1st Asynchronous Drill

Item 1
Multiple choice (one answer)
The practice of intentionally transferring funds from one bank account to another without
recording withdrawal from the originating bank but recording the deposit in the second
bank to temporarily conceal a cash shortage is called_____.
kiting
interbank transfers
lapping
shorting

Item 2
Multiple choice (one answer)
Which of the following cash transfers results in misstatement of cash at December 31,
2015?
Bank Transfer Schedule
Disbursement Date Receipt Date
Per books Per bank Per books Per bank

12/31/2015 01/05/2016 12/31/2015 01/04/2016

01/04/2016 01/11/2016 01/04/2016 01/04/2016

01/04/2016 01/05/2016 12/31/2015 01/04/2016

12/31/2015 01/04/2016 12/31/2015 12/31/2015

Item 3
Multiple choice (one answer)
Which of the following procedures would an auditor most likely perform in auditing the
statement of cash flows?
Reconcile the cutoff bank statement to the proof of cash to verify the accuracy of the
year-end cash balance.
Reconcile the amounts included in the statement of cash flows to the other financial
statement's amounts
Confirm the amounts included in the statement of cash flows with the entity's financial
statements
Vouch a sample of cash receipts and disbursements for the last few days of the current
year.
Item 4
Multiple choice (one answer)
Which of the following misstatements is most likely to be uncovered during an audit of a
client's bank reconciliation?
Duplicate payment of a vendor's invoice
Failure to record collection of a customer's note by the bank on the client's behalf
Payment of an overtime pay of an employee in excess of what is legally required
Billing a customer at a price different from that indicated by the company policy

Item 5
Multiple choice (one answer)
Which of the following cycles does not affect cash in bank
Investing and disbursement cycle
Inventory and warehousing cycle
Financing cycle
Revenue and collection cycle

Item 6
Multiple choice (one answer)
Which of the following is a standard internal control over cash disbursements?
Checks should be signed by the controller and another employee of the company
Making payments out of cash collected during the day
Checks should be sequentially numbered and the numerical sequence of the check
should be accounted for by the person preparing the bank reconciliation
Checks should be issued directly to the payee by the person signing the check

Item 7
Multiple choice (one answer)
Which of the following audit procedures would most likely detect kiting?
Prepare a bank transfer schedule
Prepare year-end bank reconciliations
Review composition of authenticated deposit slips
Review subsequent bank statements and cancelled checks returned by the bank
Item 8
Multiple choice (one answer)
In most situations, the petty cash fund is reimbursed just prior to year-end to avoid
The understatement of cash and understatement of expenses
The overstatement of cash and understatement of expenses
The overstatement of cash and overstatement of expenses
The understatement of cash and overstatement of expenses

Item 9
Multiple choice (one answer)
The general cash account is considered significant in almost all audits
even when ending balance is immaterial
when the ending balance is material
when either the beginning balance or the ending balance is material
when the beginning balance is material

Item 10
Multiple choice (one answer)
Which of the following would most likely be detected by preparing a proof of cash?
an unrecorded bank deposit made at the end of the month
a payment of an account payable previously paid by the check
A collection of an account receivable previously written off
A misappropriation of cash receipts not recorded in the cash receipts journal

Item 11
Multiple choice (one answer)
Which of the following would most likely not be detected by preparing a proof of cash?
an unrecorded bank charge for customers' DAIF checks
An issuance of check for payment of an account payable previously paid by check
A check issued but not recorded
Unrecorded remittances by customers deposited directly to the bank
Item 12
Multiple choice (one answer)
Which of the following audit procedures would most likely detect lapping?
Confirmation of cash balance with financial institutions
Conducting a cash count
Comparing postings of cash receipts with the details of cash deposits
Preparing month-end bank reconciliations

Item 13
Multiple choice (one answer)
Properly designed internal control will permit the employee to
approve vouchers for payment, and also receive and deposit cash
receive and deposit checks, and also approve write-offs of customer accounts
reconcile the bank statements, and also receive and deposit cash
Sign checks, and also cancel supporting documents

Item 14
Multiple choice (one answer)
Which objective is most directly associated with the control procedure of separating cash
handling and record keeping?
to verify that cash receipts recorded during the period are reasonable
to verify that cash receipts are appropriately recorded
to verify that recorded cash receipts are from legitimate company transactions
to verify that cash receipts are correctly classified.

Item 15
Multiple choice (one answer)
Rank the following audit evidences in the order of reliability, starting with the most reliable
to the least reliable.
I. Cash count conducted by the audit staff.
II. Bank confirmation report
III. Bank reconciliation prepared by the company's internal audit staff
IV. Verbal communication from the manager on the petty cash replenishment procedures
I, II, IV, III
II, I, III, IV
III, II, IV, I
I, II, III, IV
Item 16
Multiple choice (one answer)
Which of the following statements is incorrect?
Compensating balances are cash amounts that are not immediately accessible by the
owner
Cash which is restricted and not available for use within one year of the reporting
period should be included in non-current assets.
Cash in a demand deposit account, being held specifically for the retirement of long-
term debts not maturing currently, should be excluded from the current assets and shown
as a non-current investment
Cash and cash equivalents is always presented first in statement of financial position
when presenting current and non-current classifications
Investments which can be liquidated at once and with little risk of loss of principal may
be classified as cash equivalent and included in the caption "Cash and Cash Equivalents"

