MODULE 5 - Audit of Cash and Related Accounts

STRAIGHT PROBLEMS
Problem 1
Audit of Cash Composition
During your audit of the accounting books of Ginebra Corporation, its general ledger balance for Cash at December 31,
2020, showed a balance of P 810,000 which includes the following:
Demand deposit 160,000

Time deposit that cannot be pre-terminated until April 1, 2021 55,000
Un-deposited customer’s check 5,000
Customer NSF Check 2,000
Deposit in foreign bank - unavailable 90,000
Overdraft in another bank -20,000
Time deposit in a closed loan association 45,000
Cash advances to officers 32,000
Sinking fund cash 150,000
Pension Fund 220,000
Petty Cash Fund 2,000
Customer check dated January 31, 2021 59,000
Customer check outstanding for 18 months 10,000
810,000
Additional information:
a) The petty cash fund consists of P 600 in cash, P 400 in IOUs, and P 1,000 receipts for expenses.
b) Check of P 50,000 in payment of accounts was recorded in December 31, 2020 but mailed to creditors on
January 15, 2021.
c) Check of P 30,000 dated January 31, 2021 in payment of accounts was recorded and mailed on December 31,
2020.
d) The company uses the calendar year.
e) The cash receipts journal was held open until January 15, 2021 during which time P 100,000 was collected on
accounts and recorded on December 31, 2020.
Required:
What is the correct “Cash” balance for the statement of financial position as at December 31, 2020?
for Cash at December 31,
ailed to creditors on
mailed on December 31,
00,000 was collected on

STRAIGHT PROBLEMS
Problem 2
Audit of Cash and Cash Equivalents Composition
During your audit of Baguio Corporation for the year 2020, the following were presented to you in connection to your
audit of its Cash and Cash Equivalent account:
Petty Cash Fund which consists of the following:

Currencies and coins 8,000
Various expense receipts 10,000
Employee advances 2,000
Treasury Bills as follows:

Purchased on December 31, 2020, due on March 1, 2021 400,000
Purchased on January 31, 2020, due on January 31, 2021 600,000
Cash in Bank accounts:

Checking Account - Bank of the Philippine Islands 4,000,000
Checking Account - Banco de Oro -200,000
Checking Account – RCBC (Payroll Account) 1,000,000
US$ Savings Accounts – Metrobank (Restricted) Peso Equivalent 2,000,000
Various Checks:
Employees check dated January 10, 2021 8,000
Traveler’s Check 100,000
Others:
Postage Stamps 2,000
IOU from company president’s brother 20,000
Credit memorandum from supplier for purchase return 40,000
Postal Money Order 60,000
Treasury Warrants 600,000
Listed stocks held as temporary investments 30,000
Required:
Compute the amount of Cash and Cash Equivalents that should be reported by Baguio Corporation on its December
31, 2020 statement of financial position?
ou in connection to your
20,000
1,000,000
6,800,000
108,000
752,000
oration on its December

STRAIGHT PROBLEMS
Problem 3
Cash Count and Adjusting Journal Entries
As the representative of Bautista, Chavez and Company, CPAs, you are auditing the books and records of Sagada
Corporation as of December 31, 2020.
On January 4, 2021, at 9:05AM, you began counting the petty cash fund and other cash which might be on hand with
the cashier, Miss Ana Marie Querol, and you found bank notes, coins, checks, vouchers, and so forth as disclosed
below:
BILLS: Two (2) one hundreds, five (5) fifties, five (5) twenties
COINS: P 5.00 – 50 pieces; P 1.00 – 109 pieces; P 0.25 - 6 rolls and 47 loose (50 pieces to a roll)
CHECKS:
Maker Date Payee
Melba dela Cruz, Manager (BPI) 12/24/2020 Sagada Corporation
Ana Marie Querol, Petty Cashier (PNB) 12/24/2020 Sagada Corporation
Sagada Corporation (BDO) 12/26/2020 Ana Marie Querol
Sagada Corporation (BDO) 12/28/2020 PLDT
Sagada Corporation (BDO) 12/22/2020 Aezelle Servidad
VALE SLIPS:
Maker Date Amount
Arthur Galicio, Messenger 12/27/2020 200
John Carl Bautista, Accountant 12/28/2020 500
Remuel Bernardo, Clerk 12/28/2020 300
UNREPLENISHED PETTY CASH VOUCHERS:

Maker PCV No. Date Transactions
Safety First Freight Services 820 12/26/2020 Freight-in
Cesario Cadao, Janitor 821 12/26/2020 Salary advances
National Book Store 822 12/27/2020 Various office supplies
Arthur Galicio, Messenger 823 12/28/2020 Miscellaneous expenses
Philippine Post 824 12/29/2020 Supplies
Pandayan Book Shop, Inc. 825 4/1/2021 Supplies
The petty cash fund balance per general ledger has an imprest balance of P 12,500. Last replenishment was dated
December 23, 2020.
Further audit disclosed that cash sales of January 3, 2021 amounted to P 15,000 as shown by the sales records while
cash receipts book and the bank deposit slip on January 4, 2021 showed that only P 14,000 was deposited in the bank.
On the other hand, inside the petty cash box are the following:
a) Pay envelope of Aiko Villavicencio, P 4,000, opened; Cleofe Santiago, P 4,500, sealed.
b) Envelope containing employee contributions for the wedding of co-employee, P 3,000, opened;
c) Postage stamos, 20 pieces at P 10 each.
Required:
. Cash shortage as of December 31, 2020.
. Amount of Petty Cash Fund to be presented in the financial statements.
. Compound adjusting entry to correct petty cash fimd account as of December 31, 2020.
Date Account Names Debit Credit
2020
Dec 31
and records of Sagada
ch might be on hand with

d so forth as disclosed
Amount
500
500
12,000
3,500
1,500
Amount
750
500
225
204
250
167
plenishment was dated
by the sales records while

was deposited in the bank.
STRAIGHT PROBLEMS
Problem 4
Computation of Correct Cash Shortage
The following cash count sheet and additional information pertain to the accounts of Marvelous Company for the year
ended December 31, 2020.
Name of Fund : Indeposited Collections and Petty Cash Fund

Cash Count Date : December 29, 2020
Currencies - detailed omitted 4,600

Unreplenished Petty Cash Vouchers:
Voucher Date Explanation Amount
10/12/2020 Postage stamps 200
12/15/2020 Transportation - Messenger 50
12/28/2020 One (1) ream of bond papers 350
12/29/2020 Reapir of office table 200 800
Unused postage stamps 100
Properly approved employee advances 1,000
Total amount counted 11,500
Total accountability:
Petty Cash Fund per ledger 2,000
Undeposited collections per ledger 9,800 11,800
Cash shortage -300
Amount paid by the cashier taken from his wallet 300
During your audit, you gathered the following information:

a) There was an unclaimed pay envelope which had been opened with contents of P 5,000 which were removed.
The face of the envelope bore a notation “unclaimed”.
b)
During the year, the average monthly disbursements from the petty cash fund amount to P 1,100. The last
replenishment was made on December 16, 2020 covering the period from December 1 to 15, 2020.
c) It is the company’s policy to deposit intact all collections on a daily basis.
Required:
Compute the corect amount of shortage.
us Company for the year
00 which were removed.
to P 1,100. The last

1 to 15, 2020.
STRAIGHT PROBLEMS
Problem 5
Computation of Petty Cash Fund Balance and Shortages or Overages
Presented below are a series of unrelated situations. Answer the following questions relating to each of the
independent situations as requested.
Situation 1:
A count of the undeposited receipts under the custody of Nina Cao, cashier of Tahiti Corporation, on September 30,
2020, showed the following composition of the total per count of P 20,310:
Coins and currency 12,310

Unused Postage Stamps 220
Checks:
Date Payee Drawee
9/24/2020 Cash Nina Cao 1,000
9/20/2020 Tahiti Corporation Micronesia Corporation 2,350
9/27/2020 Tahiti Corporation Tino Pac 1,960
9/30/2020 Maynilad Micronesia Corporation 900
Cash advance voucher paid out of receipts 1,500
Question:
Assuming the cashier’s accountability to be P 18,470, what was the amount of overage/shortage on September 30,
2020?
Situation 2:
A count of the undeposited receipts under the custody of Tina Cot, the cashier of Kenya Corporation, at the close of
business September 30, 2020, showed the following composition:

Checks:
Date Payee Drawee
9/30/2020 Kenya Corporation Africa Corporation 1,300
9/29/2020 Kenya Corporation Europe Corporation 750
9/27/2020 PLDT Kenya Corporation 750
Total per count 6,810
Question:
Assuming the cashier’s accountability to be P 6,500, what is the amount of the cash shortage on September 30, 2020?
Situation 3:
Your count of the undeposited receipts under the custody of the cashier of Abaca Company on September 30, 2020
showed the following:

Checks:
Date Payee Drawee
9/25/2020 Abaca Company Exporter Corporation 1,200
9/28/2020 Abaca Company Manda Rambong 900
9/30/2020 Meralco Abaca Company 1,050
Travel expense vouhcer paid out of cash receipts 600
Question:
Assume the cashier’s accountability to be P 8,500, what was the amount of cash overage/shortage on September 30,
2020?
Situation 4:
A count of the petty cash fund showed its composition as follows:
Coins and currency

Paid Vouchers:
Transportation 600
Gasoline 400
Office Supplies 500
Postage Stamps 300
Due from employees 1,200
Manager’s check returned by bank marked “NSF”
Check drawn by the company to the order of the petty cash custodian
Question:
What amount of the petty cash fund for statement of financial position purposes?
to each of the
tion, on September 30,
age on September 30,
poration, at the close of
e on September 30, 2020?
on September 30, 2020

ortage on September 30,
3,300
3,000
5,000
2,700
STRAIGHT PROBLEMS
Problem 6
Computation of Cash Accountability
In your year-end audit of MH Del Pilar Corporation, the cashier’s accountability as at December 31, 2019 was P 24,000.
The summary of selected transactions in connection to cash account were as follows:
Credit sales during the year in which collection was 80% 1,400,000
Proceeds from short-term borrowings (BPI) 200,000
Subscribed ordinary shares 1,800,000
Accounts Receivable proven uncollectible and written off 10,000
Depreciation of property and equipment 60,000
Accrued income tax 20,000
Payment of costs and expenses 1,500,000
Cash payment in settlement of bank borrowings (BPI) 80,000
Ordinary Shares Subscription Receivable 600,000
Purchases of property and equipment 900,000
Required:
Compute the cash accountability of the cashier at December 31, 2020.
SOLUTION:
CASH
Receipts Payments
Cashier’s accountability, December 31, 2019 24,000
Credit sales collection (P 1,400,000 x 80%) 1,120,000
Cash payment in settlement of bank borrowings (BDO) 80,000
Collection from Subscription of Ordinary Shares (Schedule 1) 1,200,000
Total 2,544,000 2,480,000
2,544,000 2,544,000
Schedule 1 - Collection from Subscription of Ordinary Shares

Less: Ordinary Shares Subscription Receivable 600,000
Collection from Subscription of Ordinary Shares 1,200,000
ber 31, 2019 was P 24,000.
STRAIGHT PROBLEMS
Problem 7
Cash Related Transactions and Computation of Cash Balance
During your cash audit of Survivor Company for the year 2020, the account balances of certain accounts are presented
to you as follows:
1/1/2020 12/31/2020
Cash 1,200,000 ?
Accounts Receivable 500,000 600,000
Accounts Payables 750,000 700,000
Related transactions during the year 2020 are as follows:

. Credit sales, P 5,000,000
. Cash sales, P 200,000
. Sales returns and allowances, P 20,000
. Accounts written off, P 180,000.
. Credit purchases, P 6,000,000
. Cash purchases, P 500,000
. Bank borrowings, P 1,000,000
. Partial payment of bank borrowings, P 400,000
. Issuance of shares of stocks, P 10,000,000
. Operating expenses payments, P 3,100,000
. Dividend payments, P 800,000
. Acquisition of land, P 5,200,000
Required:
Compute the following:
A. Collectionof accounts receivable during the year 2020
B. Payments of accounts payable during the year 2020
C. Total cash receipts during the year 2020
D. Total cash disbursements during the year 2020
E. Cash balance at December 31, 2020
ain accounts are presented
STRAIGHT PROBLEMS
Problem 8
Preparation of Bank Reconciliation and Proof of Cash
In the audit of Luzon Manufacturing Company for the year 2020, the bank statement and cash receipts book were
made available to you.
Date Check No. Transactions Withdrawal Deposit Balance

