# Proof of Cash: The Four-Column Test, Worked - Author: PreciseBankFlow (https://precisebankflow.com) - Published: 2026-10-17 - Category: Bank statements in an audit - Canonical: https://precisebankflow.com/blog/proof-of-cash > How to prepare a four-column proof of cash: opening balance, receipts, disbursements and closing balance tied to the bank, with a worked example. A proof of cash reconciles a whole period of bank activity to the books in four columns: opening balance, receipts, disbursements and closing balance. Each column has a bank figure, a book figure and the items between them. When all four columns agree, you know the money that came in and went out was recorded, not just the ending balance. ## What does a proof of cash show that a single-date reconciliation hides? A proof of cash shows whether the flows were right, while an ordinary bank reconciliation only shows whether the balance was right on one day. An unrecorded receipt and an unrecorded payment of the same size leave the ending balance untouched. Only the receipts and disbursements columns of a proof of cash expose that pair. Think about what a month-end reconciliation actually compares. It takes the bank balance on the last day, adds deposits in transit, subtracts outstanding checks and arrives at an adjusted figure that should equal the ledger. Nothing in that calculation looks at the total of what passed through the account. If 18,000.00 of customer money landed in the account and the same amount left by wire to an account nobody recognizes, and neither movement reached the ledger, the reconciliation still agrees to the cent. The four-column format closes that gap by asking a second question for each side of the account. Did total deposits per bank, adjusted for timing, equal total receipts per books? Did total withdrawals per bank, adjusted the same way, equal total disbursements per books? A yes to both, plus agreement at both ends, is much stronger evidence than a matching balance. There is a further benefit for anyone who inherits a file. Because the opening column must agree to the prior reconciliation, a proof of cash forces you to check the starting point instead of assuming it. A year-end reconciliation that rests on a wrong opening figure can look clean for a long time. The guide to [preparing the year-end bank reconciliation](/blog/year-end-bank-reconciliation) covers the single-date work that the proof of cash builds on. ## Proof of cash columns and rows, laid out A proof of cash has four columns and three blocks of rows. The columns run left to right: balance at the start of the period, receipts during it, disbursements during it, balance at the end. The row blocks are the bank figures, the items that adjust the bank to the truth, and the book figures with their own adjustments. ### The columns - **Opening balance.** The bank balance on the first day of the period, which is the closing balance of the prior statement. - **Receipts.** Every credit to the account in the period, taken from the statement totals. - **Disbursements.** Every debit in the period, including checks, transfers out, fees and returned items. - **Closing balance.** The bank balance on the last day of the period. Each row must cross-foot. Opening plus receipts minus disbursements equals closing, on the bank row, on every adjustment row and on the book row. That rule is the check that keeps the schedule honest: an adjustment entered in only one column will break the cross-foot immediately. ### The rows The top row is the bank figure. Before you use it, confirm that the statement foots and that each closing balance carries into the next statement, using the steps in [footing a bank statement and chaining its balances](/blog/bank-statement-audit-footing-continuity#footing-each-bank-statement-opening-plus-activity-equals-closing). A proof of cash built on statements that do not foot proves nothing. Below the bank figure come the bank-side reconciling items: deposits in transit and outstanding checks at both the start and the end of the period. Their subtotal is the adjusted bank figure. Then come the book figures from the general ledger cash account, the book-side items such as unrecorded fees, interest and returned checks, and the adjusted book figure. The last row is the difference, which should be zero in every column. ## A worked proof of cash for one quarter The worked example below covers one quarter, January 1 to March 31, for a single operating account. All figures are example values for illustration, not drawn from any real client. The bank figures come from the statement summaries, and the book figures come from the general ledger cash account for the same dates. The facts behind the example: - At December 31 there was a deposit in transit of 3,100.00 and outstanding checks of 7,250.00. Both cleared in January. - At March 31 there was a deposit in transit of 4,600.00 and outstanding checks of 9,400.00. - The bank credited 40.00 of interest in March that the books never recorded. - The bank charged an 85.00 service fee in March, also unrecorded. - A customer check for 1,200.00, deposited in February, was returned unpaid. The bank debited the account; the books did not record the return. | Row | Opening, Dec 31 | Receipts | Disbursements | Closing, Mar 31 | | --- | ---: | ---: | ---: | ---: | | Per bank statement | 48,200.00 | 312,450.00 | 305,900.00 | 54,750.00 | | Deposit in transit, Dec 31 | 3,100.00 | (3,100.00) | | | | Deposit in transit, Mar 31 | | 4,600.00 | | 4,600.00 | | Outstanding checks, Dec 31 | (7,250.00) | | (7,250.00) | | | Outstanding checks, Mar 31 | | | 9,400.00 | (9,400.00) | | **Adjusted bank** | **44,050.00** | **313,950.00** | **308,050.00** | **49,950.00** | | Per general ledger | 44,050.00 | 313,910.00 | 306,765.00 | 51,195.00 | | Interest not recorded | | 40.00 | | 40.00 | | Service fee not recorded | | | 85.00 | (85.00) | | Returned check not recorded | | | 1,200.00 | (1,200.00) | | **Adjusted books** | **44,050.00** | **313,950.00** | **308,050.00** | **49,950.00** | | Difference | 0.00 | 0.00 | 0.00 | 0.00 | Example values only. Check the cross-foot on the adjusted bank row: 44,050.00 plus 313,950.00 minus 308,050.00 equals 49,950.00. The same arithmetic works on the ledger row and on each adjustment row, which is the sign that no item was posted to one column alone. The