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Quiz No. 5 (Proof of Cash) Solution

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47 views3 pages

Quiz No. 5 (Proof of Cash) Solution

Quiz

Uploaded by

Alex Ozford
Copyright
© © All Rights Reserved
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Quiz No.

5 PROOF OF CASH August 30, 2024

1) ABC Company provided the following condensed information to be used in preparing proof of cash:
March 31, April 30,
2023 2023
Balances per bank statement ₱5,679,000 ₱4,962,000
Bank receipts 7,094,000
Bank disbursements 7,811,000
Balances per general ledger 5,459,000 6,127,000
Book receipts 7,654,000
Book disbursements 6,986,000
Credit memos 1,200,000 400,000
Debit memos 550,000 880,000
Deposits in transit 1,000,000 900,000
Outstanding checks 450,000 300,000
In addition, the following errors were committed:
 Check of ₱200,000 was recorded in the books as ₱20,000 during March 2023.
 Deposit of ₱140,000 for April 2023 was not recorded in the books.
 Deposit of XYZ Company amounting to ₱300,000 was recorded by the bank in ABC’s bank account
during March 2023.
 Check of ₱25,000 was recorded by the bank as ₱250,000 during April 2023.
Determine the adjusted balances of the following: (3 points each)
a. Adjusted beginning bank balance
b. Adjusted bank credits
c. Adjusted bank debits
d. Adjusted ending bank balance
e. Adjusted beginning book balance
f. Adjusted book debits
g. Adjusted book credits
h. Adjusted ending book balance

Incorporating correction of errors in proof of cash


1) For previous period errors (applicable to both bank and book):
Effect of correcting the What the concerned party initially did Adjustments to be made in the
error (whether from check to correct the error during the current receipts and disbursement
or deposit) period? columns
Increase in cash in bank Added to receipts during the current Deducted from receipts
balance period column
Decrease in cash in bank Added to disbursements during the Deducted from disbursements
balance current period column
2) For current period errors (applicable to both bank and book):
Error committed (assumed not corrected during the Adjustment to be made in the receipts and
current period) disbursement columns
Understated (recorded < correct) check, including Amount of understatement to be added to
nonrecording of check disbursements column
Overstated (recorded > correct) check Amount of overstatement to be deducted from
disbursements column
Understated (recorded < correct) deposit, Amount of understatement to be added to
including nonrecording of deposit receipts column
Overstated (recorded > correct) deposit Amount of overstatement to be deducted from
receipts column
Similar to bank reconciliation, an error committed by book is considered as book-reconciling item
while an error committed by bank is considered as bank-reconciling item.
Particulars Beg. bank Bank Bank debits End. bank bal.
bal. credits
Unadjusted balances 5,679,000 7,094,000 7,811,000 4,962,000
Deposits in transit
March 31 1,000,000 (1,000,000)
April 30 900,000 900,000
Outstanding checks
March 31 (450,000) (450,000)
April 30 300,000 (300,000)
Deposit of other entity
March 31 (300,000) (300,000)
Overstated check
April 30 (250,000 – 25,000) (225,000) 225,000
Adjusted balances 5,929,000 6,994,000 7,136,000 5,787,000

Beg. book Book debits Book End. Book


bal. credits bal.
Unadjusted balances 5,459,000 7,654,000 6,986,000 6,127,000
Debit memos
March 31 (550,000) (550,000)
April 30 880,000 (880,000)
Credit memos
March 31 1,200,000 (1,200,000)
April 30 400,000 400,000
Understated check
March 31 (200,000 – 20,000) (180,000) (180,000)
Unrecorded deposit
April 30 140,000 140,000
Adjusted balances 5,929,000 6,994,000 7,136,000 5,787,000

2) ABC Company would like to compute for the ending balance of its deposit in transit. It provided the
following partial information:
June 30, July 31,
2023 2023
Deposit in transit ₱780,000 ₱???
Book debits 5,500,000
Book credits 3,600,000
Bank credits 4,800,000
Bank debits 3,800,000
Bank loan proceeds 1,000,000
ABC notes collected by the bank 200,000 330,000
ABC customers directly paying to the bank 150,000 120,000
Bank service charge 20,000 22,000
NSF check 75,000 50,000
Determine the ending deposit in transit as of July 31, 2023. (5 points)

The amount of book debits (or receipts) is not necessarily equal to the amounts of deposits made to the
bank. The purpose of the adjustments is to remove any amounts that are not considered as deposits.
The same is also true for bank credits.

Beginning deposit in transit, June 30, 2023 780,000


Add: Deposits made to the bank (5,500,000 – 1,000,000 – 200,000 – 4,150,000
150,000)*
Total deposits to be received by the bank 4,930,000
Less: Deposits acknowledged by the bank (4,800,000 – 330,000 – 120,000)** (4,350,000)
Ending deposit in transit, July 31, 2023 580,000
*book debits less items, such as credit memos from previous period and some book errors from current
and previous periods
**bank credits less items, such as credit memos for the current period and some bank errors from current
and previous periods

Only credit memos were used in the calculation. Debit memos are ignored since they are irrelevant in
computing deposits in transit.

3) ABC Company would like to compute for the ending balance of its outstanding checks. It provided the
following partial information:
June 30, July 31,
2023 2023
Outstanding checks ₱400,000 ₱???
Book debits 6,200,000
Book credits 7,050,000
Bank credits 5,900,000
Bank debits 6,800,000
Bank loan proceeds 2,000,000
Partial payment of bank loan directly debited from bank account 200,000 250,000
ABC notes collected by the bank 650,000 300,000
Bank service charge 40,000 38,000
NSF check 500,000 100,000
Determine the ending outstanding checks as of July 31, 2023. (5 points)

The amount of book credits (or disbursements) is not necessarily equal to the amounts of checks
written. The purpose of the adjustments is to remove any amounts that are not considered as checks.
The same is also true for bank debits

Beginning outstanding checks, June 30, 2023 400,000


Add: Checks written (7,050,000 – 200,000 – 40,000 – 500,000)* 6,310,000
Total checks to be paid by the bank 6,710,000
Less: Checks paid by the bank (6,800,000 – 250,000 – 38,000 – (6,412,000)
100,000)**
Ending outstanding checks, July 31, 2023 298,000
*book credits less items, such as debit memos from previous period and some book errors from current
and previous periods
**bank debits less items, such as debit memos for the current period and some bank errors from current
and previous periods

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