1.3.4.

Proof of Cash
Proof of cash is an expanded bank reconciliation. It includes the proof of receipts and
disbursements. This approach is useful in discovering possible discrepancies in handling
cash particularly when cash receipts have been recorded but have not been
deposited. It follows the same procedure as the one-date reconciliation. The same
method may be used. The complication occurs when certain facts or data are omitted
which may be one or a combination of the following:

1. Book balance – beginning and ending

2. Bank balance – beginning and ending
3. Deposits in transit – beginning and ending
4. Outstanding checks – beginning and ending.

The following formulae may be used to compute for ending balances. Reverse the same
formula to compute for the beginning balances.

Computation of book balance:

Balance per book – beginning of the month
Add: book debits during the month
Total
Less: book credits during the month
Balance per book – end of the month

Computation of bank balance:

Balance per bank – beginning of the month
Add: bank credits during the month
Total
Less: bank debits during the month
Balance per bank – end of month
Computation of deposits in transit:
Deposit in transit – beginning of the month
Add: cash receipts deposited during the month
Total deposits to be acknowledged by bank
Less: deposits acknowledged by bank during the month
Deposit in transit – end of month

Computation of outstanding checks:

Outstanding checks – beginning of the month
Add: checks drawn by depositor during the month
Total checks to be paid by bank
Less: checks paid by bank during the month
Outstanding checks – end of month

Illustration (Valix)

Given:
Bank reconciliation for January may be computed, however reconciliation for the month
of February requires computations of balance per book, balance per bank, deposits in
transit and outstanding check.
Proof of Cash