Proof of Cash

Multiple Choice:
1. When preparing a proof of cash, a credit memo from the previous month is
a. Extended to the book receipts column as an addition
b. Extended to the bank receipts column as an addition
c. Extended to the book receipts column as a deduction
d. Not extended in any of the book columns
2. When preparing a proof of cash, an overstated book debit in the previous month is
a. Extended to the book receipts column as an addition
b. Extended to the bank receipts column as an addition
c. Extended to the book disbursements column as a deduction
d. Not included in the proof of cash if the error is already corrected in the current month
3. The debit memos from the previous month are extended to the cash disbursements column of
a proof of cash as a deduction
a. true
b. false

Skill-building Activities
1. Information on ABC Co. is shown below:

30-Jul 31-Aug
Book balance 132,200 180,000
Book debits (receipts) 60,000
Book credits (disbursements) ? 12,200
Bank balance 100,600 169,000
Bank debits (disbursements) 20,600
Bank credits (receipts) ? 89,000
Notes collected by banks 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900

Requirement: Prepare a proof of cash.

30-Jul Receipts Disbursements 31-Aug
Per books 132,200 60,000 12,200 180,000
Add: CM
July 10,000 (10,000)
August 35,000 35,000
Less: DM
July (7,800)
August (7,800) (8,900)
8,900
Book errors:
August 2,800 2,800
 Adjusted balance 134,400 87,800 13,300 208,900

30-Jul Receipts Disbursements 31-Aug

Per bank 100,600 89,000 20,600 169,000
Add: DIT
July 45,000 (45,000)
August 43,800 43,800
Less: OC
July (11,200) (11,200)
August 3,900 (3,900)
Adjusted balance 134,400 87,800 13,300 208,900

2. The accountant of DEF Co. gathered the following data:

31-Mar 30-Apr
Book balance 400,000 540,000
Book debits 180,000
Book credits 40,000
Bank balance 280,000 440,000
Bank debits 30,000
Bank credits 190,000
Credit memos 36,000 23,000
Bank charges 10,000 16,000
Deposit in transit 169,000 136,000
Outstanding checks 23,000 30,000

Additional information:
a. Disbursements in April of P45,000 were recorded as P54,000.
b. Deposit in April amounting to P10,000 was erroneously credited by the bank to another
company's account.

Requirement: Prepare a proof of cash.

31-Mar Receipts Disbursements 30-Apr
Per books 400,000 180,000 40,000 540,000
Add: CM
March 36,000 (36,000)
April 23,000 23,000
Less: DM
March (10,000) (10,000)
April 16,000 (16,000)
Book errors:
April (9,000) 9,000
Adjusted balance 426,000 167,000 37,000 556,000
 31-Mar Receipts Disbursements 30-Apr
Per bank 280,000 190,000 30,000 440,000
Add: DIT
March 169,000 (169,000)
April 136,000 136,000
Less: OC
March (23,000) (23,000)
April 30,000 (30,000)
Bank errors:
April 10,000 10,000
Adjusted balance 426,000 167,000 37,000 556,000

Check for Understanding (Graded Quiz)

PROBLEM SOLVING. PROVIDE WHAT IS ASKED IN EACH ITEM.
1. Information on Yano Co. is shown below:

30-Jun 31-Jul
Book balance 382,500 527,000
Book debits 180,900
Book credits 36,400
Bank balance 365,380 653,700
Bank debits 108,020
Bank credits 396,340
Credit memos 74,200 262,800
Bank charges 2,000 6,000
Deposit in transit 169,000 136,000
Outstanding checks 23,000 30,000

Additional information:
a. The book disbursements in June were overstated by P36,340.
b. The book disbursements in July were understated by P54,280.
c. The bank receipts in June were overstated by P20,340.
d. The bank receipts in July were overstated by P30,180.

Requirement: Prepare a proof of cash.

30-Jun Receipts Disbursements 31-Jul
Per books 382,500 180,900 36,400 527,000
Add: CM
June 74,200 (74,200 )
July 262,800 262,800
Less: DM
June (2,000) (2,000)
 July 6,000 (6,000)
Book errors:
June 36,340 (36,340)
July 54,280 (54,280)
Adjusted balance 491,040 333,160 94,680 729,520

30-Jun Receipts Disbursements 31-Jul

Per bank 365,380 396,340 108,020 653,700

Add: DIT
June 169,000 (169,000)
July 136,000 136,000
Less: OC
June (23,000) (23,000)
July 30,000 (30,000)
Bank errors:
June (20,340) (20,340)
July (30,180) (30,180)
Adjusted balance 491,040 333,160 94,680 729,520

2. The following information relates to XYZ, Inc.

31-Mar 30-Apr
Book balance 396,600 540,000
Book debits 180,000
Book credits 36,600
Bank balance 280,900 445,380
Bank debits 26,900
Bank credits 191,380
Credit memos 36,000 42,000
Debit memos 10,920 16,020
Deposit in transit 46,780 131,400
Outstanding checks 28,000 19,800

Additional information:
a. The outstanding checks in March include certified checks of P5,000. These were certified in March
but were presented for payment in April.
B.Collections in March of P14,000 were recorded as P41,000.
c. Checks drawn in April amounting to P12,000 cleared the bank for P21,000. Investigation shows that
the company committed the error.
d. Deposit in March amounting to P100,000 was erroneously credited by the bank as P10,000.
Requirement: Prepare a proof of cash.
1-Mar Receipts Disbursements 30-Apr
Per books 396,600 180,000 36,600 540,000

Add: CM
March 36,000 (36,000)
April 42,000 42,000
Less: DM
March (10,920) (10,920)
April 16,020 (16,020)
Book errors:
March (27,000) (27,000)
April 9,000 (9,000)
Adjusted balance 394,680 186,000 23,700 556,980

1-Mar Receipts Disbursements 30-Apr

Per bank 280,900 191,380 26,900 445,380

Add: DIT
March 46,780 (46,780)
April 131,400 131,400
Less: OC
March (23,000) (23,000)
April 19,800 (19,800)
Bank errors:
March 90,000 (90,000)
April
Adjusted balance 394,680 186,000 23,700 556,980