2020
Dec. 2 86,520
2 10,800 97,320
2 660 2,400 94,920
2 661 1,040 93,880
4 663 1,850 92,030
4 4,000 96,030
4 642 300 95,730
4 638 1,280 94,450
6 14,600 109,050
6 Returned deposit 4,000 105,050
6 640 400 104,650
10 636 800 103,850
12 Service charge 10 103,840
12 24,800 128,640
13 666 6,200 122,440
13 669 2,400 120,040
13 662 1,200 118,840
17 664 200 118,640
17 8,200 126,840
17 667 600 126,240
20 665 Certified check 10,000 116,240
20 2,000 118,240
23 670 1,600 116,640
24 672 8,000 108,640
24 668 4,000 104,640
24 10,000 114,640
24 675 Manager's check 13,000 101,640
24 677 400 101,240
24 671 3,000 98,240
24 673 10,000 88,240
26 Debit memo 10,000 82,220
26 3,600 85,820
26 674 2,000 83,820
26 676 1,800 82,020
26 678 7,000 75,020
27 16,000 91,004
27 687 10,400 80,604
27 682 600 80,004
NOTES:
The Debit Memo of P 10,000 represents promissory note of the company deducted on the current account.
Date Deposit Check No. Check Amt.
2020
Dec. 2 660 2,400
2 661 1,040
2 662 1,200
4 4,000
4 663 1,850
4 664 200
5 665 10,000
6 14,600
6 666 6,200
6 667 600
6 668 4,000
10 669 2,400
12 24,800
12 670 1,600
12 671 3,000
12 672 8,000
16 673 100,000
17 8,000
17 674 2,000
20 2,000 675 13,000
20 676 1,800
21 677 400
22 678 7,000
22 679 1,200
22 680 1,200
23 10,000
23 681 2,000
23 682 600
25 683 8,000
26 3,600
26 684 4,000
26 685 3,000
26 686 6,000
27 16,000
27 687 10,400
27 6,400
27 1,000
Required:
. Statement reconciling the balance of P 94,540 as of November 30, 2020 appearing in the cashbook with
December 2, 2020 shown in the bank statement.
. Bank Reconciliation as of December 31, 2020. Show tick marks with legend in bank statement and in cash
books.
. Journal entries that may be needed in connection with the data and figures appearing in the statement.
. Proof of Cash for December, 2020 using the adjusted balance method.
SOLUTION:
LUZON MANUFACTURING COMPANY

Bank Reconciliation
As at December 1, 2020
Bank Book
Unadjusted balances
Adjustments:
Deposit in Transit
Outstanding Checks:
Amount
No.
No.
No.
No. 0
Adjusted balances 0 0
. Bank Reconciliation as of December 31, 2020. Show tick marks with legend in bank statement and in
cash books.

Bank Reconciliation
Bank Book
Unadjusted balances
Adjustments:
Deposit in Transit
Outstanding Checks:
Amount
No.
No.
No.
No.
No.
No.
No.
No.
Understatement of cash receipts of December 17
Service Charges
Payment of promissory note charged by bank

2020 (AJE NO. 1)
Dec 31
(AJE NO. 2)
31
(AJE NO. 3)
31
JACKSON COMPANY
Proof of Cash
For the month of December, 2020
Beginning December, 2020

1/12/2020 Receipts Disburse.
Book Balances, unadjusted
Reconciling items:
Understatement of cash receipts
On December 17, 2018 (AJE 1)
Service Charges (AJE 2)
Payment of promissory note due
To bank (AJE 3)
NSF check returned by bank on
December and redeposited on
the same month and cleared
Book Balance, adjusted 0 0 0
Bank Balance, unadjusted

Reconciling items:
Deposit in transit – December 1
Deposit in transit – December 31
Outstanding checks – December 1

Outstanding checks – December 31
Bank Balance, adjusted 0 0 0
h receipts book were
urrent account.
he cashbook with
atement and in cash
n the statement.
g in the cashbook with

nk statement and in
AJE NO. 1
AJE NO. 2
AJE NO. 3
aring in the statement.

Ending
12/31/2020
0
STRAIGHT PROBLEMS
Problem 9
Preparation of Bank Reconciliation from Erroneous Check Register
During your audit, you gathered the following data from Cebu Company’s check register for the month of April 2020.
The bank reconciliation for March showed one outstanding check, Check No. 178 for P 2,150 (written on March 20,
2020), and one deposit in transit for P 4,350 (made on March 31, 2020).
Date Items Checks Deposits Balances

2020
Apr. 1 Beginning balance 6,150
1 Deposit 26,167 32,317
1 Check No. 179 250 32,567
4 Check No. 180 10,673 21,898
27 Deposit 11,774 33,672
29 Check No, 181 13,217 20,490
The following is from Cebu’s bank statement for April:

2020
3 Check No. 179 250 3,700
3 Deposit 4,350 8,050
5 Check 180 10,673 -2,623
5 Loan 8,150 5,527
5 Deposit 26,417 31,944
20 NSF 1000 30,944
20 SC 600 30,344
30 INT 82 30,426
Legend:
NSF - No Sufficient Fund Check
SC - Service Charge
INT - Interest Income
Assume that errors or discrepancies you find are Cebu Company's, not the banks.
Required:
Prepare Bank Reconciliation as at April 30, 2020.
SOLUTION:
CEBU COMPANY
Bank Reconciliation
As at April 30, 2020
Book Bank
Unadjusted balances
Book balance - overstated
Deposit in transit
Outstanding checks:
No. 178
No. 181
Understated book receipts
Proceeds of bank loan
NSF Check
Service Charge
Interest income
he month of April 2020.
(written on March 20,
STRAIGHT PROBLEMS
Problem 10
Preparation of Corrected Bank Reconciliation
The Grandioso Company had poor internal control over its cash transactions. Facts about its cash position at
November 30, 2020 were as follows:
The cash book showed a balance of P 189,016.20, which included undeposited receipts. A credit of P 1,000 on the
bank’s records did not appear on the books of the company. The balance per bank statement was P 155,500.
Outstanding checks were: # 62 for P 1,162.50, #183 for P 1,500, #284 for P 2,532.50, #8621 for P 1,907.10, #8623 for
P 2,068, and #8632 for P 1,452.80.
The cashier abstracted all undeposited receipts in excess of P 37,944.10 and prepared the following reconciliations:
Balance per books, November 30, 2020 189,016.20

Add: Outstanding Checks
No. 8321 1,907.10
No. 8623 2,068.00
No. 8632 1,452.80 4,427.90
Total 193,444.10
Less: Undeposited Receipts 37,944.10
Balance per bank, November 30, 2020 155,500.00
Less:Unrecorded credit 1,000.00
True cash, November 30, 2020 154,500.00
Required:
Prepare a supporting schedule showing how much the cashier abstracted.
SOLUTION:
GRANDIOSO COMPANY
Bank Reconciliation
As of November 30, 2020
Bank Book
Balances, unadjusted
Adjustments:
Deposit in Transit
Outstanding Checks:
Amount
No.
No.
No.
No.
No.
No.
Unrecorded credits
Total balances 0.00 0.00
Discrepancy (Shortage) 0.00
Balance per bank, adjusted 0.00 0.00
cash position at
redit of P 1,000 on the

t was P 155,500.
for P 1,907.10, #8623 for
ollowing reconciliations:
STRAIGHT PROBLEMS
Problem 11
Verification of Outstanding Checks from Corrected Bank Reconciliation
In connection with your audit of the Morayta Corporation at December 31, 2020, you were given a bank reconciliation by a
company employee which shows:
Balance per bank 152,670

Add: Deposit in Transit 189,280
Total 341,950
Less: Check Outstanding 213,780
Balance per books 128,170
As part of your verification, you obtain the bank statement and cancelled checks from the bank on January 15, 2021.
Checks issued from January 1 to 15, 2021 per books were P 112,410. Checks returned by the bank on January 15
amounted to P 292,190 (Checks paid by bank from January 1 to 15). Of the checks outstanding December 31, 2020, P
48,000 were not returned by the bank with the January 15th statement, and of those issued per books in January, 2021. P
36,000 were not returned.
Required:
Prepare a schedule showing the above data in proper form.
SOLUTION:
MORAYTA CORPORATION
Bank Reconciliation
Bank Book
Balances, unadjusted
Adjustments:
Deposit in Transit
Outstanding Checks (See Schedule 1)
Total balances 0.00 0.00
Discrepancy (Shortage) 0.00
Balance per bank, adjusted 0.00 0.00
Schedule 1 - Computation of Outstanding Checks at December 31, 2020

Checks paid by the bank from January 1-15, 2021
Less: Checks issued from January 1-15, 2021 and
paid by the bank from January 1-15, 2021:
Issued from January 1 - 15, 2021
Less:
Checks outstanding asNot paid by bank
of December 31, as of January
2020 and paid5,by
2021
bank
from January 1-15, 2021

Add: Outstanding checks as of December 31, 2020 not yet returned
by bank with January 15th statement
Correct outstanding checks, December 31, 2021
a bank reconciliation by a
n January 15, 2021.

ank on January 15
December 31, 2020, P
books in January, 2021. P
0
STRAIGHT PROBLEMS
Problem 12
Computation of Cash Accountability and Bank Reconciliation
The Bonbon Company was organized on January 3, 2020 with a share capital fully paid up of P 5,000,000. At
December 31, 2020, the general ledger of said company showed the following accounts and balances:
Merchandise Inventory 2,150,000

Land 800,000
Building 1,200,000
Furniture and Fixtures 350,000
Delivery Equipment 850,000
Accounts Receivable - trade 620,000
Accounts Payable - trade 340,000
Notes Payable - trade 500,000
Notes Payable - PNB 200,000
Mortgage Payable - DBP 500,000
Sales 1,855,000
Salaries 680,000
Taxes and Licenses 46,000
Insurance 27,000
Repairs and Maintenance 46,644
Your examination of the bank statement for December 31, 2020 disclosed the following information:
Bank balance, December 31, 2020 403,756

Bank Charges 850
Checks not returned by the bank:
October 16, 2020 – Check No. 1784 7,875
October 23, 2020 – Check No. 1829 12,000
November 4, 2020 – Check No. 1971 8,725
December 7, 2020 – Check No. 2319 6,500
Your examination revealed the following information: Cash received on December 31, 2020 was deposited on January
2, 2021 amounted to P 62,500. The cost of merchandise sold was 65% of sale.
Questions:
. How much is the total collections from sales during the year?
. How much is the total cash receipts during the year?
. How much is the total payment of purchases during the year?
. How much is the total cash disbursements during the year?
. How much is the cash accountability at 12/31/2020?
. What is adjusted balance of cash at 12/31/2020?
f P 5,000,000. At
balances:
was deposited on January

STRAIGHT PROBLEMS
Problem 13
Computation of Cash Shortage Using Proof of Cash
You have been assigned to the audit of Jackson Company. You acquired the following information:
A. Balances of cash account per the general ledger at November 30, 2020 and December 31, 2020, were P 380,200
and P 97,700, respectively.
B.
Balance on checking accounts at the Banco De Oro at December 31, per bank confirmation was P 100,000.
C. Outstanding checks at December 31 amounted to P 40,000.
D. An NSF Check for P 2,450 was charged by the ban in December. This check was obtained from a customer on
account.
E. Deposits in transit at the beginning and end of month were P 25,000 and P 35,000, respectively.
F. Exchange and collection charges deducted by the bank in the amount of P 250 for December have not been
recorded. Those charges for the month of November totaled P 200.
G. The reconciliation data as of November 30 showed that the balance per bank statement was P 450,000 and the
outstanding checks totaled P 100,000.
H. In November, the bank charged in error a P 2,600 check to the Jackson Company account. It was corrected by
the bank in December.
I. Total deposits shown by the bank statement for December amounted to P 1,000,000.
J. Following is a summary of cash receipts and disbursements for the month indicated: November – Receipts, P
1,024,700 and Disbursements, P 1,298,800; December – Receipts, P 1,007,400 and Disbursements, P
1,289,900.
Required:
. Prepare proof of cash for December 2020.
. Make the necessary adjusting journal entries at December 31, 2020.
.
What amount should be reported as cash in the statement of financial position as of December 31, 2020?
SOLUTION:
. Proof of cash for December 2020.
JACKSON COMPANY
Proof of Cash

Book Balances, unadjusted
NSF Check in December
Exchange and collection charges:
November
December
Book Balances, unadjusted 0 0 0
Overstated cash payments (Shortage)
Book Balances, adjusted
Bank Balances, unadjusted

Outstanding Balances, adjusted Checks:
November
December
Deposit in transit:
November
December
Erroneous charging in December
Bank Balances, adjusted 0 0 0
. The necessary adjusting journal entries at December 31, 2020.

