AUDITING REPORT

CHAPTER 9:
SUBSTANTIVE TESTS OF
CASH
(CASE 11)

COKE AIDENRY E. SALUDO

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Case 11: PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES
The following data are assembled by the accountant of HAROLD COMPANY:

NOV. 30,2012 DEC. 31,2012

CASH ACCOUNT BALANCE ₱41,175.00 ₱100,712.50
BANK STATEMENT BALANCE 267,705.00 344,542.50
DEPOSITS IN TRANSIT 20,502.50 32,200.00
OUTSTANDING CHECKS 69,295.00 75,280.00
BANK SERVICE CHARGES 1,800.00 1,500.00
NSF CHECK* 20,625.00
COMPANY’S NOTES 179,537.50 202,250.00
RECEIVABLE COLLECTED BY
BANK

* Redeposited in the same month. No entries made to take up the return

and redeposit.
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The bank statement and the company’s cash records show the following totals:

CANCELED CHECKS AND DEBIT MEMOS PER BANK STATEMENT ₱545,932.50

CASH RECEIPTS PER CASH BOOK 411,592.50
CHECKS WRITTEN PER CASH BOOK 529,792.50
DEPOSITS AND CREDIT MEMOS PER BANK STATEMENT 622,770.00

REQUIRED:

PREPARE A PROOF OF CASH FOR THE MONTH OF DECEMBER USING THE

ADJUSTED BALANCE METHOD FOR HAROLD COMPANY.
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DEFINITION OF TERMS:

 COLLECTION OF NOTES RECEIVABLE- Notes receivable collected by bank in favor of the

depositor and credited to the account of the depositor that have an effect of increasing the bank balance.
 BANK SERVICE CHARGES- These include bank charges for interest, collection, checkbook and
penalty, that have an effect of decreasing the bank balance.
 NSF CHECK or NO SUFFICIENT FUND CHECKS- Are checks deposited but returned by the bank
because of insufficiency of fund, that have an effect of decreasing the bank balance.
 DEPOSITS IN TRANSIT- Are collections already recorded by the depositor as cash receipts but not yet
reflected on the bank statement.
 OUTSTANDING CHECKS- Are checks already recorded by the depositor as cash disbursements but
not yet reflected on the bank statement.
 PROOF OF CASH- Is a type of reconciliation that incorporates the monthly cash receipts and payments
or disbursements to test the internal control over cash and provides additional evidence of the accuracy
of the cash balance.
 ADJUSTED BALANCE METHOD- One of the 3 forms of making a proof of cash, under this method,
the book balance and the bank balance are brought to a correct cash balance that must appear on the
company’s balance sheet.
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BOOK RECONCILING ITEMS: BANK RECONCILING ITEMS:

ADD: CREDIT MEMOS (Including ADD: DEPOSIT IN TRANSIT

receivables collected by bank in LESS: OUTSTANDING CHECKS
behalf of the depositor)
LESS: DEBIT MEMOS (Including
NSF checks and bank service charges)
6 HAROLD COMPANY 17
ADJUSTED BALANCE PROOF OF CASH
METHOD: FOR THE MONTH OF DECEMBER
BALANCE DECEMBER BALANCE
NOV. 30 RECEIPTS DISBURSEMENTS DEC.31
BOOK RECONCILING BOOK RECONCILING ITEMS:
ITEM: BOOK RECONCILING ITEMS:
BALANCE PER ₱41,175.00 ₱591,130.00 ₱531,592.50 ₱100,712.50
BOOKS
a.) NOV. Bank Service Charge
NSF CHECK a.) NOV. Collection of notes receivables
COLLECTIONS OF
NOTES  X - bank disbursements
Deposited by Harold company  X - bank receipts
RECEIVABLE:
CASH  - book disbursements (Dec.)
20,625.00  - book receipts (Dec.)
ACCOUNT RECEIVABLE
 NOVEMBER 20,625.00
179,537.50 (179,537.50)
DEC. BOOK DISBURSEMENTS= DEC. BOOK RECEIPTS= OVERSTATED
 DECEMBER OVERSTATED (DEDUCT)202,250.00 202,250.00
(DEDUCT)
BANK SERVICE
Returned by bank
CHARGES:
ACCOUNT RECEIVABLEb.) DEC. Bank Service Charge
20,625.00 b.) DEC. Collection of notes receivables
 NOVEMBER CASH  (1,800.00)
- bank disbursements
20,625.00  -(1,800.00)
bank receipts
 X – book disbursements  X – book receipts
 DECEMBER 1,500.00 (1,500.00)
NSF CHECK DEC. BOOK DISBURSEMENTS=
20,625.00 20,625.00
DEC. BOOK RECEIPTS= UNDERSTATED
UNDERSTATED (ADD) (ADD)
CORRECTED BOOK ₱218,912.50 ₱634,467.50 ₱551,917.50 ₱301,462.50
BALANCE
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CASH RECEIPTS PER CASH BOOK ₱411,592.50