three book-side items each need a journal entry: interest income, bank charges expense and a receivable for the returned check. The bank-side items need no entry, because they are timing and the books already have them. The returned check could also be shown as a reduction of receipts rather than an addition to disbursements. Either works, provided you treat it the same way on both rows and say which you chose. ## How do timing items move across proof of cash columns? A timing item appears twice in a proof of cash, with opposite signs, because it belongs to one period on the books and another at the bank. The December deposit in transit adds to the opening column and comes out of the receipts column. The March deposit in transit goes into receipts and into the closing column. The logic is easier to see one item at a time. The 3,100.00 deposit was recorded in the ledger in December, so the books counted it in the opening balance. The bank did not credit it until January, so the bank's quarterly receipts include it while the books' quarterly receipts do not. To compare like with like, the schedule adds it to the bank's opening figure and removes it from the bank's receipts. Its job in the quarter is done once it clears. Outstanding checks work the same way on the disbursement side. The December checks of 7,250.00 were in the books before the quarter began but hit the bank in January, so they reduce the bank's opening balance and are removed from the bank's quarterly disbursements. The March checks of 9,400.00 were written in the quarter but had not cleared, so they are added to bank disbursements and subtracted from the closing balance. ### A quick test for sign errors Most proof of cash mistakes are sign errors on these rows. Two checks catch nearly all of them: 1. Every opening-period timing item must appear in the opening column and in exactly one flow column. 2. Every closing-period timing item must appear in exactly one flow column and in the closing column. If an item appears in only one column, the row will not cross-foot. If it appears in three, it is counted twice. Scanning for that pattern takes a minute and saves the hour spent hunting a difference that is really a misplaced sign. ## Transfers and cutoff inside a proof of cash period Transfers between the client's own accounts and items near the period end are where a proof of cash most often goes wrong. A transfer is a receipt in one account and a disbursement in another, and the two sides may post on different days. Cutoff errors push activity into the wrong column, and sometimes into the wrong period entirely. ### Transfers between accounts When the client runs several accounts, prepare a proof of cash for each and keep a separate listing of every transfer near the period end. That listing should show the date each side left one bank and reached the other, and the date each side was recorded in the books. A transfer that left the operating account on March 31 and reached the payroll account on April 1 is an outstanding disbursement in one account and a deposit in transit in the other. How to build that listing, and what it reveals about kiting, is covered in the [interbank transfer schedule guide](/blog/interbank-transfer-schedule). Transfers also inflate both flow columns without changing anything real. A company that sweeps 200,000.00 from savings to checking and back every week will show large receipts and disbursements in both accounts. That is not a problem for the proof of cash, as long as each sweep appears on both statements and in the books. It does mean the flow columns will be far larger than sales or expenses, so do not compare them to the income statement without removing the sweeps first. ### Cutoff at the period end The closing column depends on correct cutoff. A deposit dated March 31 in the books should clear in the first business days of April. A check dated March 31 should not have been mailed in mid-April. The best evidence for both is a bank statement covering the first weeks after the period, obtained directly from the bank. The post on [using a cutoff bank statement](/blog/cutoff-bank-statement) explains how to request one and which items to trace to it. ## When a proof of cash receipts column refuses to tie A difference in one flow column, with agreement in the balance columns, is the pattern a proof of cash exists to find. The usual cause is an unrecorded receipt matched by an unrecorded disbursement of the same amount. It can also be a misposting between cash and another account. Investigate the difference; never post it as a balancing adjustment. Suppose the worked example had shown bank receipts 2,000.00 higher than adjusted book receipts, and bank disbursements also 2,000.00 higher. The closing column would still agree. The two flows point to one thing: 2,000.00 came into the account and 2,000.00 left, and the books saw neither. Start with the bank statement. Look for a credit and a debit of the same or similar amount, often within a few days of each other. Then ask who had access to both the bank portal and the ledger. ### Ordinary explanations to rule out first Not every one-column difference is concealment. Rule these out before you escalate: - **Netted entries.** The books recorded a deposit net of a fee, while the bank shows the gross credit and the fee as a separate debit. Both flow columns differ by the fee. - **Reversed items.** A payment the bank reversed and reissued shows as an extra debit and an extra credit at the bank, and as nothing in the books. - **Card processor batches.** A processor that deposits gross sales and debits chargebacks separately inflates both bank columns compared with a ledger that records net settlements. ### When not to force the schedule If the difference is small, unexplained and in a low-risk account, the temptation is to call it immaterial and move on. Write down what you tried and why you stopped, rather than adding a plug row. A plug turns a finding into a false pass, and the next reviewer cannot tell the difference. Building the bank side of a proof of cash is the slow part: footing every statement, totaling credits and debits and listing the items that did not match. [PreciseBankFlow](/get-started) is built to foot each statement and list unmatched lines as exceptions, so your time goes to the columns that do not tie.