Accounting All-in-One For Dummies (+ Videos and Quizzes Online), 3rd Edition

Chapter 3

Proving Out Cash

IN THIS CHAPTER

Understanding the purpose of closing out cash

Counting your company’s cash

Finalizing the cash journals

Using temporary posting journals

The process of verifying the accuracy of your cash is called proving out the cash. Any accounting system is susceptible to mistakes, and unfortunately, any business can fall victim to incidents of theft or embezzlement. One way to minimize the risk is to prove out the cash periodically.

This chapter explains how to ensure the cash counts are accurate, finalize the cash journals for the accounting period, prove out the bank accounts, and post any adjustments or corrections to the general ledger.

Making Sure That Ending Cash Is Right

Testing your books starts with counting your cash. Why start with cash? For most businesses, the cash account has more transactions than any other account. More transactions in an account can mean a higher risk of error. Also, cash is the asset that’s most susceptible to theft. If you prove your cash balance first, you’re addressing your most difficult account first. Before ...