Item 17
Multiple choice (one answer)
Deposits held as compensating balances
none of these
usually do not earn interest
if legally restricted and held against short-term credit may be included as cash
if legally restricted and held against long-term credit may be included among current
assets

Item 18
Multiple choice (one answer)
On October 31, 2020, Dingo, Inc. has cash accounts at three different banks. One account
balance is segregated solely for a November 15, 2020 payment into a bond sinking fund. A
second account, used for branch operations, is overdrawn. The third account, used for
regular corporate operations, has a positive balance. How should these accounts be
reported in Dingo's October 31, 2020 classified balance sheet?
The segregated account should be reported as a non-current asset, the regular account
should be reported as a current asset, and the overdraft should be reported as current
liability.
The segregated account should be reported as non-current asset, and the regular
account should be reported as a current asset net of the overdraft
The segregated and regular accounts should be reported as current assets net of the
overdraft
The segregated and regular accounts should be reported as current assets, and the
overdraft should be reported as current liability.
Item 19
Fill in the blanks / identification
The following were taken from the records of SML Co. as of December 31, 20x1:
Checks drawn but not yet issued to payees P 120,000
Customer's checks dated January 15, 20x2 35,000
Customer's checks dated December 31, 20x1 40,000
SML's check dated Jan. 15, 20x2 already mailed to payee 16,000
Cash on hand 130,000
Employees' checks representing unclaimed salaries, held by the
14,000
treasurer
Petty cash fund (fully replenished) 20,000

How much of the items listed above will be included in SML's December 31, 20x1 cash? DO
NOT USE COMMA IN YOUR ANSWER! _____

Solution:
Checks drawn but not yet issued to payees P 120,000
Customer's checks dated December 31, 20x1 40,000
SML's check dated Jan. 15, 20x2 already mailed to payee 16,000
Cash on hand 130,000
Employees' checks representing unclaimed salaries, held by the
14,000
treasurer
Petty cash fund (fully replenished) 20,000
340,000

Item 20
Fill in the blanks / identification
The cash balance of ABC Co comprises the following:
Cash on hand 40,000 Solution:
Cash in bank - savings - BPI 100,000 Cash on hand 40,000
CIB-Savings -BPI
Cash in bank - current - BPI (10,000)
( 100k-20k-10k) 70,000
Cash in bank - current - Metrobank (60,000) Total Cash 110,000
Total 70,000

Additional information:
Cash on hand includes undeposited collections of P2,000.
The cash in bank - savings maintained at BPI includes a P20,000 compensating balance
which is restricted.
Compute for the amount of cash to be reported in the financial statements. DO NOT USE
COMMA IN YOUR ANSWER! _____

Item 21
Multiple choice (one answer)
A petty cash system is designed to
handle cash sales
account for all cash receipts and disbursements
cash checks for employees
pay small miscellaneous expenses

Item 22
Multiple choice (one answer)
In most situations, the petty cash fund in reimbursed just prior to the year end and an
adjusting entry is made to avoid
the understatement of cash and the overstatement of expenses
the understatement of cash with the appropriate statement of expenses
the overstatement of cash and understatement of expenses
the misstatement of revenues

Item 23
Multiple choice (one answer)
In replenishing a petty cash fund, which one of the following entries is required?
Debit individual expense accounts, credit in Cash in Bank
Debit Cash in Bank, credit Petty Cash
Debit Petty Cash, credit Cash in Bank
Debit Petty Cash, credit individual expense accounts

Item 24
Fill in the blanks / identification
An examination on the morning on January 2, 2016 by the auditor for the Luz Company
discloses the following items in the petty cash drawer, under the custody of Ms. Cruz, the
petty cash custodian
Postage stamps P 220.00
Currency and coins 1,156.60
IOUs from members of the staff 1,210.00
An envelope containing collections for a gift for a
350
departing employee, with office names attached
Petty cash vouchers for miscellaneous expenses
985
(including a PCV for stamps purchased for P450.00)
Employee's check postdated January 15, 2016 1,500
Employee's check mark "DAIF" 1,890
Personal check drawn by Ms. Cruz 3,450
P10,761.60

The ledger account discloses a P10,500 balance for petty cash.

Do not use comma and peso sign in your answer.
a. How much is the cash shortage or overage as of December 31, 2015? Indicate whether
shortage or overage, e.g., 1500.30 shortage
ANSWER: _____

Petty Cash Items:

Currency and Coins 1,156.60
IOUs from members of the staff 1,210.00
Unreplenished vouchers 985.00
Post-dated employee’s check 1,500.00
DAIF Employee’s Check 1,890.00
TOTAL 6,741.60

Accountability:
Imprest balance of Petty Cash 10,500.00
SHORTAGE 3,758.40

b. How much petty cash fund shall be shown as part of Cash balance as of December 31,
2015?
ANSWER: _____

Currency and Coins 1,156.60

Item 25
Fill in the blanks / identification
Red Corporation records the showed the following:
Outstanding checks, November 30 P 90,000
Customer's NSF check returned in November and recorded in
6,000
December
Service charges made by the bank in November and recorded in
2,400
December
Total credits to the cash account in all journal during December 190,400
Checks and charges returned by bank in December including a
195,000
December service charge of P3,000 and NSF check of P12,000
Book debit error in November and corrected in December 3,000

What is the amount of outstanding checks as of December 31?