2020
Dec 31
. The amount that should be reported as cash in the statement of financial position as of December 31,
2020
r 31, 2020, were P 380,200
ation was P 100,000.
ined from a customer on
cember have not been
nt was P 450,000 and the
ount. It was corrected by
ovember – Receipts, P
Disbursements, P
ecember 31, 2020?
Ending
12/31/2020
0
0
n as of December 31,
STRAIGHT PROBLEMS
Problem 14
Preparation of Proof of Cash with Missing Outstanding Checks at end of year
The following information were presented to you by Android Corporation in connection to your audit of its Cash in Bank
account for the month of December 2020:
A. Cash in bank account balances in company’s books: November 30 – P 1,876,500; December 31 – P

1,576,500
B. Bank statement balances: November 30 – P 1,875,000; December 31 – P 2,025,000
C. Bank statement debits during December were P 1,950,000.
D. Company collections not yet deposited to the bank: November 30 – P 300,000; December 31 – P 229,500.
E. Checks issued already credited in company’s accounting books but not yet paid by the bank on November
30 were P 225,000.
F. Bank credit errors: November 30 – P 67,500; December 31 – P 25,500.
G. Bank debit errors: November 30 – P 30,000; December 31 – P 45,000.
H. Bank credit memorandum indicating collection of notes receivable were P 187,500 in November and P
225,000 in December.
I.
Customer’s NSF Check returned by bank were P 165,000 for November and P 112,500 for December.
J. Customer’s check amounting to P 31,500 was already deposited in November but recorded in the
company’s books as P 18,000. This was corrected in December.
Required:
. Prepare Proof of Cash for the month of December 2020.
. Prepare the necessary adjusting journal entries at December 31, 2020.
SOLUTION:
. Proof of Cash for the month of December 2020.
ANDROID CORPORATION
Proof of Cash
For the month of December 2020

Book balances, unadjusted
Customer’s NSF Check:
November
December
Collection of Notes Receivable:
November
December
Book receipt error (P 31,500 - P 18,000)
Book balances, adjusted 0 0 0
Bank balances, unadjusted

Deposit in transit:
November
December
Outstanding checks:
November
December
Bank credit errors:
November
December
Bank debit errors:
November
December
Bank balances, adjusted 0 0 0

2020 (AJE NO. 1)
Dec 31
ur audit of its Cash in Bank
0; December 31 – P
ecember 31 – P 229,500.
by the bank on November
0 in November and P
12,500 for December.

t recorded in the
Ending
12/31/2020
0
0
STRAIGHT PROBLEMS
Problem 15
Reconstruction of Cash receipts
During your audit of the cash receipts book of your client Jackson and Jackson Company you find the entries in that book and in
ledger (both of which are reproduced below) of particular interest.
CASH RECEIPT BOOK - MAY 2020

Accounts
Date Customer Receivables Cash Sales Discount
2020
May 1 Anthony Ford 11,250
2 Orlando Florida 16,000
3 Cash Sales* 2,000
4 Eugene Santos 8,000
5 Ulysses Romano 20,000
10 Anthony Ford 8,000 160
15 Orlando Florida 15,000 300
20 Eugene Santos 12,000 240
20 Cash Sales* 6,000
25 Ulysses Romano 27,000 540
30 Anthony Ford 2,000
Total 168,250 8,000 2,340
*In agreement with cash register tape and numbered cash sales slips.
In the following customers' accounts, all the debit represent sales, except for initial debt in each account, which was the balance
terms were 2% - 10 days, net 30 days.
Anthony Ford
Date Debit Credit Balances
May 1 [2] 11,250 11,250
1 [1] 11,250 0
3 [2] 8,000 8,000
4 12,000 20,000
10 [1] 8,000 12,000
30 2,000 10,000
Orlando Florida
May 1 [1] 16,000 16,000
2 [2] 16,000 0
2 [2] 15,000 15,000
9 [3] 10,000 25,000
15 [2] 15,000 10,000
15 [4] 9,000 19,000
26 [3] 10,000 9,000
30 [4] 9,000 0
Ulysses Romano
May 1 [1] 20,000 20,000
2 [2] 15,000 35,000
2 [2] 27,000 8,000
10 [2] 12000 20,000
25 [2] 20,000 0
Eugene Santos
May 1 [1] 8,000 8,000
4 [1] 8,000 0
15 [2] 12,000 12,000
16 [3] 30,000 42,000
20 [2] 12000 30,000
26 [3] 30,000 0
Required:
. Working papers to compute for the shortage. Use the following format:
. Prepare the necessary adjusting journal entries.
SOLUTION:
JACKSON AND JACKSON COMPANY

Reconstruction of Cash Receipts
For the month of May, 2020
Accounts
2020
May 1 Anthony Ford
2 Orlando Florida
3 Cash Sales*
4 Eugene Santos
5 Ulysses Romano
10 Anthony Ford
15 Orlando Florida
20 Eugene Santos
20 Cash Sales*
25 Ulysses Romano
26 Orlando Florida
26 Eugene Santos
30 Orlando Florida
30 Anthony Ford
Total Per Audit 0 0 0
Less: Total per record
Shortage - Adjustment 0 0 0
. The necessary adjusting journal entries.

2020
Dec 31
u find the entries in that book and in the customers'
Net Cash
11,250
16,000
2,000
8,000
20,000
7,840
14,700
11,660
6,000
26,260
10,000
29,200
9,000
2,000
173,910
ach account, which was the balance due at April 30. The
Net Cash
0
STRAIGHT PROBLEMS
Problem 16
Audit of Cash Receipts and Cash Disbursements Books in Detecting Cash Shortages
The cash receipts and disbursements records of the Believer Corporation for the month of December 2020 are presented below.
audit the cash records. Assume credit terms of 2/10, n/30 for both cash receipts and disbursements.
CASH RECEIPTS
General Accounts
Date Account Invoice Date Ledger Receivable
2020
Dec. 6 Richard Guzman 11/28/2020 110,000
14 Shawn Martos 11/20/2020 170,000
20 Tommy Jones 11/12/2020 190,000
31 Cash Sales 400,000
400,000 450,000
CASH DISBURSEMENTS
General
Date Account Invoice Date Check No. Ledger
2020
Dec. 5 Albert Santos 11/26/2020 501
10 Bruce Sanster 11/30/2020 502
15 Rent 503 20,000
20 Charles Corpuz 11/15/2020 504
31 Payroll 505 120,000
140,000
A. Cancelled checks returned by the bank at december 31 were as follows:

No. 501 - P 245,000 No. 503 - P 20,000
No. 502 - P 137,200 No. 505 - P 210,000
B. The bank statement at December 31, 2020 showed the following:
Balance at December 1 - P 1,023,500
Deposits of P 788,700
Checks of P 612,200
C. There were no outstanding checks at November 30, nor was there undeposited cash at November 30 or at December 31.
D. The cash balance at December 31 according to the ledger account was P 1,148,000.
QUESTION:
Do the record indicate a shortage? If so, what is the amount?
ecember 2020 are presented below. You are asked to
ements.
Sales
Discount Net Cash
2,200 107,800
3,400 166,600
5,700 184,300
400,000
11,300 838,700
Accounts
Payable Discount Net Cash
250,000 5,000 245,000

140,000 2,800 137,200
20,000
52,000 52,000
120,000
532,000 7,800 664,200
t November 30 or at December 31.

STRAIGHT PROBLEMS
Problem 17
Comprehensive Problem and Documentation
You are contacted by PAASA CORPORATION to audit its financial statements for the year 2020. The company starts
its operations on July 1 of the same year. Currently, you are auditing the Cash and Cash Equivalent account with a
balance of P 830,500 as of December 31, 2020. Its analysis is presented below:

Un-deposited Receipts 60,000
Cash in Bank – Metro Bank 550,500
Cash Equivalents 200,000
830,500
. PETTY CASH FUND

Your petty cash count on January 3, 2021 at 9AM in front of the petty cash custodian, Nancy Sicuat, reveals the
following:
Currencies and Coins

Petty Cash Vochers:
Date Nature of Payments Amount
12/27/2020 Supplies purchased from NBS 1,200
12/28/2020 Vale – Juan del Pilar, Clerk 1,000
12/28/2020 Vale – Andres Rizal, Messenger 800
12/29/2020 Postage Stamps 500
2/1/2021 Repair of computer – Toby’s Computer Shop 1,500
Unused Postage Stamps
You also found the following inside the petty cash box:
A. Check number 1150 dated 12/28/2016 payable to Nancy Sicuat issued by PAASA
Corporation.
B. Empty envelope with names of her co-employees which represents contribution for the
birthday cake of Cory Pot, their company accountant
. UNDEPOSITED RECEIPTS
Your cash count of undeposited receipts under the custody of the cashier, Keno Cupit, is P 61,000. Further
inquiry revealed that at 8:55 AM, few minutes prior to your cash count, Nancy Sicuat changed the Petty Cash
Fund P 1,000 peso bill from undeposited receipts of Keno Cupit. The P 1,000 peso bill was included in your count
of undeposited receipts. Unfortunately, Nancy Siquat did not receive the change from Keno since you controlled
already all physical cash in their custody for this morning’s cash count. The resulted to a cash overage of Keno
but a cash shortage of Nancy.
. CASH IN BANK - METROBANK

The cashbook of PAASA Corporation during December 2020 is presented below:
Date Transactions Ref. No. Receipts Payments

2020
Dec. 1 Balance forwarded
5 Payment of account Chk No. 124 20,000
8 Various collections 150,000
15 Payroll Chk No. 127 120,000
16 Bank service charge - November DM No. 887 500
20 Collection – Check No. 1455 5,500
TOTAL 445,500 375,500
You received the Bank Statement for December 2020 on January 2, 2021. It showed the following details:
Date Transactions Ref. No. Withdrawals Deposits

2020
1 Cash deposit 70,000
2 Check payment Chk. # 122 20,000
21 Deposit – Check # 1455 5,500
23 Returned Check # 1455 5,500
23 Service Charges DM # 1250 1,500
24 Redeposit – Check # 1455 5,500
28 Bank loan proceeds CM # 1050 200,000
TOTAL 357,000 591,000
. CASH EQUIVALENTS
The breakdown of cash equivalent is as follows:
Certificate of Time Deposits dated December 1, 2020 (Term: 3 months)

Certificate of Time Deposits dated November 2, 2020 (Term: 6 months)
Total
Required:
. Complete the TOP SCHEDULE or LEAD SHEET for cash below. This is indexed as Working Paper A (WP-
A). In case the net adjustment is a negative amount for each cash item (more cash decrease than cash
increase depending on the accounts), put the amount inside the parenthesis. In case the net adjustment is
zero or none, indicate the figure “0”.
PAASA CORPORATION
Working Paper for Cash and Cash Equivalents
12.31.2020
WP Per Book Net

Reference 12.31.2020 Adjustments
Petty Cash Fund A1
Undeposited Receipts A2
Cash in Bank - Metrobank A3
Cash Equivalents A4
Total Cash and Cash Equivalents 0 0
. Compute the petty cash fund shortage as at December 31, 2020. Show computation below in good form.
Use the solution guide below. This is indexed as Working Paper – A1.
PAASA CORPORATION
Petty Cash Count Sheet
12.31.2020
As accounted for:
Currencies and coins
Petty Cash Vouchers (Total amount)
Replenishment Check
Others, if any (specify)
Total
Less: To be accounbted for
Petty Cash Fund per book
Shortage
. Prepare the adjusting entries in relation to petty cash fund at December 31, 2020. In case AJE is not
necessary, indicate “NO AJE REQUIRED”.
Date Account Names Debit

2020
Dec 31
. Prepare the adjusting entry for Undeposited Receipts at December 31, 2020. In case AJE is not necessary,
indicate “NO AJE REQUIRED”.
2020
Dec 31
. Prepare the Bank Reconciliation at December 31, 2020. Use the solution gudie below which is marked as
Working Paper - A3
PAASA CORPORATION
Bank Reconciliation Statement
12.31.2020
Book
Unadjusted balances at December 31, 2020
Deposit in transit
Outstanding checks
Bank service charges
Adjusted balances at December 31, 2020 0
. Prepare Proof of Cash for the month of December, 2020. Use the solution guide below which is marked
Working Paper - A4
PAASA CORPORATION
Proof of Cash
December
Dec. 1 Receipts Payments
Unadjusted book balance
Bank Service Charges:
November
December
NSF Check returned, redeposited,
and cleared in December
Adjusted book balance 0 0 0
Unadjusted bank balance

Deposit in transit:
November
December
Outstanding checks
November
December
Adjusted bank balance 0 0 0
. Prepare the adjusting entries in relation to Cash in Bank – Metro Bank at December 31, 2020. In case AJE
is not necessary, indicate “NO AJE REQUIRED”.

