How the worksheet works
Start from the bank statement totals for the period: opening balance, total deposits, total withdrawals and closing balance. In the balance columns, bank balance plus deposits in transit less outstanding checks plus other items should equal the book balance. In the receipts column, bank receipts less opening deposits in transit plus closing deposits in transit plus other items should equal book receipts, and in the disbursements column bank disbursements less opening outstanding checks plus closing outstanding checks plus other items should equal book disbursements. The tool also foots the bank statement and the books, which is a quick check on data entry.
When to use it
Use it when the cash risk calls for more than a year-end bank reconciliation, for example in an owner-managed company where one person records and deposits cash. Pair it with a cutoff test of the first and last checks and deposits of the period and with a random selection of items traced to support. See the random selection tool.
Limits
The worksheet reconciles totals, so it shows that bank and books agree but not that each item is valid. A zero difference does not rule out transactions recorded in both the bank and the books for the wrong purpose. Statement periods must match the books period. Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is a proof of cash?
A proof of cash reconciles four things at once: the opening balance, the period’s receipts, the period’s disbursements and the closing balance, each between the bank statement and the books. A normal bank reconciliation proves only the closing balance. The proof also tests that receipts and disbursements for the whole period agree, which is why it is a textbook audit technique for cash.
How are deposits in transit and outstanding checks used across columns?
A deposit in transit at the start of the period was recorded in the books before the period and reached the bank during it, so it is deducted from bank receipts to get book receipts; a deposit in transit at the end is added. Outstanding checks work the same way on the disbursements side: opening outstanding checks clear the bank during the period and are deducted from bank disbursements, and closing outstanding checks are added.
What does a difference in one column mean?
Differences in the receipts or disbursements column that also show up in a balance column suggest a recorded or unrecorded transaction. A difference in one column only points to a cutoff, transposition or classification problem. The four differences always satisfy opening + receipts − disbursements = closing, which the tool shows so you can find the column that is out.
When is a proof of cash worth doing?
When the risk of misappropriation of cash is high, controls over cash receipts or disbursements are weak, or one person handles both the deposits and the books. Because it covers every item for the period, it can reveal practices such as lapping or unrecorded disbursements that a year-end reconciliation misses. The decision to perform it is a matter of the auditor’s risk assessment and firm methodology.
What are the “other items” inputs?
Reconciling items that are neither deposits in transit nor outstanding checks, such as bank charges not yet recorded, interest credited, NSF items or bank errors. Enter them with the sign that moves the bank figure toward the books in that column, and keep the support for each one.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.