Do not use comma and peso sign in your answer.
ANSWER: _____ 89,000

Disbursements recorded by the BANK for the month of December 195,000

Bank debit memos recorded by bank in December:
Dec. Service Charge 3,000
Dec. NSF Check 12,000 (15,000)
Checks cleared/accepted/acknowledged by Bank in December 180,000
Outstanding Checks as of Nov 30 (90,000)
Checks cleared by bank in December for Checks drawn by the Book in Dec 90,000

Disbursements recorded by the BOOK for the month of December 190,400

Bank debit memos recorded by Book in December:
Nov. Service Charge 2,400
Nov. NSF Check 6,000 (8,400)
Book debit in November corrected in Dec (3,000)
Checks issued/drawn by the Book in December 179,000

Hence,
Checks issued/drawn by the Book in December 179,000
Checks cleared by bank in December for Checks drawn by the Book in Dec (90,000)
OUTSTANDING CHECK AS OF DECEMBER 31 89,000

Item 26
Fill in the blanks / identification
The following information was revealed in trying to reconcile the bank statement balance
as of June 30 with the client's records as of the same date:
 ✓ Total credits per June bank statement were P310,000.
✓ Among the bank credits in May was a customer's note collected by the bank for
the account of the company which the company recognized in June. Proceeds
were P30,300.
✓ Client books for June showed receipts of P420,000.
✓ Deposits in transit on May 31 were P15,000.
✓ The bank credited the client's account in June for P50,000 representing loan
approved and granted by the bank. Your client has not recorded this yet.
✓ A deposit of P4,300 was recorded by your client as P3,400 in June. The bank
recorded the deposit at its correct amount.

How much were deposits in transit as of June 30? 145,600

Do not use comma and peso sign in your answer.
ANSWER: _____

Receipts recorded by the BANK for the month of June 310,000

Bank credit memos recorded by bank in June:
Loan proceeds (50,000)
Deposits acknowledged by Bank in June 260,000
Deposit in transit as of May 31 (15,000)
Deposits acknowledged by Bank in June for deposits made by Book in June 245,000

Receipts recorded by the BOOK for the month of June 420,000

Bank credit memos recorded by Book in June:
Noted Collected by recorded by Book in June (30,300)

Book debit error adjustment (4,300-3,400) 900

Deposits made by Book in June 390,600

Hence,
Deposits made by Book in June 390,600
Deposits acknowledged by Bank in June for deposits made by Book in June (245,000)
DEPOSIT IN TRANSIT AS OF JUNE 30 145,600

Item 27
Multiple choice (one answer)
The practice which postpones entries for the collection of receivables to conceal as existing
cash shortage is referred to as
kiting
lapping
interbank transfers
shorting
Item 28
Fill in the blanks / identification
A good internal control requires that before a check is drawn for the replenishment of petty
cash fund, the accounting department sees to it that this document is appropriately
prepared.
ANSWER: _____ Check Disbursement Voucher/Cash DV/DV

Item 29
Fill in the blanks / identification
This document evidences that a certain amount from petty cash fund was advanced to a
certain requester.
ANSWER: _____ Petty Cash Voucher

Item 30
Multiple choice (one answer)
The principal purpose of a voucher system is to provide assurance that
All cash disbursements are approved before a check is issued
All purchase invoices are supported by debit memoranda
All cash receipts are recorded in the accounting records
All cash receipts are deposited intact in the bank

Item 31
Multiple choice (one answer)
Which of the following is not a debit memo?
Bank service charges
Direct deposits of customers to the depositor’s account
No sufficient funds checks (NSF)
Automatic debits representing payments of bills by the bank on behalf of the depositor

Item 32
Multiple choice (one answer)
Which of the following is not a basic characteristic of a system of cash control?
Internal audits at irregular intervals
Combined responsibility for handling and recording cash
Daily deposit of all cash received
Use of a voucher system
Item 33
Fill in the blanks / identification
The cash balance of South Co. comprises the following:
Cash on hand 300,000
Cash in bank – savings – BPI 600,000
Cash in bank – current – BPI (240,000)
Cash in bank – deposit in escrow – Metrobank 300,000
Cash in bank – current – Metrobank ( 60,000)
Cash in bank – current – BDO ( 90,000)
Total 810,000
Additional information:
• Cash on hand includes undeposited collections of P60,000.
• The cash in bank – savings maintained at BPI includes a P150,000 compensating balance
which is not restricted.
What amount of cash is reported in the financial statements?
Do not use comma and peso sign in your answer.
ANSWER: _____660,000

SOLUTION:
Cash on hand 300,000
Cash in Bank – Savings BPI (600,000-240,000) 360,000
660,000