2020
Dec 31
. Prepare the adjusting entries for Cash Equivalents at December 31, 2020. In case AJE is not necessary,

2020
Dec 31
020. The company starts
uivalent account with a
Nancy Sicuat, reveals the
3,000
5,000
300
11,000
500
is P 61,000. Further
hanged the Petty Cash
was included in your count
Keno since you controlled
a cash overage of Keno
Balance
480,500
460,500
610,500
560,500
530,500
610,500
490,500
490,000
495,500
460,500
540,500
670,500
550,500
he following details:
Balance
470,000
540,000
520,000
510,000
660,000
630,000
710,000
590,000
570,000
540,000
545,500
540,000
538,500
544,000
624,000
824,000
704,000
150,000
50,000
200,000
as Working Paper A (WP-

sh decrease than cash
ase the net adjustment is
Per Audit
12.31.2020
0
To WTB
tion below in good form.
A1
. In case AJE is not
Credit
ase AJE is not necessary,

Credit
elow which is marked as
Bank
A3
below which is marked
Dec. 31
0
A4
ber 31, 2020. In case AJE
Credit
e AJE is not necessary,
Credit
MULTIPLE CHOICE PROBLEMS - CASH (DO-IT-YOURSELF)
MCQ PROBLEM 1
In connection with your audit of Happy-Cee Company of its financial statements for the year ended December 31,
2020, it provided you the following information concerning its cash and cash equivalents and some other items:

Checks received from customers 600,000
Certificate of deposits, term: 12 months 800,000
Petty Cash fund 4,000
Postage Stamps 600
Bank A, checking account balance 2,100,000
Post-dated check, customer 10,000
Money order from customer 15,000
Cash in savings account 100,000
Bank draft from customer 40,000
Utility deposit to gas company, refundable 5,000
Cash advance received from customer 8,000
NSF Check, C Company 20,000
Cash advance to company executive, collectible upon demand 200,000
Bank B, checking account, overdraft 20,000
IOUs from employees 12,000
Question 1:
What amount of cash and cash equivalents should Agenda Company report in its December 31, 2020 statement of financial posi
A. P 2,869,000
B. P 2,874,000
C. P 2,882,000
D. P 2,909,000
MCQ PROBLEM 2
The statement of financial position of Hark Corporation at December 31, 2020 showed a cash balance of P 1,835,000. An
examination of the accounting books disclosed the following:
. From January 1 to 7, 2021, cash sales of P 240,000 from various customers were predated as of December 27 to 29,
2020, and debited to Cash account.
. Customers’ checks with a total of P 90,000 deposited with and retuned by the bank with a mark “NSF” on December 3
2020. These checks were not reflected in the accounting books.
. Two (2) checks of P 56,000 each in payment of liabilities were prepared and recorded on December 29, 2020 but with
by the company treasurer.
. Five (5) post-dated checks from customers with a total amount of P 68,000 are being held by the cashier as part of ca
Based on company’s experience, post-dated checks from these customers are immediately realized into cash.
. Officers’ personal checks with a total amount of P 54,000 were redeemed on December 31, 2020 but returned to cash
on January 3, 2021.
. The cash account includes P 400,000 being reserved for the purchase of office furniture and equipment which will be
delivered soon.
Question 2:
The cash balance to be shown on the December 31, 2020 statement of financial position should be
A. P 1,835,000
B. P 1,383,000
C. P 1,095,000
D. P 1,149,000
MCQ PROBLEM 3
The following table is a summary of the cash receipts and disbursements of Triple K Corporation for the last six months of year 2
Months Receipts Payments

July 204,000 120,000
August 140,000 220,000
September 240,000 136,000
October 344,000 184,000
November 520,000 244,000
December 560,000 360,000
1,928,000 1,336,000
The bank balance on July 1, 2020 was P 400,000 and on December 31, 2020, it is P 1,048,000. No checks were outstanding on
1. Checks outstanding on December 31, 2020 were P 84,000. Undeposited checks on December 31, 2020, are P 48,000 which a
included in the December receipts. Bank deposits for the six months totaled P 1,828,000.
Question 3:
Based on the foregoing information, the cash shortage as of December 31, 2020 will be:
A. P 12,000
B. P 60,000
C. P 0
D. P 132,000
MCQ PROBLEM 4
During the audit of Summer Corporation, the following bank reconciliation for the month of November 30, 2020 was presented to
Bank balance, November 30, 2020 1,804,000

Add: Deposit in transit 415,000
Total 2,219,000
Less:Outstanding checks 630,000
Bank credit recorded in error 2,000 632,000
Book balance, November 30, 2020 1,587,000
During the month of December 2020, total bank credits were P 2,610,000 while total bank debits were P 2,242,000. The Decemb
31, 2020 bank statement balance was P 2,172,000.
All items that were outstanding as of November 30, cleared through the bank in December, including bank erroneous credit. In
addition, P 250,000 in checks were outstanding as of December 31, 2020.
Question 4:
What is the balance of cash per book at December 31, 2020?
A. P 1,922,000
B. P 1,924,000
C. P 2,172,000
D. P 2,422,000
Question 5:
What is the amount of disbursements per books during December 2020?
A. P 2,490,000
B. P 1,860,000
C. P 2,242,000
D. P 1,862,000
MCQ PROBLEM 5
You gathered the following information during your engagement to audit the financial statements of Lei Company for the year end
December 31, 2020:
• The company started its operation on October 2, 2020 with Lei Bernardo investing P 240,000 cash.
• Bank statements for the last quarter of the year are presented to you but they admitted that monthly bank reconciliatio
have not been prepared.
• The bank statement in December 2020 showed an ending balance of P 101,000.
• During your examination of paid checks, you found out that checks totaling P 9,000 were issued by the company in
December 2020 and were presented for payment only in January 2021.
• Cash count of the cashier’s accountability amounted to P 16,400. You were told by the cashier that P 10,000 of these
checks, were cash sales on December 29, 2020 and deposited on January 3, 2021. The balance in currency and coin
represents petty cash fund.
Further review of accounting records, the following additional information were discovered:
1) Accounts Receivable subsidiary ledgers had a total balance of P 140,000 at December 31, 2020.
2) Merchandise inventory at December 31, 2020 amounted to P 60,000.
3) Supplier’s unpaid invoices for merchandise totaled P 120,000.
4) The bank statement in October showed a bank credit for P 200,000, dated October 2, 2020 representing bank loan proceed
120-days discounted bank note. P 140,000 of this loan was paid by check in December 2020.
5) Operating expenses paid during the period totaled P 180,000; while merchandise purchases amounted to P 480,000.
6) The gross profit rate is 25% based on sales.
Question 6:
How much is the adjusted balance per bank as of December 31, 2020?
A. P 92,000
B. P 102,000
C. P 268,000
D. P 271,000
Question7:
How much is the total payment for merchandise purchased in 2020?
A. P 360,000
B. P 380,000
C. P 500,000
D. P 620,000
Question 8:
How much is the cost of goods sold in 2020?
A. P 380,000
B. P 420,000
C. P 500,000
D. P 560,000
Question 9:
How much is the total sales in 2020?
A. P 440,000
B. P 528,000
C. P 560,000
D. P 968,000
Question 10:
How much is the amount of cash shortage as of December 31, 2020?
A. Nil
B. P 71,600
C. P 118,000
D. P 155,000
MCQ PROBLEM 6
A count of the undeposited receipts under the custody of J. Zamora, cashier of Powerful Trading Corporation (PTC), on Septemb
30, 2020 showed the following composition:

Unused documentary stamps 120
Checks:
Payable to Cash dated February 24, 2020, drawn by J. Zamora 2,000
Payable to PTC dated September 20, drawn by BB Company 4,700
Payable to PTC dated September 27, drawn by J. Pineda 3,920
Payable to Maynilad dated September 30, 2020, drawn by PTC 1,800
Petty Cash Vouchers marked paid with attached expense receipts 3,200
Review of accounting books, the ledger balances of undeposited receipts at September 30, 2020 was P 26,940 while the petty ca
fund has an imprest balance of P 10,000.
Question 11:
What was the amount of cash shortage or overage of the cashier as at September 30, 2020?
A. P 480 shortage
B. P 3,220 shortage
C. P 3,320 shortage
D. No shortage/overage
MCQ PROBLEM 7
The following information are related to cash account of Powerful Company for the month of December, 2020:
Cash balance per ledger

Cash balance per bank statement
Proceeds of bank loan discounted on December 1, 2020 for one year at 14%
Debit memo for a checkbook
Undeposited collections on december 31
Deposit of December 2 was incorrectly recorded by bak at P 7,654;
the correct amount is
Erroneous bank debit
Check issued in payment of an account payable had been recorded as P 3,456;
The ledger account for cash was the only cash account kept by the company;
it included a petty cash account comprised of the following items:
Currency and coins 400
Supplies 200
Transportation 300
Postage 100
Erroneous bank credit
Deposit of December 29 omitted from bank statement
Oustanding checks (including certified check of P 3,000)
Question 12:
Based from the foregoing information, how much is the net adjustment to the cash account as of December 31, 202
A. Net debit of P 21,906
B. Net debit of P 21,446
C. Net credit of P 20,696
D. Net credit of P 20,906
MCQ PROBLEM 8
You were approached by your parish priest to determine if there is a cash shortage or overage of the parish finance
of September 30, 2020. He stated that he does not maintain a good internal control over its cash transactions. The
parish records show a balance of cash on hand and in bank of P 100,380. You counted the cash on hand amountin
P 58,240. A pledge of P 800 was collected by the bank and for which a service charge of P 60 did not appear in the
parish records. The statement balance is P 74,000. Outstanding checks amounted to P 27,400.
Question 13:
Based from the foregoing information, there is a cash chortage or cash overage of
A. P 46,600 cash shortage
B. P 46,600 cash overage
C. P 3,720 cash shortage
D. P 3,720 cash overage
MCQ PROBLEM 9
In your audit of the cash account of Kurt Company, you have asceryained the following data relative to the debits pe
books and credit per bank:
Book debits in February 400,000

Bank credits in February 360,000
Credit Memo for interest earned in January
but taken up in the books in February 5,000
Credit Memo for interest earned in February
but taken up in the books in March 6,000
Check from customer in January amounting
to P 40,000 but was taken up in the books as 4,000
Check from customer in February amounting to
P 20,000 but was taken up in the books as 4,000
Check by the company issued to supplier in January
amounting to P 3,000 but was taken up in the books as 30,000
Erroneous bank credit - February 2,500
Erroneous bank charge - January 1,000
Deposit in transit - January 31 50,000
Question 14:
How much is the undeposited collections at the end of the February?
A. P 47,500
B. P 31,500
C. P 15,500
D. P 46,500
MCQ PROBLEM 10
Based on the followig information, the causes of the disvrepancies between the book credits and the bank debits are
ascertained:
Book credits in May 85,800

Bank debits in May 97,650
Check issued on May 29 for P 5,700 erroneously
recorded in the books of the depositor as 7,500
Customer's DAIF check, returned by the bank
of the depositor in May 2,300
April bank service charges, taken up in the books in May 30
Payment of VISA credit card automativally debited by the
bank on May 25, as per Automatic Debit Arrangament
(ADA), but taken up in the books of the depositor in June 3,000
Oustanding checks as of May 31 4,500
Question 15:
How much is the outstandinng checks at the beginning of the period?
A. P 4,500
B. P 5,300
C. P 12,880
D. P 11,880
MCQ PROBLEM 11
Reconciliation of Jordan East Corporation's bank account at May 31 of the current year is:
Book Bank
Unadjusted balances 2,190,000 2,600,000
Deposit in transit 300,000
Bank service charge -10,000
Erroneous bank charge 40,000
Oustanding checks -100,000
Erroneous bank credit -60,000
Credit memo for collection of note 600,000
Adjusted balances 2,780,000 2,780,000
June data are as follows:

Book Bank
Checks recorded 2,500,000 2,200,000
Corrections of erroneous bank cvredit in May 60,000
Deposits recorded 1,800,000 1,600,000
Correction of erroneous bank charge 40,000
Service charges recorded 50,000
Credit Memo for collection by bank 600,000 550,000
NSF Checks retruned with June 30 statement
(wil be redeposited) 100000
Based on the above date and the result of your audit, compute the following:
Question 16:
How much is the total outstanding checks on June 30?
A. P 400,000
B. P 510,000
C. P 190,000
D. P 340,000
Question 17:
How much is the total deposit in transit on June 30?
A. P 510,000
B. P 500,000
C. P 100,000
D. P 90,000
Question 18:
How much is the total adjusted cash receipts in June?
A. P 2,350,000
B. P 2,400,000
C. P 2,190,000
D. P 2,030,000
Question 19:
How much is the total adjusted cash disbursements in June?
A. P 2,650,000
B. P 2,410,000
C. P 2,500,000
D. P 2,350,000
Question 20:
How much is the total adjusted cash balance as of June 30?
A. P 2,480,000
B. P 2,280,000
C. P 2,370,000
D. P 2,490,000
YOURSELF)
ended December 31,

some other items:
h balance of P 1,835,000. An
e predated as of December 27 to 29,
nk with a mark “NSF” on December 31,
rded on December 29, 2020 but withheld
eing held by the cashier as part of cash.

mmediately realized into cash.
cember 31, 2020 but returned to cashier
urniture and equipment which will be

tion for the last six months of year 2020.
00. No checks were outstanding on July

mber 31, 2020, are P 48,000 which are
ovember 30, 2020 was presented to you:
bits were P 2,242,000. The December
ncluding bank erroneous credit. In

ents of Lei Company for the year ended
g P 240,000 cash.
mitted that monthly bank reconciliations
00 were issued by the company in
by the cashier that P 10,000 of these, in

