Auditing Proof of Cash Problem

Spring 2018

You are doing the first year audit of Sherman School District and have been assigned the responsibility for doing a four-column proof of cash for the month of March. You obtain the following information.

1. Balance per books February 28 $8,106 March 31 3,850

2. Balance per bank February 28 5,411 March 31 6,730

3. Outstanding checks February 28 916 March 31 837

4. Cash receipts for March Per bank 26,977 Per books 19,711

5. Cash disbursements Per Bank 25,658 Per Books 23,967

6. Deposits in transit February 28 3,611 March 31 693

7. Interest charged to Sherman on a bank loan for the month of March, charged by the bank but not recorded was $596.

8. Proceeds on a note of the Jones Company were collected by the bank on behalf of Sherman on March 28 but were not entered on the books: Principle $ 4,000 Interest 48 $ 4,048

9. On March 26, a $407 check on the Billings Company was charged to Sherman School District's account by the bank in error.

10. Dishonored checks are recorded on the books as an adjustment to cash receipts and account receivable (credit to cash, debit to accounts receivable) when the district is notified by the bank. The bank treats them as disbursements when they are dishonored and deposits when they are redeposited. Checks totaling $609 were dishonored in March and included in the bank's amounts; $300 of this was recorded and redeposited in March and $309 was recorded and redeposited in April (i.e. notification of the NSF was included in the bank statement for this $309). There were no dishonored checks in February.

Required:

1) Prepare a four-column proof of cash for the month ended March 31. Note: You will have to use the given information and work back to find the disbursements per bank and per book.

2) Prepare adjusting entries to propose to the School District.