INTERMEDIATE ACCT 1 –Lecture no.

3 – PROOF OF CASH

Proof of cash – “Two-date bank reconciliation”. It is an expanded reconciliation in that it includes proof of receipts
and disbursements.

Computation of book balance

Balance per book-beginning of month xx
Add: Book Debits during the month xx
Total xx
Less: Book Credits during the month xx
Balance per book-end of month xx

Computation of bank balance

Balance per bank-beginning of month xx
Add: Bank Credits during the month xx
Total xx
Less: Bank debits during the month xx
Balance per bank-end of month xx

Computation of deposits in transit

Deposits 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 the mo. xx
Deposit in transit –end of the month xx

Computation of outstanding checks

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

Three forms of proof of cash:

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

Illustration:
Cash in bank per ledger
Balance, Jan 31 50,000
Book debits-Feb., including Jan CM for note collected of P15,000 200,000
Book credits-Feb., including NSF check of P5,000 and service charge of P1,000-Jan 180,000

Bank statement for February

Balance, Jan 31 84,000
Bank credits –Feb, including CM for note collected-P20,000 and Jan.
deposit in transit of P40,000 170,000
Bank debits for Feb, including NSF check of P10,000 and Jan. outstanding
check of 65,000 130,000

Illustration (summary) January 31 February 28

Balance per book 50,000 70,000
Balance per bank 84,000 124,000
Book debits 200,000
Book credits 180,000
Bank debits 130,000
Bank credits 170,000
Deposit in transit 40,000 75,000
Outstanding checks 65,000 119,000
NSF check 5,000 10,000
Service charge 1,000 ----
Note collected by bank 15,000 20,000