21. The balance in currency and coins,
2020 representing bank loan proceeds for

r 2020.
hases amounted to P 480,000.
ding Corporation (PTC), on September
2020 was P 26,940 while the petty cash
month of December, 2020:
30,840
59,954
25,800
5
3,230
4,567
375
6,345
1,000
6,500
8,774
13,000
account as of December 31, 2020?
or overage of the parish finances as

over its cash transactions. The
nted the cash on hand amounting to
rge of P 60 did not appear in the
to P 27,400.
wing data relative to the debits per

ok credits and the bank debits are
MULTIPLE CHOICE QUESTIONS - THEORY (DO-IT-YOURSELF)
Substantitive Audit Procedures for Cash
. When conducting surprise cash count, the auditor should simultaneously count all cash funds, marketable
securities and other negotiable assets to prevent
A. Time out
B. Defalcation
C. Substitution
D. Misappropriation
. A cash shortage may be conealed by transporting funds from one location to another or by converting negotiab
assets to cash. Because of this, which of the following is vital?
A. Simultaneous confirmations
B. Simultaneous bank reconciliations
C. Simultaneous verifications
D. Simultaneous surprise cash count
. Which of the following misstatements is most likely to be uncovered during an audit of a client’s bank
reconciliation?
A. Duplicate payment of a vendor’s invoice.
B. Billing a customer at a lower price than indicated by company policy.
C. Failure to record a collection of a note receivable by the bank on the client’s behalf.
D. Payment to an employee for more than the hours actually worked.
. Which of the following is the focus of an audit of cash for most companies?
A. General cash account.
B. Payroll cash account.
C Petty cash account.
D. Money market account.
. The audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees
with the general ledger can be tested by which of the following procedures?
A. Performing tests for kiting.
B. Receiving and testing a cutoff bank statement.
C. Footing the outstanding checks list and the list of deposits in transit.
D. Examining the minutes of the board of directors for restrictions on the use of cash.
. Cash is important to auditors primarily because of the potential for:

A. errors.
B fraud.
C. liquidity.
D. expenditures.
. A partial-period bank statement and the related canceled checks, duplicate deposit slips, and other documents
included in bank statements, mailed by the bank directly to the CPA firm’s office, is called:
A. a four-column proof of cash.
B. a year-end bank statement.
C. a cutoff bank statement.
D. a short-period bank statement.
. When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to
perform extended tests of the year-end bank reconciliation. Assuming the client has a October 31 year-end, th
extended tests would not include:
When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to
A. comparing all September 30 reconciling items with canceled checks and other documents in the October
bank statement.
B. comparing all canceled checks and deposit slips in the October bank statement with the October cash
disbursements and receipts records.
C. carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff
statement.
D. determining that all outstanding checks had cleared by the date of the bank cutoff statement.
. Which of the following would normally not be discovered as part of the audit of the bank reconciliation?
A. Failure to bill a customer.
B. Failure to include a deposit in transit on the bank reconciliation.
C. Duplicate payment of a vendor’s invoice.
D. Payment to an employee for more hours than she worked.
. A proof of cash represents:

A. a test of controls and substantive test of transactions.
B. a substantive test of transactions.
C. a substantive test of transactions and test of details of balances.
D. a test of details of balances.
.
Which of the following balance-related audit objectives typically is assessed as having high inherent risk for ca
A. Existence.
B Cutoff.
C. Detail tie-in.
D. Presentation and disclosure.
. The general cash account is considered significant in almost all audits:

A. where the ending balance is material.
B. even when the ending balance is immaterial.
C. except those of not-for-profit organizations.
D. where either the beginning or ending balance is material.
. Because cash is the most desirable asset for people to steal, it has a higher:
A/ control risk.
B. inherent risk.
C. detection risk.
D. liquidity risk.
. Testing the reasonableness of the cash balance at year-end is less important when the year-end bank
reconciliation is verified:
A. on a 100% basis.
B by someone in client’s organization who is independent of the treasurer’s function.
C. by someone in client’s organization who is independent of the controller’s function.
D. by the owner/manager.
.
A major consideration in the audit of the general cash balance is the possibility of fraud. The auditor must exte
his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there a
A. large cash balances at the end of the year.
B. large cash receipts and disbursements during the year.
C. no imprest accounts used for payroll.
D. inadequate internal controls.
. The starting point for the verification of the balance in the general bank account is to obtain:
A. a bank reconciliation from the client.
B. the client’s cash account from the general ledger.
C. a cutoff bank statement directly from the bank.
D. the client’s year-end bank statement and reconcile it.
. In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details
balance procedures?
A. Trace the book balance on the reconciliation to the general ledger.
B. Trace outstanding checks to subsequent period bank statements.
C. Perform a four-column proof of cash.
D. Review financial statements to make sure that material savings accounts and certificates of deposit are d
. The audit procedure which requires the auditor to record the last check number used on the last day of the yea
and subsequently trace to the outstanding checks and the cash disbursements records is performed to satisfy
audit objective of:
A. detail tie-in.
B. existence.
C. completeness.
D. cutoff.
. The direct receipt of a confirmation from every bank with which the client does business is:
A. required by auditing standards for every audit.
B. not necessary unless material fraud is suspected.
C. typically done but not required by auditing standards.
D. necessary for every audit except when there are an unusually large number of active accounts.
. The reason for testing the client’s bank reconciliation is to verify whether the client’s recorded bank balance is
same amount as the actual cash in bank, except for deposits in transit, checks outstanding, and other reconcil
items. The information needed to complete the tests of the reconciliation are provided by the:
A. client’s records and ledgers for the year under audit.
B. cutoff bank statement.
C. client’s records and ledgers for the subsequent year.
D. canceled checks for the year under audit.
T-YOURSELF)
sh
nt all cash funds, marketable
another or by converting negotiable
audit of a client’s bank
iation, foots correctly and agrees
eposit slips, and other documents

ce, is called:
ly misstated, it is appropriate to
nt has a October 31 year-end, these
other documents in the October
tement with the October cash
the use of the bank cutoff
ank cutoff statement.
f the bank reconciliation?
s having high inherent risk for cash?
when the year-end bank
y of fraud. The auditor must extend

y of a material fraud when there are:
nt is to obtain:
hich of the following test of details of
and certificates of deposit are disclosed separately.
er used on the last day of the year

s records is performed to satisfy the
s business is:
ber of active accounts.
lient’s recorded bank balance is the

s outstanding, and other reconciling
provided by the:
MULTIPLE CHOICE QUESTIONS - THEORYS (DO-IT-YOURSELF)
Internal Control for Cash
. Two clerks sharing the same cash register is a violation of which internal control principle?
A. Insure assets
B. Establish responsibilities
C. Maintain adequate controls
D. Apply technological controls
. The reconciliation of the cash register tape with the cash in the register is an example of
A. other controls.
B. independent internal verification.
C. establishment of responsibility.
D. segregation of duties
. Which of the following is not an internal control procedure for cash?

A. Payments should be made with cash.
B. There should be limited access to cash.
C. The amount of cash on hand should be kept to a minimum.
D. Cash should be deposited daily.
. At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares the cash count with
recorded sales for the day, and (3) makes notations of differences on a special report that is forwarded, along
the cash, to the accounting department. This procedure is
A. acceptable practice, adhering to internal control principles
B. designed to provide adequate internal control over cash
C. unacceptable practice, not following internal control principles
D. follows the broad principle of internal control of insuring assets
. There are three employees in the accounting department: payroll clerk, accounts payable clerk, and accounts
receivable clerk. Which one of these employees should not make the daily deposit?
A. payroll clerk
B. account payable clerk
C. accounts receivable clerk
D. none of them
. There are several elements to internal controls. Which of the following would not address the issue of having c
transactions reported in the accounting records?
A. One employee would have access to the cash register.
B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a
prenumbered form.
C. Ask customers to report to a manager if they do not receive a sales receipt or invoice.
D. The person behind the cash register should also be responsible for making price adjustments.
. Which one of the following documents is not needed to process a payment to a vendor?
A. vendor invoice
B. packing slip
C. check request
D. purchase order
. Which of the following assets require the strongest of internal controls?
A. inventory
B. credit cards
C. computer equipment
D. cash
. For internal control purposes, which of the following individuals should be given preference in the distribution o
payroll checks?
A. Bookkeeper
B. Payroll clerk
C. Receptionist
D. Cashier
. Which of the following would mandate proper internal control over the cash payroll function?
A. The payroll clerk should fill the envelopes with cash and write computation of the net wages.
B. Unclaimed pay envelopes should be retained by the paymaster.
C. Each employee should be asked to sign a receipt.
D. A separate checking account for the payroll be maintained.
. For the purpose of proper accounting control, postdated checks remitted by customers should be
A. Restrictively endorsed
B. Returned to customer
C. Recorded as a cash sale
D. Placed in the joint custody of two officers.
. Which of the following is an effective internal accounting control over cash payments?
A. Signed checks should be mailed or delivered under the supervision of the check signor.
B. Spoiled checks which have been voiced should be disposed of immediately.
C. Checks should be prepared only by persons responsible for cash receipts and cash disbursements.
D. A check sigining machine with two signatures should be utilized.
. Which of the followijg is a standard internal accounting control for cash disbursements?
A. Checks should be signed by the controller and at least one other employee of the company.
B. Checks should be sequentially numbered and the numerical sequence should be accounted for by the pe
preparing bank reconciliations.
C. Checks amd supporting documents should be marked "PAID" immediately after the check is returned with
bank statement.
D. Checks should be sent directly to the payee by the employee whp prepares documents that authorize che
preparation.
. Internal control over cash receipts is weakened when an employee who receives customer mail receipts also
A. records credits to individual accounts receivable.
B. prepares initial cash receipts records.
C. prepares bank deposit slips for all mail receipts.
D. maintains a petty cash fund.
. Contact with banks for the purpose of opening company bank accounts should normally be the responsibility o
corporate
A. Board of Directors
B Treasurer
C. Controller
D. Executive Committee
. As compared to manual processing, electronic processing of cash transactions generally makes kiting:
A. impossible to accomplish.
B. easier to accomplish
C. more difficult to accomplish
D. neither easier, nor more difficult to accomplish.
. An example of an internal weakness is to assign to a department supervisor the responsibility of

A. Reviewing and approving time reports for subordinate employees
B. Authorizing payroll checks for terminated employees.
C. Initiating requests for salary adjustments for subordinate employees.
D. Distributing payroll checks to subordinate employees.
. Operating control over the check signature plate normally should be the responsibility of the
A. Secretary
B. Chief Accountant
C. Vice President for Finance
D. Treasurer
. The mailing of disbursement checks and remittance advices should be controlled by the employee who
A. Signed the checks last
B. Approved the vouchers payment
C. Matched the receiving reportsm ourchase orders and vendors' invoices
D. Verified the mathematical accuracy of the vochers and remittance advices.
. A company receives numerous checks in the mail every day. Which of the following would be a weak internal
control procedure for this company?
A. All employees are required to take vacations.
B. The person opening the mail prepares a duplicate deposit slip.
C. The person opening the mail records the cash receipts to the customer account receivables.
D. The person who makes the bank deposit does not perform the bank account reconciliation.
T-YOURSELF)
rol principle?
2) compares the cash count with the

al report that is forwarded, along with
nts payable clerk, and accounts

posit?
not address the issue of having cash
hould be reconciled on a
pt or invoice.
ng price adjustments.
en preference in the distribution of
ayroll function?
on of the net wages.
ustomers should be
e check signor.
s and cash disbursements.
ee of the company.
hould be accounted for by the person
ly after the check is returned with the
res documents that authorize check
ves customer mail receipts also
d normally be the responsibility of the

s generally makes kiting:
he responsibility of
nsibility of the
led by the employee who
owing would be a weak internal
ccount receivables.
ount reconciliation.
MODULE 3.01
Audit of Cash and Related Accounts
ANSWER KEY
STRAIGHT PROBLEMS
Problem 1
Audit of Cash Composition
(Adapted from )
During your audit of the accounting books of Ginebra Corporation, its general ledger balance for Cash at December 31,
2020, showed a balance of P 810,000 which includes the following:

