge of 50,000 8,000,000
Service charge made by bank in May and recorded
on book in June 100,000
Total credits to cash in all journals during June 9,000,000
Customer’s NSF check returned as a bank charge
in June (no entry made on book) 1,000,000
Customer’s NSF check returned in May and redeposited
in June (no entry made in book in either May or June) 500,000
Outstanding checks at May 31 3,000,000

What is the amount of outstanding checks on June 30?

A. 5,450,000
B. 3,950,000
C. 4,950,000
D. 4,000,000
Problem 9 – 13 Frivolous Company
Provided the following information for the bank reconciliation:

Checks and charges returned by bank in June

including a June service charge of 50,000 8,000,000
Service charge made by bank in May and recorded
on book in June 100,000
Total credits to cash in all journals during June 9,000,000
Customer’s NSF check returned as a bank charge
in June (no entry made on book) 1,000,000
Customer’s NSF check returned in May and redeposited
in June (no entry made in book in either May or June) 500,000
Outstanding checks at May 31 3,000,000

What is the amount of outstanding checks on June 30?

A. 5,450,000 Outstanding Checks, May 31 3,000,000
B. 3,950,000 Add: Checks drawn by depositor during the month:
C. 4,950,000 Book credits 9,000,000
D. 4,000,000 Service charge in May and recorded
in June (100,000) 8,900,000
Total checks to be paid by bank 11.900,000
Less: Checks paid by bank during the month:
Bank debits 8,000,000
June Service charge (50,000)
June NSF check (1,000,000) 6,950,000
Outstanding Checks, June 30 4,950,000
Problem 9 – 16 Cool Company
Prepared the following bank reconciliation for the month of November:

Balance per bank statement, Nov. 30 3,600,000

Add: Deposit in transit 800,000
Total 4,400,000
Less: Outstanding checks 1,200,000
Bank credit recorded in error 200,000 1,400,000
Balance per book, Nov. 30 3,000,000

Data per bank statement for the month of December follow:

December deposits (including note collected of
1,000,000 for Cool Company) 5,500,000
December disbursements (including NSF,
350,000 and service charge, 50,000) 4,400,000

All the items that were outstanding on November 30 cleared through the bank in
December, including the bank credit. In addition, 500,000 in checks were
outstanding and deposits of 700,000 were in transit on December 31.
1. What is the balance of cash per ledger on December 31?
A. 4,100,000
B. 4,900,000
C. 4,700,000
D. 4,300,000

2. What is the amount of cash receipts per book in December?

A. 5,400,000
B. 4,400,000
C. 5,500,000
D. 6,400,000

3. What is the amount of cash disbursements per book in December?

A. 3,700,000
B. 3,300,000
C. 3,100,000
D. 3,500,000
1. What is the balance of cash per ledger on December 31?
A. 4,100,000
B. 4,900,000 Balance per bank statement, Nov. 30 3,600,000
C. 4,700,000 Add: Deposits 5,500,000
D. 4,300,000 Total 9,100,000
Less: Disbursement 4,400,000
Balance
2. What is the amount of cash receipts per bank
per book statement, Dec. 31 4,700,000
in December?
A. 5,400,000
Balance per bank statement, Dec. 31 4,700,000
B. 4,400,000 Add: Deposits in transit, Dec. 31 700,000
C. 5,500,000 Total 5,400,000
D. 6,400,000 Less: Outstanding Checks, Dec. 31 500,000
Adjusted cash balance 4,900,000
3. What is the amount of cash disbursements per book in December?
A. 3,700,000 Cash per ledger 4,300,000
B. 3,300,000 Add: Note collected 1,000,000
Total 5,300,000
C. 3,100,000
Less: NSF Check 350,000
D. 3,500,000 Service Charge 50,000 400,000
Adjusted cash balance 4,900,000
1. What is the balance of cash per ledger on December 31?
A. 4,100,000
B. 4,900,000
C. 4,700,000
D. 4,300,000

