SUMMARY FORMAT of PROOF OF CASH USING ADJUSTED BALANCE METHOD

BANK BALANCES Beginning Receipts Disbursements Ending

UNADJUSTED xx xx xx xx
a. Deposits in transit
 PRIOR xx (xx)
 CURRENT xx xx
b. Outstanding checks
 PRIOR (xx) (xx)
 CURRENT xx (xx)
c. Errors
 CURRENT PERIOD
ERROR
 CORRECTION of
PRIOR PERIOD
ERRORS
ADJUSTED xx xx xx xx

BOOK BALANCES Beginning Receipts Disbursements Ending

UNADJUSTED xx xx xx xx
a. Credit Memo
 PRIOR xx (xx)
 CURRENT xx xx
b. Debit Memo
 PRIOR (xx) (xx)
 CURRENT xx (xx)
c. Errors
 CURRENT PERIOD
ERROR
 CORRECTION of
PRIOR PERIOD
ERRORS
ADJUSTED xx xx xx xx

*** Guide questions in the analysis of error(s)

1. Who committed the error?

2. When was it committed?
3. What was the effect of the error?
4. Was it corrected during the current period?
5. How was it corrected?
RECALL OF BASIC JOURNAL ENTRIES

Transaction BOOK RECORDS BANK RECORDS

1. Deposit of cash CASH in BANK xx Cash on Hand xx
by the company Cash on hand xx DEPOSIT LIABILITY xx

2. Payment of Accounts Payable xx DEPOSIT LIABILITY xx

liabilities thru CASH IN BANK xx Cash on Hand xx
issuance of checks

3. Collection of CASH in BANK xx Cash on Hand xx

receivables by the Note Receivable xx DEPOSIT LIABILITY xx
bank in behalf of
the company

4. Charges made Bank Service Charges xx DEPOSIT LIABILITY xx

by the bank CASH IN BANK xx Service Income xx
Problem 1

In your audit of the cash account of FCT Company, you have ascertained the following data relative to
the debits per books and credits per bank:

Book debits in February 400,000

Bank credits in February 360,000
CM for interest earned in January but taken up in the books February 5,000
CM for interest earned in February but taken up in the books in March 6,000
Check from customer in January amounting to P40,000 but was taken up 4,000
in the books as
Check from customer in February amounting to P20,000 but was taken up 4,000
in the books as
Check by the company issued to supplier in January amounting to P3,000 30,000
but was taken up in the books as
Erroneous bank credit- February 2,500
Erroneous bank charge – January 1,000
Deposit in transit – January 31 50,000
How much is the undeposited collections at the end of February?

DEPOSIT IN TRANSIT - FEBRUARY

January 50,000 Bank Credits 360,000
Book Debits 400,000 END (47,500) ?

CM – February 6,000 CM - January 5,000

BOOK error in February 16,000 Correction of January BOOK error 36,000
(understatement of receipts) (understatement of receipts)
Correction of erroneous BANK 1,000 Correction of BOOK error in 27,000
charge in January January (understatement of
disbursement)
Erroneous BANK credit in February 2,500
Problem 2

Based on the following information, the causes of the discrepancies between the book credits and bank
debits are ascertained:

Book credits in May 85,800

Bank debits in May 97,650
Check issued on May 29 for P5,700 erroneously recorded in the books of 7,500
the depositor as
Customer’s DAIF check, returned by the bank of the depositor in May 2,300
April bank service charges, taken up in the books in May 30
Payment of VISA credit card automatically debited by the bank on May 3,000
25, as per ADA, but taken up in the books of the depositor in June
Outstanding checks as of May 31 4,500
How much is the outstanding checks at the beginning of the period?

OUTSTANDING CHECKS - MAY

BANK Debits 97,650 BEGINNING (12,880) ?
END 4,500 BOOK Credits 85,800
Error in MAY 1,800 NSF checks
(overstatement of book credits)
Debit memo - April 30 Unrecorded book credits for MAY 3,000

Problem 3

Reconciliation of Jazz Company’s bank account at May 31 of the current year is:

Balance per bank statement 2,600,000

Deposits outstanding 300,000
Bank service charge 10,000
Erroneous bank charge 40,000
Outstanding checks (100,000)
Erroneous bank credit (60,000)
CM for collection of note (600,000)
Balance per book 2,190,000
June data are as follows:

Bank Book
Checks recorded 2,200,000 2,500,000
Correction of erroneous bank credit in May 60,000 -
Deposits recorded 1,600,000 1,800,000
Correction of erroneous bank charge 40,000 -
Service charges recorded 50,000 -
CM for collection by bank 550,000 600,000
NSF checks returned with June 30 statement 100,000 -
(will be redeposited)

Prepare the company’s proof of cash.

 DEPOSIT IN TRANSIT - JUNE
Beginning 300,000 Deposit recorded by BANK 1,600,000
Deposit recorded by BOOK 1,800,000 END 500,000

OUSTANDING CHECKS - JUNE

Checks recorded by BANK 2,200,000 Beginning 100,000
END 400,000 Checks recorded by BOOK 2,500,000

PROOF of CASH

BOOK BALANCES MAY Receipts = Disbursements JUNE

UNADJUSTED 2,190,000 *2,400,000 **2,500,000 2,090,000

a. Credit Memo
 MAY 600,000 (600,000)
 JUNE 550,000 550,000
b. Debit Memo
 MAY (10,000) (10,000)
 JUNE 50,000 (50,000)
c. Errors
 NSF check
100,000 (100,000)
returned
ADJUSTED 2,780,000 2,350,000 2,650,000 2,480,000

BANK BALANCES MAY Receipts = Disbursements JUNE

UNADJUSTED 2,600,000 *2,190,000 *2,410,000 2,380,000

a. Deposit in Transit
 MAY 300,000 (300,000)
 JUNE 500,000 500,000
b. Outstanding Checks
 MAY (100,000) (100,000)
 JUNE 400,000 (400,000)
c. Errors
(1) Correction of
erroneous Bank 40,000 (40,000)
charge in MAY
(2) Correction of
erroneous bank (60,000) (60,000)
credit in MAY
ADJUSTED 2,780,000 2,350,000 2,650,000 2,480,000