Time deposit that cannot be pre-terminated until April 1, 2021 55,000
Customer NSF Check 2,000
Deposit in foreign bank - unavailable 90,000
Overdraft in another bank -20,000
Time deposit in a closed loan association 45,000
Cash advances to officers 32,000
Sinking fund cash 150,000
Pension Fund 220,000
Customer check dated January 31, 2021 59,000
Customer check outstanding for 18 months 10,000
810,000
Additional information:
a) The petty cash fund consists of P 600 in cash, P 400 in IOUs, and P 1,000 receipts for expenses.
b) Check of P 50,000 in payment of accounts was recorded in December 31, 2020 but mailed to creditors on
January 15, 2021.
c) Check of P 30,000 dated January 31, 2021 in payment of accounts was recorded and mailed on December 31,
2020.
d) The company uses the calendar year.
e) The cash receipts journal was held open until January 15, 2021 during which time P 100,000 was collected on
accounts and recorded on December 31, 2020.
Required:
What is the correct “Cash” balance for the statement of financial position as at December 31, 2020?
SOLUTION:
Petty Cash Fund 600
Undelivered check to creditor until January 15, 2021 50,000
Post-dated check to creditors – January 31, 2021 30,000
Collection of 2021 recorded in 2020 -100,000
Adjusted cash balance at December 31, 2020 145,600
ALTERNATIVE SOLUTION:
Unadjusted cash balance, December 31, 2020 810,000
Adjustments:
Time deposit that cannot be pre-terminated until April 1, 2021 -55,000
Customer NSF Check -2,000
Deposit in foreign bank - unavailable -90,000
Overdraft in another bank 20,000
Time deposit in a closed loan association -45,000
Cash advances to officers -32,000
Sinking fund cash -150,000
Pension Fund -220,000
Petty Cash Fund (P 400 IOUs + P 1,000 Expenses) -1,400
Customer check dated January 31, 2021 -59,000
Customer check outstanding for 18 months -10,000
Undelivered check to creditor until January 15, 2021 50,000
Post-dated check – January 31, 2021 (to creditors) 30,000
Collection of 2021 recorded in 2020 -100,000 -664,400
Adjusted cash balance, December 31, 2020 145,600
Problem 2
Audit of Cash and Cash Equivalents Composition
(Adapted from )
During your audit of Baguio Corporation for the year 2020, the following were presented to you in connection to your
audit of its Cash and Cash Equivalent account:
Petty Cash Fund which consists of the following:

Various expense receipts 10,000
Employee advances 2,000
Treasury Bills as follows:

Purchased on December 31, 2020, due on March 1, 2021 400,000
Purchased on January 31, 2020, due on January 31, 2021 600,000
Cash in Bank accounts:

Checking Account - Banco de Oro -200,000
Checking Account – RCBC (Payroll Account) 1,000,000
US$ Savings Accounts – Metrobank (Restricted) Peso Equivalent 2,000,000
Various Checks:
Employees check dated January 10, 2021 8,000
Others:
Postage Stamps 2,000
IOU from company president’s brother 20,000
Credit memorandum from supplier for purchase return 40,000
Listed stocks held as temporary investments 30,000
Required:
Compute the amount of Cash and Cash Equivalents that should be reported by Baguio Corporation on its December
SOLUTION:
Petty Cash Fund – currencies and coins 8,000
Treasury Bills purchased on 12/31/2020, due on March 1, 2021 400,000
Cash in Bank Accounts:
Checking Account – RCBC (Payroll Account) 1,000,000 5,000,000
Cash and Cash Equivalents, 12/31/2020 6,168,000
Problem 3
Cash Count and Adjusting Journal Entries
(Adapted from )
As the representative of Bautista, Chavez and Company, CPAs, you are auditing the books and records of Sagada
Corporation as of December 31, 2020.
On January 4, 2021, at 9:05AM, you began counting the petty cash fund and other cash which might be on hand with
the cashier, Miss Ana Marie Querol, and you found bank notes, coins, checks, vouchers, and so forth as disclosed
below:
BILLS: Two (2) one hundreds, five (5) fifties, five (5) twenties
COINS: P 5.00 – 50 pieces; P 1.00 – 109 pieces; P 0.25 - 6 rolls and 47 loose (50 pieces to a roll)
CHECKS:
Maker Date Payee
Sagada Corporation (BDO) 12/28/2020 PLDT
Sagada Corporation (BDO) 12/22/2020 Aezelle Servidad
VALE SLIPS:
Maker Date Amount
Arthur Galicio, Messenger 12/27/2020 200
John Carl Bautista, Accountant 12/28/2020 500
Remuel Bernardo, Clerk 12/28/2020 300
UNREPLENISHED PETTY CASH VOUCHERS:

Maker PCV No. Date Transactions
Safety First Freight Services 820 12/26/2020 Freight-in
Cesario Cadao, Janitor 821 12/26/2020 Salary advances
National Book Store 822 12/27/2020 Various office supplies
Arthur Galicio, Messenger 823 12/28/2020 Miscellaneous expenses
Philippine Post 824 12/29/2020 Supplies
Pandayan Book Shop, Inc. 825 4/1/2021 Supplies
The petty cash fund balance per general ledger has an imprest balance of P 12,500. Last replenishment was dated
December 23, 2020.
Further audit disclosed that cash sales of January 3, 2021 amounted to P 15,000 as shown by the sales records while
cash receipts book and the bank deposit slip on January 4, 2021 showed that only P 14,000 was deposited in the bank.
On the other hand, inside the petty cash box are the following:
a) Pay envelope of Aiko Villavicencio, P 4,000, opened; Cleofe Santiago, P 4,500, sealed.
b) Envelope containing employee contributions for the wedding of co-employee, P 3,000, opened;
c) Postage stamos, 20 pieces at P 10 each.
Required:
. Compound adjsuting entry to correct petty cash fimd account as of December 31, 2020.
SOLUTION:
Accounted for:
Currency and Coins (Schedule 1) 995.75
Checks (Schedule 2) 13,000.00
IOUs of Employees (200 + 500 + 300) 1,000.00
Unreplenished Vouchers (750+500+225+204+250+167) 2,096.00
Less: Accountabilities:
PCF Imprest balance 12,500
Cash Sales, un-deposited in January, 2021
(P 15,000 per sales book – P 14,000 per bank deposit) 1,000
Unclaimed salaries (Opened envelope) – A. Villavicencio 4,000
Cash Shortage
Schedule 1 - Currencies and Coins:

Bills : P 100 x 2 pcs. 200.00
P 50 x 5 pcs. 250.00
P 20 x 5 pcs. 100.00
Coins : P 5.00 x 50 pcs. 250.00
P 1.00 x 109 pcs. 109.00
P 0.25 x [(50 pieces per roll x 6 rolls) + 47 pieces] 86.75
Total 995.75
Schedule 2 - Checks
Maker Date Payee
Total amount of Checks
Currencies and coins 995.75

Checks issued by Ana Marie Querol, Cashier 500.00
Replenishment Check for Petty Cash Fund 12,000.00
Total Cash 13,495.75
Included in currencies and coins:
Less: Cash sales 1,000.00
Unclaimed salaries 4,000.00 5,000.00
Petty Cash Fund in SFP, 12/31/2020 8,495.75
. Compound adjsuting entry to correct petty cash fimd account as of December 31, 2020.

2020
Dec 31 Cash (1,000 + 4,500) 5,500.00
Advances to Employees (200 + 500 + 300 + 500) 1,500.00
Supplies (225 + 250) 475.00
Freight-in 750.00
Miscellaneous Expense 204.00
Supplies Expense 50.00
Receivable from Cashier 408.25
Salaries Payable (4,000 + 4,500) 9,500.00
Sales 1,000.00
Petty Cash Fund 1,612.75
Problem 4
Computation of Correct Cash Shortage
(Adapted from )
The following cash count sheet and additional information pertain to the accounts of Marvelous Company for the year
ended December 31, 2020.
Name of Fund : Indeposited Collections and Petty Cash Fund

Cash Count Date : December 29, 2020

10/12/2020 Postage stamps 200
12/15/2020 Transportation - Messenger 50
Undeposited collections per ledger 9,800 11,800
Cash shortage -300
Amount paid by the cashier taken from his wallet 300
During your audit, you gathered the following information:

a) There was an unclaimed pay envelope which had been opened with contents of P 5,000 which were removed.
The face of the envelope bore a notation “unclaimed”.
b)
During the year, the average monthly disbursements from the petty cash fund amount to P 1,100. The last
replenishment was made on December 16, 2020 covering the period from December 1 to 15, 2020.
c) It is the company’s policy to deposit intact all collections on a daily basis.
Required:
Compute the corect amount of shortage.
SOLUTION:
Undeposited collections per ledger 9,800
Unclaimed wages 5,000 16,800
Cash shortage -10,650
To be accounted for:
Undeposited collections 9,800
Unclaimed wages 5,000
Total accountability 16,900
As accounted for as follows:
Currencies – details omitted 4,600
Unreplenished petty cash vouchers* 550
Unused postage stamps 100 6,250
Shortage 10,650
Problem 5
Computation of Petty Cash Fund Balance and Shortages or Overages
(Adapted from Various Sources)
Presented below are a series of unrelated situations. Answer the following questions relating to each of the
independent situations as requested.
Situation 1:
A count of the undeposited receipts under the custody of Nina Cao, cashier of Tahiti Corporation, on September 30,
2020, showed the following composition of the total per count of P 20,310:

Checks:
Date Payee Drawee
9/24/2020 Cash Nina Cao 1,000
9/30/2020 Maynilad Micronesia Corporation 900
Question:
Assuming the cashier’s accountability to be P 18,470, what was the amount of overage/shortage on September 30,
2020?
SOLUTION:
Checks:
Date Payee Drawee
Total per count (as accounted for) 18,230
Less: Accountability (to be accounted for)
Undeposited receipts balance per record 18,470
Undeposited receipts shortage -240
Situation 2:
A count of the undeposited receipts under the custody of Tina Cot, the cashier of Kenya Corporation, at the close of
business September 30, 2020, showed the following composition:

Checks:
Date Payee Drawee
9/27/2020 PLDT Kenya Corporation 750
Question:
Assuming the cashier’s accountability to be P 6,500, what is the amount of the cash shortage on September 30, 2020?
SOLUTION:
Checks:
Date Payee Drawee
Total per count (as accounbted for) 6,060
Situation 3:
Your count of the undeposited receipts under the custody of the cashier of Abaca Company on September 30, 2020
showed the following:

Checks:
Date Payee Drawee
9/30/2020 Meralco Abaca Company 1,050
Question:
Assume the cashier’s accountability to be P 8,500, what was the amount of cash overage/shortage on September 30,
2020?
SOLUTION:
Checks:
Date Payee Drawee
Total per count (as accounted for) 7,740
Situation 4:
A count of the petty cash fund showed its composition as follows:
Coins and currency

Paid Vouchers:
Transportation 600
Gasoline 400
Office Supplies 500
Postage Stamps 300
Due from employees 1,200
Manager’s check returned by bank marked “NSF”
Check drawn by the company to the order of the petty cash custodian
Question:
What amount of the petty cash fund for statement of financial position purposes?
SOLUTION:
Check drawn by the company to the order of the petty cash custodian 2,700
Amount of petty cash fund for statement of financial position purposes 6,000
Problem 6
Computation of Cash Accountability
(Adapted from CPA Examination Reviewer in Auditing Practice)
In your year-end audit of MH Del Pilar Corporation, the cashier’s accountability as at December 31, 2019 was P 24,000.
The summary of selected transactions in connection to cash account were as follows:
Credit sales during the year in which collection was 80% 1,400,000
Accounts Receivable proven uncollectible and written off 10,000
Depreciation of property and equipment 60,000
Accrued income tax 20,000
Cash payment in settlement of bank borrowings (BPI) 80,000
Ordinary Shares Subscription Receivable 600,000
Required:
Compute the cash accountability of the cashier at December 31, 2020.
SOLUTION:
CASH
Receipts Payments
Credit sales collection (P 1,400,000 x 80%) 1,120,000
Cash payment in settlement of bank borrowings (BDO) 80,000
Collection from Subscription of Ordinary Shares (Schedule 1) 1,200,000
Total 2,544,000 2,480,000
2,544,000 2,544,000
Schedule 1 - Collection from Subscription of Ordinary Shares

Less: Ordinary Shares Subscription Receivable 600,000
Collection from Subscription of Ordinary Shares 1,200,000
Problem 7
Cash Related Transactions and Computation of Cash Balance
(Adapted from CPA Examination Reviewer in Auditing Practice)
During your cash audit of Survivor Company for the year 2020, the account balances of certain accounts are presented
to you as follows:
1/1/2020 12/31/2020
Cash 1,200,000 ?
Accounts Receivable 500,000 600,000
Accounts Payables 750,000 700,000
Related transactions during the year 2020 are as follows:

