Proof of Cash

Illustrative Problems

PROBLEM 1
The following information pertains to the cash of OMG Company.

June 30 July 31
Balance shown on bank statement 2,700,000 ?
Balance shown in general ledger 2,500,000 ?
Deposits shown on bank statement 5,500,000
Charges shown on bank statement 5,600,000
Cash receipts shown on company books 5,300,000
Cash payments shown company books 5,400,000
Bank service charge 20,000 25,000
NSF checks 200,000
Interest on bond investment collected and credited by bank to company’s
account 75,000
Check of P600,000 issued in July for equipment incorrectly recorded by the
company as 900,000
Deposit in transit 625,000 500,000
Outstanding checks 845,000 550,000

Prepare a four-column bank reconciliation showing the adjusted method.

PROBLEM 2
In reconciling the cash in bank account of SOLO Company with the bank statement balance for the month
of July 2010, the following data are summarized:

Cash in bank
Balance June 30 1,000,000
Book debits for July including June CM for note collected, P300,000 4,000,000
Book credits for July including June NSF of P100,000 and service charge of P4,000 3,600,000

Bank statement for July

Balance, June 30 1,650,000
Bank debits for July including service charge of P1,000 and June outstanding checks of
P854, 000 2,500,000
Bank credits for July including CM for bank loan of P500,000 and June deposit in transit of
P400,000 3,500,000

Prepare a four-column bank reconciliation showing the adjusted method.

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PROBLEM 3
In your examination of the cash account of Tacloban Company, you were requested by the client to
prepare a four-column reconciliation of receipts, disbursements, and balances to reconstruct the
balances per book.

November 30 December 31
a) Balances per bank $14,010 $19,630
b) Deposits in transit 2,740 3,110
c) Outstanding checks 4,260 3,870
d) Bank collections not in books 1,200 1,600
e) Bank charges not in books 950 640

f) Of the checks outstanding on December 31, one check for $700 was certified at the request of
the payee.
g) Receipts for December, per bank statement - $281,070.
h) DAIF check from customer was charged by the bank on December 28, and has not been
recorded -$800.
i) DAIF check returned in November and recorded in December, $1,050.
j) DAIF check returned and recorded in December, $900.
k) Check of Taclosan Co. charged by the bank in error. $2,010.
l) Receipt on December 6 paid put in cash for travel expenses, $750. Recorded as receipts and
disbursements per books.
m) Error in recording customer’s check on December 20, $165 instead of $465.
n) Error in disbursements journal for December, $3,250 instead of $325.

You noted that the DAIF checks returned by the bank are recorded as a reduction on the cash receipts
journal instead of recording it at cash disbursement journal; redeposit are recorded as regular cash
receipts.

Instruction
a) Prepare a 4-column bank reconciliation for the month of December. Use adjusted balance
method.
b) Entries necessary as of December 31, 2012.