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The bank statement and the company’s cash records show the following totals:

CANCELED CHECKS AND DEBIT MEMOS PER BANK STATEMENT ₱545,932.50

CASH RECEIPTS PER CASH BOOK 411,592.50
CHECKS WRITTEN PER CASH BOOK 529,792.50
DEPOSITS AND CREDIT MEMOS PER BANK STATEMENT 622,770.00

REQUIRED:

PREPARE A PROOF OF CASH FOR THE MONTH OF DECEMBER USING THE

ADJUSTED BALANCE METHOD FOR HAROLD COMPANY.
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CASH RECEIPTS PER CASH BOOK ₱411,592.50

ADD: NOTES COLLECTED BY BANK IN NOVEMBER 179,537.50
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Case 11: PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES

The following data are assembled by the accountant of HAROLD COMPANY:

NOV. 30,2012 DEC. 31,2012

CASH ACCOUNT BALANCE ₱41,175.00 ₱100,712.50
BANK STATEMENT BALANCE 267,705.00 344,542.50
DEPOSITS IN TRANSIT 20,502.50 32,200.00
OUTSTANDING CHECKS 69,295.00 75,280.00
BANK SERVICE CHARGES 1,800.00 1,500.00
NSF CHECK* 20,625.00
COMPANY’S NOTES 179,537.50 202,250.00
RECEIVABLE COLLECTED BY
BANK

* Redeposited in the same month. No entries made to take up the return

and redeposit.
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CASH RECEIPTS PER CASH BOOK ₱411,592.50

ADD: NOTES COLLECTED BY BANK IN NOVEMBER 179,537.50
TOTAL BOOK RECEIPTS IN DECEMBER ₱ 591,130.00

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CHECKS WRITTEN PER CASH BOOK ₱529,792.50

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The bank statement and the company’s cash records show the following totals:

CANCELED CHECKS AND DEBIT MEMOS PER BANK STATEMENT ₱545,932.50

CASH RECEIPTS PER CASH BOOK 411,592.50
CHECKS WRITTEN PER CASH BOOK 529,792.50
DEPOSITS AND CREDIT MEMOS PER BANK STATEMENT 622,770.00

REQUIRED:

PREPARE A PROOF OF CASH FOR THE MONTH OF DECEMBER USING THE

ADJUSTED BALANCE METHOD FOR HAROLD COMPANY.
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CHECKS WRITTEN PER CASH BOOK ₱529,792.50

ADD: BANK SERVICE CHARGE IN NOVEMBER 1,800.00
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Case 11: PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES

The following data are assembled by the accountant of HAROLD COMPANY:

NOV. 30,2012 DEC. 31,2012

CASH ACCOUNT BALANCE ₱41,175.00 ₱100,712.50
BANK STATEMENT BALANCE 267,705.00 344,542.50
DEPOSITS IN TRANSIT 20,502.50 32,200.00
OUTSTANDING CHECKS 69,295.00 75,280.00
BANK SERVICE CHARGES 1,800.00 1,500.00
NSF CHECK* 20,625.00
COMPANY’S NOTES 179,537.50 202,250.00
RECEIVABLE COLLECTED BY
BANK

* Redeposited in the same month. No entries made to take up the return

and redeposit.
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CHECKS WRITTEN PER CASH BOOK ₱529,792.50

ADD: BANK SERVICE CHARGE IN NOVEMBER 1,800.00
TOTAL BOOK DISBURSEMENTS IN DECEMBER ₱531,592.50

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BALANCE DECEMBER BALANCE

NOV. 30 RECEIPTS DISBURSEMENTS DEC.31
BALANCE PER BANK RECONCILING
₱267,705.00 ITEMS:
₱622,770.00 BANK RECONCILING
₱545,932.50 ITEMS:
344,542.50
BANK STATEMENT
DEPOSITS IN a.) NOV. Outstanding Checks a.) NOV. Deposit in Transit
TRANSIT:
 X – book disbursements  X - book receipts
 NOV. 30
 -20,502.50 (20,502.50)
bank disbursements (Dec.)  - bank receipts (Dec.)
 DEC. 31 32,200.00 32,200.00
DEC. BANK DISBURSEMENTS= DEC. BANK RECEIPTS= OVERSTATED
OUTSTANDING OVERSTATED (DEDUCT) (DEDUCT)
CHECKS:
 NOV. 30 (69,295.00)
b.) DEC. Outstanding Checks (69,295.00)
b.) DEC. Deposit in Transit
 - book disbursements  - book receipts
75,280.00 (75,280.00)
 DEC. 31
 X – bank disbursements X – bank receipts
CORRECTED BANK ₱218,912.50 ₱634,467.50 ₱551,917.50 ₱301,462.50
BALANCE DEC. BANK DISBURSEMENTS= DEC. BANK RECEIPTS=
UNDERSTATED (ADD) UNDERSTATED (ADD)
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