. Credit sales, P 5,000,000
. Cash sales, P 200,000
. Sales returns and allowances, P 20,000
. Accounts written off, P 180,000.
. Credit purchases, P 6,000,000
. Cash purchases, P 500,000
. Bank borrowings, P 1,000,000
. Partial payment of bank borrowings, P 400,000
. Issuance of shares of stocks, P 10,000,000
. Operating expenses payments, P 3,100,000
. Dividend payments, P 800,000
. Acquisition of land, P 5,200,000
Required:
Compute the following:
A. Collectionof accounts receivable during the year 2020
B. Payments of accounts payable during the year 2020
C. Total cash receipts during the year 2020
D. Total cash disbursements during the year 2020
E. Cash balance at December 31, 2020
SOLUTION:
Cash Cash Accounts
Receipts Payments Receivable
January 1, 2020 balances 500,000
. Credit sales 5,000,000
. Cash sales 200,000
. Sales returns and allowances -20,000
. Accounts written off -180,000
. Credit purchases
. Cash purchases 500,000
. Bank borrowings 1,000,000
. Partial payment of bank borrowings 400,000
. Issuance of shares of stocks 10,000,000
. Operating expenses payments 3,100,000
. Dividend payments 800,000
. Acquisition of land 5,200,000
Balances 11,200,000 10,000,000 5,300,000
Less: December 31, 2020 balances (given) 600,000
A. Collection of accounts receivable in 2020 4,700,000 4,700,000
B. Payment of accounts payable in 2020 6,050,000
C. Total Cash receipts during 2020 15,900,000
D. Total Cash disbursements during 2020 16,050,000
Add: January 1, 2020 balances 1,200,000
Total balances during the year 2020 17,100,000 16,050,000
E. Cash balance, December 31, 2020 1,050,000
17,100,000 17,100,000
Problem 8
Preparation of Bank Reconciliation and Proof of Cash
(Adapted from )
In the audit of Luzon Manufacturing Company for the year 2020, the bank statement and cash receipts book were
made available to you.
Date Check No. Transactions Withdrawal Deposit Balance

2020
Dec. 2 86,520
2 10,800 97,320
2 660 2,400 94,920
2 661 1,040 93,880
4 663 1,850 92,030
4 4,000 96,030
4 642 300 95,730
4 638 1,280 94,450
6 14,600 109,050
6 640 400 104,650
10 636 800 103,850
12 24,800 128,640
13 666 6,200 122,440
13 669 2,400 120,040
13 662 1,200 118,840
17 664 200 118,640
17 8,200 126,840
17 667 600 126,240
20 665 Certified check 10,000 116,240
20 2,000 118,240
23 670 1,600 116,640
24 672 8,000 108,640
24 668 4,000 104,640
24 10,000 114,640
24 675 Manager's check 13,000 101,640
24 677 400 101,240
24 671 3,000 98,240
24 673 10,000 88,240
26 Debit memo 10,000 82,220
26 3,600 85,820
26 674 2,000 83,820
26 676 1,800 82,020
26 678 7,000 75,020
27 16,000 91,004
27 687 10,400 80,604
27 682 600 80,004
NOTES:
The Debit Memo of P 10,000 represents promissory note of the company deducted on the current account.
Date Deposit Check No. Check Amt.

2020
Dec. 2 660 2,400
2 661 1,040
2 662 1,200
4 4,000
4 663 1,850
4 664 200
5 665 10,000
6 14,600
6 666 6,200
6 667 600
6 668 4,000
10 669 2,400
12 24,800
12 670 1,600
12 671 3,000
12 672 8,000
16 673 100,000
17 8,000
17 674 2,000
20 2,000 675 13,000
20 676 1,800
21 677 400
22 678 7,000
22 679 1,200
22 680 1,200
23 10,000
23 681 2,000
23 682 600
25 683 8,000
26 3,600
26 684 4,000
26 685 3,000
26 686 6,000
27 16,000
27 687 10,400
27 6,400
27 1,000
Required:
. Bank Reconciliation as of December 31, 2020. Show tick marks with legend in bank statement and in cash
books.
SOLUTION:

Bank Reconciliation
Bank Book
Unadjusted balances 86,520 94,540
Adjustments:
Deposit in Transit 10,800
Outstanding Checks:
No. 636 800
638 1,280
640 400
642 300 -2,780
Adjusted balances 94,540 94,540
. Bank Reconciliation as of December 31, 2020. Show tick marks with legend in bank statement and in
cash books.

Bank Reconciliation
Bank Book
Adjustments:
Deposit in Transit 6,400
Outstanding Checks:
No. 679 1,200
680 1,200
681 2,000
683 8,000
684 4,000
685 3,000
686 6,000
688 1,000 -26,400
Understatement of cash receipts of December 17 200
Service Charges -46
Payment of promissory note charged by bank -10,000

2020 (AJE NO. 1)
Dec 31 Cash 200
Accounts Receivable 200
Understatement of cash receipts of
December 17, 2020.
(AJE NO. 2)
31 Bank Service Charges 46
Cash 46
Various bank charges during 2020.
31 Notes Payable 10,000

Cash 10,000
Payment of noites due to bank.
JACKSON COMPANY
Proof of Cash

Book Balances, unadjusted 94,540 89,400 114,090
Reconciling items:
Understatement of cash receipts
On December 17, 2018 (AJE 1) 200
Service Charges (AJE 2) 46
Payment of promissory note due
To bank (AJE 3) 10,000
NSF check returned by bank on
December and redeposited on
the same month and cleared 4,000 4,000
Book Balance, adjusted 94,540 93,600 128,136
Bank Balance, unadjusted 86,520 98,000 104,516

Reconciling items:
Deposit in transit – December 1 10,800 -10,800
Deposit in transit – December 31 6,400
Outstanding checks – December 1 -2,780 -2,780

Outstanding checks – December 31 26,400
Bank Balance, adjusted 94,540 93,600 128,136
Problem 9
Preparation of Bank Reconciliation from Erroneous Check Register
(Adapted from )

2020
1 Deposit 26,167 32,317
1 Check No. 179 250 32,567
4 Check No. 180 10,673 21,898
27 Deposit 11,774 33,672
29 Check No, 181 13,217 20,490
The following is from Cebu’s bank statement for April:

2020
3 Check No. 179 250 3,700
3 Deposit 4,350 8,050
5 Check 180 10,673 -2,623
5 Loan 8,150 5,527
5 Deposit 26,417 31,944
20 NSF 1000 30,944
20 SC 600 30,344
30 INT 82 30,426
Legend:
NSF - No Sufficient Fund Check
SC - Service Charge
INT - Interest Income
Assume that errors or discrepancies you find are Cebu Company's, not the banks.
Required:
Prepare Bank Reconciliation as at April 30, 2020.
SOLUTION:
CEBU COMPANY
Bank Reconciliation
As at April 30, 2020
Book Bank
Book balance - overstated -539
Outstanding checks:
No. 178 -2,150
No. 181 -13,217
Understated book receipts 300
Proceeds of bank loan 8,150
NSF Check -1,000
Service Charge -600
Interest income 82
Notes: Book balance at April 30, 2020 is overstated by P 539 (Error P 20,490 – Correct P 19,951)
Problem 10
Preparation of Corrected Bank Reconciliation
(Adapted from )
The Grandioso Company had poor internal control over its cash transactions. Facts about its cash position at
November 30, 2020 were as follows:
The cash book showed a balance of P 189,016.20, which included undeposited receipts. A credit of P 1,000 on the
bank’s records did not appear on the books of the company. The balance per bank statement was P 155,500.
Outstanding checks were: # 62 for P 1,162.50, #183 for P 1,500, #284 for P 2,532.50, #8621 for P 1,907.10, #8623 for
P 2,068, and #8632 for P 1,452.80.
The cashier abstracted all undeposited receipts in excess of P 37,944.10 and prepared the following reconciliations:
Balance per books, November 30, 2020 189,016.20

Add: Outstanding Checks
No. 8321 1,907.10
No. 8623 2,068.00
No. 8632 1,452.80 4,427.90
Total 193,444.10
Less: Undeposited Receipts 37,944.10
Balance per bank, November 30, 2020 155,500.00
Less:Unrecorded credit 1,000.00
True cash, November 30, 2020 154,500.00
Required:
Prepare a supporting schedule showing how much the cashier abstracted.
SOLUTION:
GRANDIOSO COMPANY
Bank Reconciliation
As of November 30, 2020
Bank Book
Balances, unadjusted 155,500.00 189,016.20
Adjustments:
Deposit in Transit 37,944.10
Outstanding Checks:
No. 62 1162.5
No. 183 1500
No. 284 2532.5
No. 8621 1907.1
No. 8623 2068
No. 8632 1452.8 -10,622.90
Unrecorded credits 1,000.00
Total balances 182,821.20 190,016.20
Discrepancy (Shortage) 7,195.00
Balance per bank, adjusted 190,016.20 190,016.20
Breakdown of cash shortage:

Cash misappropriation covered up by:
. Outstanding checks not reported
Check No. 62 1,162.50
Check No. 183 1,500.00
Check No. 284 2,532.50 5,195.00
. Unrecorded credit in cash book 1,000.00
. Understatement of outstandinhg checks total 1,000.00
Total 7,195.00
Problem 11
Verification of Outstanding Checks from Corrected Bank Reconciliation
(Adapted from )
In connection with your audit of the Morayta Corporation at December 31, 2020, you were given a bank reconciliation
by a company employee which shows:
Balance per bank 152,670

Add: Deposit in Transit 189,280
Total 341,950
Less: Check Outstanding 213,780
Balance per books 128,170
As part of your verification, you obtain the bank statement and cancelled checks from the bank on January 15, 2021.
Checks issued from January 1 to 15, 2021 per books were P 112,410. Checks returned by the bank on January 15
amounted to P 292,190 (Checks paid by bank from January 1 to 15). Of the checks outstanding December 31, 2020, P
48,000 were not returned by the bank with the January 15th statement, and of those issued per books in January,
2021. P 36,000 were not returned.
Required:
Prepare a schedule showing the above data in proper form.
SOLUTION:
MORAYTA CORPORATION
Bank Reconciliation
Bank Book
Balances, unadjusted 152,670.00 128,170.00
Adjustments:
Deposit in Transit 189,280.00
Outstanding Checks (See Schedule 1) -263,780.00
Total balances 78,170.00 128,170.00
Discrepancy (Shortage) 50,000.00
Balance per bank, adjusted 128,170.00 128,170.00
Schedule 1 - Computation of Outstanding Checks at December 31, 2020

Checks paid by the bank from January 1-15, 2021
Less: Checks issued from January 1-15, 2021 and
paid by the bank from January 1-15, 2021:
Issued from January 1 - 15, 2021 112,410
Less:
Checks outstanding asNot paid by bank
of December 31, as of January
2020 and paid5,by
2021
bank 36,000
from January 1-15, 2021

Add: Outstanding checks as of December 31, 2020 not yet returned
by bank with January 15th statement
Correct outstanding checks, December 31, 2021
Problem 12
Computation of Cash Accountability and Bank Reconciliation
(Adapted from )
The Bonbon Company was organized on January 3, 2020 with a share capital fully paid up of P 5,000,000. At
December 31, 2020, the general ledger of said company showed the following accounts and balances:
Merchandise Inventory 2,150,000

Land 800,000
Building 1,200,000
Delivery Equipment 850,000
Accounts Receivable - trade 620,000
Notes Payable - trade 500,000
Notes Payable - PNB 200,000
Mortgage Payable - DBP 500,000
Sales 1,855,000
Salaries 680,000
Insurance 27,000
Repairs and Maintenance 46,644
Your examination of the bank statement for December 31, 2020 disclosed the following information:
Bank balance, December 31, 2020 403,756

Bank Charges 850
Checks not returned by the bank:
October 16, 2020 – Check No. 1784 7,875
October 23, 2020 – Check No. 1829 12,000
Your examination revealed the following information: Cash received on December 31, 2020 was deposited on January
2, 2021 amounted to P 62,500. The cost of merchandise sold was 65% of sale.
Questions:
SOLUTION:
Total sales during the years (assumed on credit sales) 1,855,000

Less: Accounts Receivable – trade, 12/31/2020 620,000
Total collections from sales during the year 1,235,000

Proceeds from share capital issuance 5,000,000
Collections from sales (See Number 1) 1,235,000
Proceeds of notes payable – PNB (loan) 200,000
Proceeds of mortgage loan - DBP 500,000
Total cash receipts during the year 6,935,000
Sales during the year 1,855,000

Multiply by cost rate 65%
Cost of sales 1,205,750
Add: Merchandise inventory, 12/31/2020 2,150,000
Total Purchases during the year (assumed on credit) 3,355,750
Less: Unpaid at end of year 2020:
Notes Payable - trade 500,000 840,000
Total payment of purchases during the year 2,515,750
Total payment of purchases during the year (See No. 3) 2,515,750

Acquisition cost of PPE:
Land 800,000
Building 1,200,000
Delivery Equipment 850,000 3,200,000
Payment of Salaries 680,000
Insurance 27,000
Repairs and Maintenance 46,644 3,999,644
Total cash disbursements during the year 6,515,394
Total cash receipts during the year (See No. 2) 6,935,000

