PROOF OF CASH

two date bank reconciliation because it literally involves two dates - the cash
balance at the beginning of the current month (or end of the last month) and
the cash balance at the end of the current month

Expanded reconciliation that includes the proving of balances of receipts and

disbursements of both the book and bank records

Prepared by the auditor if the internal control for cash is weak

Four balances to reconcile in proof of cash

 Cash balance at the beginning of the current month (or end of last month)

 Receipts during the current month

 Disbursements during the current month

 Cash balance at the end of the current month

Book debits: cash receipts or all items debited to the cash in bank account
Book credits: cash disbursement or all items credited to the cash in bank account
In a T-account form, the cash in bank may appear as follows:

PROOF OF CASH 1
 Computation of deposits in transit
Deposit in transit - beginning of month xx
Add: Cash receipts deposited during the month xx
Total deposits to be acknowledged by bank xx
Less: Deposits acknowledged by bank during month xx
Deposits in transit - end of month xx

Computation of outstanding checks

Outstanding checks - beginning of month xx
Add: Cash receipts drawn during the month xx
Total checks to be paid by bank xx
Less: Checks paid by bank during month xx
Outstanding checks - end of month xx

For reconciling items of LAST MONTH

Cash Balance, beginning of current month + Receipts during the current month
- Disbursement during the current months
For reconciling items of the CURRENT MONTH

Receipts during the current month - Disbursement during the current month =
Cash balance, end of current month

Method/ Forms of Proof of Cash

 Adjusted Balance Method

 Book to Bank Method

 Bank to Book Method

Proof of Cash Procedures

PROOF OF CASH 2
 Adjusted Balance Method)

BOOK BALANCES

BANK BALANCES

PROOF OF CASH 3
 Reconciling Items for the Book
NSF Check Analysis)

Debit memo: an item on a company's bank account statement that reduces the
company's checking account balance. (book reconciling item)

PROOF OF CASH 4
 Notes Collected by Bank

Credit memo: items that the bank added that is not reflected in the book
: is an item on a company's bank account statement that increases a company's
checking account balance.

PROOF OF CASH 5
PROOF OF CASH 6
 Reconciling Items for the Bank

Deposit in Transit

PROOF OF CASH 7
 Outstanding checks: ay ang mga babayarin ng kumpanya na ibinayad na sa mga
pinagkakautangan ng kumpanya ngunit sa kung ano mang dahilan ay hindi pa ito
nababayaran ng banko

PROOF OF CASH 8
PROOF OF CASH 9
 ERRORS

Example:

 August collection of P40,000 recorded by entity as P4,000

 August check in payment of account payable for P120,000 recorded by entity

as P12,000

 Deposit of Alpha Men Corporation erroneously credited by bank to Alpha Gen

Corporation, P40,000

 August check of Alpha Men Corporation erroneously charged by bank to Alpha

Gen Company, P80,000

 August collection of P40,000 recorded by entity as P4,000

PROOF OF CASH 10
 2. August check in payment of account payable for P120,000 recorded by
entity as P12,000

3. Deposit of Alpha Men Corporation erroneously credited by bank to Alpha Gen

Corporation, P40,000

PROOF OF CASH 11
 4. August check of Alpha Men Corporation erroneously charged by bank to
Alpha Gen Company, P80,000

PROOF OF CASH 12
 Adjusting Journal Entries

Focus only on BOOKS

Look at the Cash Ending Balance

If the reconciling item is positive, It means CASH - DEBIT. The corresponding

credit entry will depend on the nature of the reconciling item

If the reconciling item is negative, it means CASH - CREDIT. The

corresponding debit entry will depend on the nature of the reconciling item

PROOF OF CASH 13
 Book to Bank Method

PROOF OF CASH 14
 Bank to Book Method

IF HINDI GIVEN ANG AMOUNT NI OUTSTANDING CHECKS & DEPOSIT IN

TRANSIT

Outstanding Checks - January 31

65,000
Add: Checks drawn by depositor during February:
Book credits 180,000

Less: January Debit Memo 6,000

174,000
Total
239,000

PROOF OF CASH 15
 Less: Checks paid by bank during February:
Bank debits 130,000
Less: February NSF 10,000
120,000
Outstanding checks - February 28
119,000

Deposit in Transit - January 31

40,000

Add: Checks receipts deposited during February:

Book debits 200,000
Less: January CM for note collected 15,000
185,000
Total
225,000
Less: Deposits acknowledged by bank in February:
Bank credits 170,000
Less: February CM for not collected 20,000
150,000
Deposit in transit - February 28
119,000

PROOF OF CASH 16