Problem:
You obtained the following information in connection with the audit of Bonsoir Company cash account as of December 31, 20x1:
Outstanding checks, 11/30/20x1 P 16,250
Outstanding checks, 12/31/20x1 12,500
Deposit in transit, 11/30/20x1 12,500
Cash balance per general ledger, 12/31/20x1 37,500
Actual company collections from its customers during
December 152,500
Company checks paid by bank in December 130,000
Bank service charges recorded on the company books
in December 2,500
Bank service charges per December bank statement 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on company
books in December 1,500
The cash receipts book of December is underfooted by P 2,500.
The bank erroneously charged the company's account for a P3,750 check of another depositor. This bank error was corrected in January 20x2.
Questions:
1. How much is the deposit in transit on December 31, 20x1?
2. What is the total unrecorded bank service charges as of December 31, 20x1?
3. What is the total book receipts in December?
4. What is the total amount of company checks issued in December?
5. What is the total book disbursements in December?
6. What is the book balance on November 30, 20x1?
7. What is the bank balance on November 30, 20x1?
8. What is the total bank receipts in December?
9. What is the total bank disbursements in December?
10. What is the bank balance on December 31, 20x1?
Solution:
Bonsoir Company
Proof of Cash
For the month ended December 31, 20x1
November 30 Receipts Disbursements December 31
Book Balances 16,250 + 150,000 - 128,750 = 37,500
Bank Service Charge
November 30 DM (1,500) (1,500)
December 31 DM 2,250 (2,250)
Underfoot of CRJ 2,500 2,500
Adjusted Book Balances 14,750 152,500 129,500 37,750
Bank Balances 18,500 145,000 137,000 26,500
Outstanding Checks
November 30 (16,250) (16,250)
December 31 12,500 (12,500)
Deposit in Transit
November 30 12,500 (12,500)
December 31 20,000 20,000
Bank Error (3,750) 3,750
Adjusted Bank Balances 14,750 152,500 129,500 37,750
*The items in Black were already given.
*The items in Green were computed from the given.
*The items in Red were squeezed from the proof of cash table.
*Magkatabi, different signs; magkalayo, same signs..except for the balances =)
*DM=Debit Memo; CRJ=Cash Receipts Journal
*Receipts and Disbursements relates to December transactions.
*A line item always affects two columns in the Proof of Cash.
Let's start with first line item in the problem.
1. Outstanding checks, 11/30/20x1, 16,250
These are considered as disbursements for the month of November that's why you subtract 16,250 from the November 30 Bank Balance. Subsequently, you also subtract 16,250 from the bank disbursements of December because the checks are presumed to be encashed in the bank during December unless otherwise specified.
2. Outstanding checks, 12/31/20x1, 12,500
These are considered as disbursements for the month of December so add 12,500 in the Disbursements and deduct 12,500 in the December 31 Bank Balance. These checks are not yet presented for encashment by the payee that's why it is not reflected as a disbursement in the bank statement but reflected as a disbursement in the book balance.
3. Deposit in transit, 11/30/20x1, 12,500
The deposit in transit is added to the November 30 Bank Balance since they are rightfully receipts from November but are not yet received by the bank. Subsequently, it is subtracted from the receipts of December because the bank only received your November Receipts in December.
4. Cash balance per general ledger 12/31/20x1, 37,500
This represents the unadjusted book balance for December 31.
5. Actual company collections from its customers during December, 152,500
This represents part of the receipts (in the books) during December. Other possible receipts are notes collected by the bank (CM). However, no other items in the problem affect the cash receipts in the books. Therefore, it is safe to presume that 152,500 is the amount of December Book Receipts. We can't presume that this is the amount of the unadjusted December Book Receipts because of the existence of a book error affecting receipts.
6. Company checks paid by bank in December, 130,000
This represents part of the bank disbursements during December. However, paid checks are not the only disbursements reflected in the bank statement. Other disbursements reflected in the bank statement are the bank service charge and bank errors. Other disbursements not reflected in the bank statement are outstanding checks.
The following solution reflects the computation for the unadjusted bank disbursements:
Company checks paid by bank in December 130,000
Bank service charges per December bank statement 3,250
Bank error (erroneously charged check) 3,750 (will later be adjusted)
Unadjusted Bank Disbursements 137,000
7. Bank service charges recorded on the company books in December, 2,500
Bank service charges per December bank statement, 3,250
November bank service charges recorded on company books in December, 1,500
These items reflect that the bank service charges recorded on the company books in December includes the November bank service charge plus an estimate of the December bank service charge.
The following solution reflects the existence of unrecorded bank service charges.
Bank service charges recorded on the company books in December 2,500
November bank service charges recorded on company books in December (1,500)
Bank service charges per December bank statement (3,250)
Unrecorded bank service charge (2,250)
8. Deposits credited by bank during December, 145,000
This represents the unadjusted Bank Receipts.
9. The cash receipts book of December is underfooted by 2,500
This represents a book error in December. The unadjusted book balances are referenced from the totals of the cash books. Since the underfooting unjustly reduces the total of the cash books, it must be corrected. Therefore, we add the deficiency of 2,500 to the cash book receipts and December 31 book balance.
10. The bank erroneously charged the company's account for a 3,750 check of another depositor. This bank error was corrected in January 20x2.
Since the bank error was corrected the following month, we must correct our December bank balances to reconcile with our book balances. Hence, we subtract the bank disbursements and add it back to the December 31 bank balance.
By filling up the black and green items in the proof of cash, you can now solve for the answers.
Answers:
1. 20,000
2. 2,250
3. 150,000
4. 126,250
5. 128,750
6. 16,250
7. 18,500
8. 145,000
9. 137,000
10. 26,500
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