PROOF OF CASH

Irene Mae C. Guerra, CPA

- To be able to prepare a two-date bank reconciliation
- To know the computation of deposits in transit and
outstanding checks
- To know the reconciliation of cash receipts per ledger
with cash receipts per bank statement
- To know the reconciliation of cash disbursements per
ledger with cash disbursements per bank statements
- To be able to prepare a reconciliation showing proof of
cash.
Bank Recon is also called “two-date because it involves two dates.

Among others, the omitted information may be any one or a

combination of the following:
a. Book Balance – beginning and ending
b.Bank Balance – beginning and ending
c. Deposit in Transit – beginning and ending
d.Outstanding Checks – beginning and ending
Computation of Book Balance
Balance per Book – Beg xx
Add: DM xx
Less: CM (xx)
Balance per Book – End xx

Computation of Bank Balance

Balancer per Bank - Beg xx
Add: Bank Credits xx
Less: Bank Debits (xx)
Balance per Bank – End xx
Computation of Deposit in Transit
Deposits in Transit – Beg xx
Add: Cash Receipts deposited xx
Less: Deposits acknowledged by bank (xx)
Deposit in Transit – End xx

Computation of Outstanding Checks

Outstanding Checks –Beg xx
Add: Checks drawn by depositor xx
Less: Checks paid by bank (xx)
Outstanding Checks – End xx
Example:
Cash in Bank per ledger
Balance, Jan 31 50,000
Book Debits for February, including January CM
for note collected of P 15,000 200,000
Book Credits for February, including
NSF check of P 5,000 and service charge of P 1,000 for January 180,000

Bank Statement for February

Balance, Jan 31 84,000
Bank Credits for February, including CM for
note collected of P 20,000 and January deposit
in transit of P 40,000 170,000
Bank Debits for February, including NSF check of P 10,000 and
January outstanding check of P 65,000 130,000
Bank Recon for January

Balance per book, January 31 50,000

Note Collected by bank in Jan (CM) 15,000
Total 65,000
NSF Check for January (DM) (5,000)
Adjusted Book Balance 59,000

Balance per bank, January 31 94,000

Deposit in Transit for January 40,000
Total 124,000
Outstanding Check for Jan (65,000)
Adjusted bank Balance 59,000
So for the month of February it requires computation of balance per book, balance per bank, deposits in
transit and outstanding checks.

Computation of book balance

Balance per book – Jan 31 50,000
Add: Book debits during February 200,000
Total 250,000
Less: Book credits during February (180,000)
Balance per book – February 28 70,000

Computation of bank balance

Balance per bank – January 31 84,000
Add: Bank credits during February 170,000
Total 254,000
Less: Bank debits during February 130,000
Balance per bank – February 28 124,000
Computation of deposits in transits
Deposits in transit – Jan 31 40,000
Add: Cash Receipts deposited during Feb
Book debits 200,000
Less: Jan CM for note collected (15,000) 185,000
Total 225,000
Less: Deposits acknowledged by bank in Feb
Bank credits 170,000
Less: February CM for note collected (20,000) 150,000
Deposits in transits – Feb 28 75,000
Computation of Outstanding Checks

Outstanding checks – Jan 31 65,000

Add: Checks drawn by depositor during February:
Book credits 180,000
Less: January DMs (6,000) 174,000
Total 239,000
Less: Checks paid by bank during February :
Bank debits 130,000
Less: February NSF (10,000) 120,000
Outstanding Checks – February 28 119,000
Bank Recon – February

Balance per book 70,000

Note collected by bank 20,000
Total 90,000
NSF check for February (10,000)
Adjusted book balance 80,000

Balance per bank 124,000

Deposits in transit for Feb 75,000
Total 199,000
Outstanding checks for Feb (119,000)
Adjusted bank balance 80,000
PROOF CASH
-is an expanded reconciliation in that it includes proof of receipts and
disbursements.
-this may be useful in discovering possible discrepancies in handing cash
particularly when cash receipts have been recorded but have not
deposited.

Three forms of Proof of Cash:

a. Adjusted balance method
b. Book to Bank method
c. Bank to Book method
Example January 31 February 28
Balance per book 50,000 70,000
Balancer per bank 84,000 124,000
Book Debits 200,000
Book Credits 180,000
Bank Debits 130,000
Bank Credits 170,000
Deposits in Transit 40,000 75,000
Outstanding Checks 65,000 119,000
NSF Checks 5,000 10,000
Service Charge 1,000 -
Note collected by bank 15,000 20,000

*Book debits and credits and the bank debits and credits for January are not listed anymore because they
are not necessary.
*Proof of cash pertains to the receipts and disbursements for the current month of February.
 JAN 31 RECEIPTS DISBURSEMENTS FEB 28
BALANCE PER 50,000 200,000 180,000 70,000
BOOK
NOTE COLLECTED (CM)
January 15,000 (15,000)OVERSTATED
February 20,000 20,000
UNDERSTATED
NSF CHECK (DM)
January (5,000) (5,000)
OVERSTATED
February 10,000 (10,000)
SERVICE CHARGE UNDERSTATED

January (1,000) (1,000)

ADJUSTED BOOK OVERSTATED
BALANCE 59,000 205,000 184,000 80,000

59,000 + 205,000 - 184,000 = 80,000

 JAN 31 RECEIPTS DISBURSEMENTS FEB 28
BALANCE PER BANK 84,000 170,000 130,000 124,000
DEPOSITS IN TRANSIT
January 40,000 (40,000)
OVERSTATED
February 75,000 75,000
OUTSTANDING CHECKS UNDERSTATED
January (65,000) (65,000)
February OVERSTATED 119,000 (119,000)
ADJUSTED BANK
BALANCE 59,000 205,000 184,000UNDERSTATED80,000
 JAN 31 RECEIPTS DISBURSEMENTS FEB 28
BALANCE PER BOOK 50,000 200,000 180,000 70,000
NOTE COLLECTED (CM)
January 15,000 (15,000)
February 20,000 20,000
NSF CHECK (DM)
January (5,000) (5,000)
February 10,000 (10,000)
SERVICE CHARGE
January (1,000) (1,000)
Deposits in transit
January (40,000) 40,000
February (75,000) (75,00)0
Outstanding Checks
January 65,000 65,000
February (119,000) 119,000
Balancer per bank 84,000 170,000 130,000 124,000
 JAN 31 RECEIPTS DISBURSEMENTS FEB 28
BALANCE PER Bank 84,000 170,000 130,000 124,000
Deposits in transit
January 40,000 (40,000)

February 75,000 75,000

Outstanding Checks
January (65,000) (65,000)

February 119,000 (119,000)

NOTE COLLECTED (CM)

January (15,000) 15,000
February (20,000) (20,000)
NSF CHECK (DM)
January 5,000 5,000
February (10,000) 10,000
SERVICE CHARGE
January 1,000 1,000
Balancer per book 50,000 200,000 180,000 70,000