CASE 6-Proof of Cash / Two-Date Bank Reconciliation
Data for the audit of cash in bank of Edwin Co. are shown below:
November 30
December 31
Cash account balance
203,400
485,400
Bank statement balance
1,070,600
1,378,200
Deposits in transit
82,000
128,800
Outstanding checks
277,000
301,000
Bank service charges for the month, not recorded by Edwin Co.
7,200
6,000
NSF checks returned by bank, not recorded by Edwin Co.
43,000
82,400
Bank collections from company customers, not recorded by Edwin Co.
722,400
809,000
Additional information:
Deposits and credit memos per bank statement
2,491,000
Cancelled checks and debit memos per bank statement
2,183,400
Cash receipts per cash book
1,728,800
Checks written per cash book
2,119,000
Requirements:
1. Prepare a proof of cash statement.
2. What is the adjusted cash in bank balance in November 30?
3. What is the adjusted cash in bank balance in December 31?
Answer (1)
### 1. Proof of Cash Statement| | Nov 30 | Dec 31 | Increase (Decrease) ||-----------------------|-----------------|-----------------|---------------------|| Book balance | 203,400 | 485,400 | 282,000 || Bank balance | 1,070,600 | 1,378,200 | 307,600 || Deposits in transit | 82,000 | 128,800 | 46,800 || Outstanding checks | (277,000) | (301,000) | (24,000) || Adjusted bank balance | 875,600 | 1,205,600 | 330,000 |**Reconciling Receipts and Disbursements:**- Cash receipts per book: 1,728,800 - Add: Bank collections not yet recorded (Dec): 809,000 - Less: Bank collections not yet recorded (Nov): 722,400 Receipts per bank: 2,491,000- Checks written per book: 2,119,000 - Add: Bank charges not yet recorded (Dec): 6,000 - Less: Bank charges not yet recorded (Nov): 7,200 - Add: NSF checks not yet recorded (Dec): 82,400 - Less: NSF checks not yet recorded (Nov): 43,000 Disbursements per bank: 2,183,400### 2. Adjusted Cash in Bank Balance at November 30Bank statement balance (Nov 30): 1,070,600 Add: Deposits in transit: 82,000 Less: Outstanding checks: (277,000) Less: Bank service charges: (7,200) Less: NSF checks: (43,000) Add: Bank collections: 722,400 **Adjusted cash in bank balance (Nov 30):** = 1,070,600 + 82,000 - 277,000 - 7,200 - 43,000 + 722,400 = **1,547,800**### 3. Adjusted Cash in Bank Balance at December 31Bank statement balance (Dec 31): 1,378,200 Add: Deposits in transit: 128,800 Less: Outstanding checks: (301,000) Less: Bank service charges: (6,000) Less: NSF checks: (82,400) Add: Bank collections: 809,000 **Adjusted cash in bank balance (Dec 31):** = 1,378,200 + 128,800 - 301,000 - 6,000 - 82,400 + 809,000 = **1,926,600**---#### Explanations- **Proof of Cash Statement:** Compares book and adjusted bank balances, and reconciles receipts/disbursements per book to those per bank.- **Adjusted balances:** Calculated by adjusting the bank statement for deposits in transit, outstanding checks, unrecorded bank collections, NSF checks, and bank charges.