2. What is the amount of cash receipts per book in December?

A. 5,400,000
B. 4,400,000 Bank Receipts in December 5,500,000
C. 5,500,000 Note collected during December (1,000,000)
D. 6,400,000 Deposit in Transit:
November (800,000)
December 700,000
3. What is the amount of cash disbursements per book in December?
Cash Receipts per book, December 4,400,000
A. 3,700,000
B. 3,300,000
C. 3,100,000
D. 3,500,000
1. What is the balance of cash per ledger on December 31?
A. 4,100,000
B. 4,900,000
C. 4,700,000
D. 4,300,000

2. What is the amount of cash receipts per book in December?

A. 5,400,000
B. 4,400,000
C. 5,500,000
D. 6,400,000

3. What is the amount of cash disbursements per book in December?

A. 3,700,000 Bank Disbursements in December 4, 400,000
B. 3,300,000 December debit memos:
C. 3,100,000 NSF Check 350,000
D. 3,500,000 Service Charge 50,000 (400,000)
November bank reconciling items:
Outstanding Checks 1,200,000
Erroneous bank credit 200,000 (1,400,000)
Outstanding Checks, December 500,000
Cash Disbursements per book, December 3,100,000
Problem 9 – 19 Opaque 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 1,200,000
Balance per book, Nov. 30 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 31cleared through the bank in April. Outstanding
checks on April 30 totaled 750,000 and deposits in transit amounted to 1,500,000.
1. What is the balance of cash per ledger on April 30?
A. 6,400,000
B. 5,650,000
C. 4,900,000
D. 4,650,000

2. What is the amount of cash receipts per book in April?

A. 5,000,000
B. 6,500,000
C. 7,500,000
D. 5,500,000

3. What is the amount of cash disbursements per book in April?

A. 5,000,000
B. 5,500,000
C. 4,500,000
D. 5,750,000
1. What is the balance of cash per ledger on April 30?
A. 6,400,000 Balance per bank statement, March 31 4,650,000
B. 5,650,000 Add: Deposits 6,000,000
C. 4,900,000 Total 10,650,000
D. 4,650,000 Less: Disbursement 5,000,000
Balance per bank statement, April 30 5,650,000
2. What is the amount of cash receipts perper
Balance book
bankinstatement,
April? April 30 5,650,000
A. 5,000,000 Add: Deposits in transit, April 30 1,500,000
B. 6,500,000 Total 7,150,000
C. 7,500,000 Less: Outstanding Checks, April 30 750,000
D. 5,500,000 Adjusted cash balance 6,400,000

Cash per ledger

3. What is the amount of cash disbursements 6,400,000
per book in April?
A. 5,000,000
B. 5,500,000
C. 4,500,000
D. 5,750,000
1. What is the balance of cash per ledger on April 30?
A. 6,400,000
B. 5,650,000
C. 4,900,000
D. 4,650,000

2. What is the amount of cash receipts per book in April?

A. 5,000,000 From the month of April:
B. 6,500,000
C. 7,500,000 Deposits 6,000,000
D. 5,500,000 Deposit in Transit:
March (1,000,000)
April per book
3. What is the amount of cash disbursements 1,500,000
in April?
A. 5,000,000 Cash Receipts per book, April 6,500,000
B. 5,500,000
C. 4,500,000
D. 5,750,000
1. What is the balance of cash per ledger on April 30?
A. 6,400,000
B. 5,650,000
C. 4,900,000
D. 4,650,000

2. What is the amount of cash receipts per book in April?

A. 5,000,000
B. 6,500,000
C. 7,500,000
D. 5,500,000

3. What is the amount of cash disbursements per book in April?

A. 5,000,000 From the month of April:
B. 5,500,000
C. 4,500,000 Disbursements 5,000,000
D. 5,750,000 Outstanding Checks:
March (1,250,000)
April 750,000
Cash Disbursements per book, April 4,500,000