Less: Total cash disbursements during the year (See No. 4) 6,515,394
Cash accountability at 12/31/2020 419,606
Bank Book
Unadjusted balances, 12/31/2020 419,606 403,756
Bank Charges -850
Deposit in transit, 12/31/2020 62,500
Outstanding Checks, 12/31/2020
October 16, 2020 – Check No. 1784 -7,875
October 23, 2020 – Check No. 1829 -12,000
November 4, 2020 – Check No. 1971 -8,725
November 17, 2020 – Check No. 1978 -11,050
December 7, 2020 – Check No. 2319 -6,500
December 11, 2020 – Check No. 2346 -1,350
Adjusted balances, 12/31/2020 418,756 418,756
Problem 13
Computation of Cash Shortage Using Proof of Cash
(Adapted from )
You have been assigned to the audit of Jackson Company. You acquired the following information:
A. Balances of cash account per the general ledger at November 30, 2020 and December 31, 2020, were P 380,200
and P 97,700, respectively.
B.
Balance on checking accounts at the Banco De Oro at December 31, per bank confirmation was P 100,000.
C. Outstanding checks at December 31 amounted to P 40,000.
D. An NSF Check for P 2,450 was charged by the ban in December. This check was obtained from a customer on
account.
E. Deposits in transit at the beginning and end of month were P 25,000 and P 35,000, respectively.
F. Exchange and collection charges deducted by the bank in the amount of P 250 for December have not been
recorded. Those charges for the month of November totaled P 200.
G. The reconciliation data as of November 30 showed that the balance per bank statement was P 450,000 and the
outstanding checks totaled P 100,000.
H. In November, the bank charged in error a P 2,600 check to the Jackson Company account. It was corrected by
the bank in December.
I. Total deposits shown by the bank statement for December amounted to P 1,000,000.
J. Following is a summary of cash receipts and disbursements for the month indicated: November – Receipts, P
1,024,700 and Disbursements, P 1,298,800; December – Receipts, P 1,007,400 and Disbursements, P
1,289,900.
Required:
. Prepare proof of cash for December 2020.
. Make the necessary adjusting journal entries at December 31, 2020.
.
What amount should be reported as cash in the statement of financial position as of December 31, 2020?
SOLUTION:
. Proof of cash for December 2020.
JACKSON COMPANY
Proof of Cash

Book Balances, unadjusted 380,200 1,007,400 1,289,900
NSF Check in December 2,450
Exchange and collection charges:
November -200 -200
December 250
Book Balances, unadjusted 380,000 1,007,400 1,292,400
Overstated cash payments (Shortage) 2,400 2,400
Book Balances, adjusted 377,600 1,007,400 1,290,000
Bank Balances, unadjusted 450,000 1,000,000 1,350,000

Outstanding Balances, adjusted Checks:
November -100,000 -100,000
December 40,000
Deposit in transit:
November 25,000 -25,000
December 35,000
Erroneous charging in December 2,600 -2,600
Bank Balances, adjusted 377,600 1,007,400 1,290,000

2020 (AJE NO. 1)
Dec 31 Accounts Receivable 2,450.00
Cash 2,450.00
NSF Check in December, 2020.
(AJE NO. 2)
31 Bank Service Charges 250.00
Cash 250.00
Exchange and collection charges in
December, 2020.
. The amount that should be reported as cash in the statement of financial position as of December 31,
2020
The amount that should be reported as cash in the statement of financial position as of December 31, 2020 would
be P 95,000.
Problem 14
Preparation of Proof of Cash with Missing Outstanding Checks at end of year
(Adapted from )
The following information were presented to you by Android Corporation in connection to your audit of its Cash in Bank
account for the month of December 2020:
A. Cash in bank account balances in company’s books: November 30 – P 1,876,500; December 31 – P

1,576,500
B. Bank statement balances: November 30 – P 1,875,000; December 31 – P 2,025,000
C. Bank statement debits during December were P 1,950,000.
D. Company collections not yet deposited to the bank: November 30 – P 300,000; December 31 – P 229,500.
E. Checks issued already credited in company’s accounting books but not yet paid by the bank on November
30 were P 225,000.
F. Bank credit errors: November 30 – P 67,500; December 31 – P 25,500.
G. Bank debit errors: November 30 – P 30,000; December 31 – P 45,000.
H. Bank credit memorandum indicating collection of notes receivable were P 187,500 in November and P
225,000 in December.
I.
Customer’s NSF Check returned by bank were P 165,000 for November and P 112,500 for December.
J. Customer’s check amounting to P 31,500 was already deposited in November but recorded in the
company’s books as P 18,000. This was corrected in December.
Required:
. Prepare Proof of Cash for the month of December 2020.
. Prepare the necessary adjusting journal entries at December 31, 2020.
SOLUTION:
. Proof of Cash for the month of December 2020.
ANDROID CORPORATION
Proof of Cash

Book balances, unadjusted 1,876,500 1,950,000 2,250,000
Customer’s NSF Check:
November -165,000 -165,000
December 112,500
Collection of Notes Receivable:
November 187,500 -187,500
December 225,000
Book receipt error (P 31,500 - P 18,000) 13,500 -13,500
Book balances, adjusted 1,912,500 1,974,000 2,197,500
Bank balances, unadjusted 1,875,000 2,100,000 1,950,000

Deposit in transit:
November 300,000 -300,000
December 229,500
Outstanding checks:
November -225,000 -225,000
December 765,000
Bank credit errors:
November -67,500 -67,500
December -25,500
Bank debit errors:
November 30,000 -30,000
December -225,000
Bank balances, adjusted 1,912,500 1,974,000 2,197,500
Supporting computations:
. Bank Receipts, unadjusted = P 2,025,000+ P 1,950,000 - P 1,875,000 = P 2,100,000
. Bank Receipts, adjusted = P 2,100,000 – P 300,000 + P 229,000 – P 25,500 – P 30,000 = P 1,974,000
. Bank December 31, adjusted = Book December 31, adjusted of P 1,689,00
. Bank Disbursements, adjusted = P 1,912,500 + P 1,974,00 – P 1,689,000 = P 2,197,500
.
Outstanding checks, December 31 = P 2,197,500 + P 225,000 + P 67,500 + P 225,000 – P 1,950,000 = P 765,000
. Book Receipts, adjusted = Bank Receipts adjusted of P 1,974,000
. Book Receipts unadjusted = P 1,974,000 + P 13,500 - P 225,000 + P 187,500 = P 1,950,000
. Book disbursements, unadjusted = P 1,876,500 + P 1,950,000 – P 1,576,000 = P
. Book disbursements, adjusted = P 2,250,000 – P 165,000 + P 112,500 = P 2,197,500

2020 (AJE NO. 1)
Dec 31 Accounts Receivable 112,500
Cash 112,500
Customers' NSF Check in December.
(AJE NO. 2)
31 Cash 225,000
Notes Receivable 225,000
Collection of Notes Receivable in
December, 2020.
Problem 15
Reconstruction of Cash receipts
(Adapted from Reviewer in Auditing Practice by Petronilo Santos)
During your audit of the cash receipts book of your client Jackson and Jackson Company you find the entries in that book and in
ledger (both of which are reproduced below) of particular interest.
CASH RECEIPT BOOK - MAY 2020

Accounts
2020
3 Cash Sales* 2,000
Total 168,250 8,000 2,340
*In agreement with cash register tape and numbered cash sales slips.
In the following customers' accounts, all the debit represent sales, except for initial debt in each account, which was the balance
terms were 2% - 10 days, net 30 days.
Anthony Ford
May 1 [2] 11,250 11,250
1 [1] 11,250 0
3 [2] 8,000 8,000
4 12,000 20,000
10 [1] 8,000 12,000
30 2,000 10,000
Orlando Florida
May 1 [1] 16,000 16,000
2 [2] 16,000 0
2 [2] 15,000 15,000
9 [3] 10,000 25,000
15 [2] 15,000 10,000
15 [4] 9,000 19,000
26 [3] 10,000 9,000
30 [4] 9,000 0
Ulysses Romano
May 1 [1] 20,000 20,000
2 [2] 15,000 35,000
2 [2] 27,000 8,000
10 [2] 12000 20,000
25 [2] 20,000 0
Eugene Santos
May 1 [1] 8,000 8,000
4 [1] 8,000 0
15 [2] 12,000 12,000
16 [3] 30,000 42,000
20 [2] 12000 30,000
26 [3] 30,000 0
Required:
. Prepare the necessary adjusting journal entries.
SOLUTION:
JACKSON AND JACKSON COMPANY

Reconstruction of Cash Receipts
For the month of May, 2020
Accounts
2020
3 Cash Sales* 2,000

Total Per Audit 168,250 8,000 1,000
Less: Total per record 168,250 8,000 2,340
Shortage - Adjustment 0 0 -1,340
Cover-up of Shortage:
Recording of fictitious sales discounts:
(a) Orlando Florida 300
(b) Ulysses Romano 540 840
Understatement of net cash receipts:
(a) Eugene Santos on 5/20
(P 11,760 - P 11,660) 100
(b) Eugene Santos on 5/26
(P 29,400 - P 29,200) 200
(c) Ulysses Romano on 5/20
(P 26,460 - P 26,260) 200 500
Total shortage 1,340
Supporting Analysis:
Anthony Ford
May 1 [2] 11,250 11,250
1 [1] 11,250 0 Correctly recorded in CRB
3 [2] 8,000 8,000
4 12,000 20,000
10 [1] 8,000 12,000 Correctly recorded in CRB with 2% discount
30 2,000 10,000 Correctly recorded in CRB
Orlando Florida
May 1 [1] 16,000 16,000
2 [2] 15,000 15,000
9 [3] 10,000 25,000
15 [2] 15,000 10,000 Erroneously recorded in CRB; must be at gross amo
15 [4] 9,000 19,000
26 [3] 10,000 9,000 Correctly recorded in CRB
Ulysses Romano
May 1 [1] 20,000 20,000
2 [2] 15,000 35,000
5 [1] 20,000 15,000 Correctly recorded in CRB
10 [2] 12,000 27,000
25 [2] 27,000 0 Erroneously recorded in CRB; must be at gross amo
Eugene Santos
May 1 [1] 8,000 8,000
4 [1] 8,000 0
15 [2] 12,000 12,000
16 [3] 30,000 42,000
20 [2] 12,000 30,000 Correctly recorded
26 [3] 30,000 0 Correctly recorded
. The necessary adjusting journal entries.

2020 (AJE NO. 1)
Dec 31 Cash 1,340
Sales Discount 1,340
Overstatement of sales discount
(AJE NO. 2)
31 Receivable from Custodian 1,340
Cash 1,340
Cash shortage.
Problem 16
Audit of Cash Receipts and Cash Disbursements Books in Detecting Cash Shortages
(Adapted from Reviewer in Auditing Practice by Petronilo Santos)
The cash receipts and disbursements records of the Believer Corporation for the month of December 2020 are presented below.
audit the cash records. Assume credit terms of 2/10, n/30 for both cash receipts and disbursements.
CASH RECEIPTS
General Accounts
2020
14 Shawn Martos 11/20/2020 170,000
20 Tommy Jones 11/12/2020 190,000
400,000 450,000
CASH DISBURSEMENTS
General
2020
10 Bruce Sanster 11/30/2020 502
15 Rent 503 20,000
31 Payroll 505 120,000
140,000
A. Cancelled checks returned by the bank at december 31 were as follows:

No. 501 - P 245,000 No. 503 - P 20,000
No. 502 - P 137,200 No. 505 - P 210,000
B. The bank statement at December 31, 2020 showed the following:
Deposits of P 788,700
Checks of P 612,200
C. There were no outstanding checks at November 30, nor was there undeposited cash at November 30 or at December 31.
D. The cash balance at December 31 according to the ledger account was P 1,148,000.
QUESTION:
Do the record indicate a shortage? If so, what is the amount?
SOLUTION:
Details of shortage in December (See proof of cash - book records):
Unaccounted receipts 75,300
Unrecorded and unsupported disbursements 90,000
Total 165,300
Cover up for shortage:

Unrecorded November receipts 50,000
Underfooting December cash receipts:
Understated Accounts Receivable 20,000
Overstated sales discount 5,300 25,300
Underfooting of December cash disbursements:
Overstated Accounts Payable 90,000
Total 165,300
SUPPORTING COMPUTATION AND ANALYSIS:
BELIEVER CORPORATION
Proof of Cash

Bank balances, unadjusted 1,023,500 788,700 612,200
Outstanding checks - December 52,000
Bank Balances, adjusted 1,023,500 788,700 664,200
Book balances, unadjusted 973,500 838,700 664,200

Underfooting cash receipts:
Understated Accounts Receivable 20,000
Overstated sales discount 5,300
Underfooting of cash disbursements:
Overstated Accounts Payable -90,000
Corrected balances 973,500 864,000 574,200
DISCREPANCIES 50,000 -75,300 90,000
Unrecorded November receipts

(P 1,023,500 bank - P 973,500 book) 50,000
Unaccounted December receipts -75,300
(P 788,700 - P 864,000)
Unrecorded and unsupported disbursements 90,000
(P 664,200 - P 574,200)
Total 50,000 -75,300 90,000
SUPPORTING ANALYSIS:
CASH RECEIPTS
General Accounts
2020
14 Shawn Martos 11/20/2020 170,000
20 Tommy Jones 11/12/2020 190,000
Total Per audit 400,000 470,000
Less: Per records 400,000 450,000
Adjustments 0 20,000
Under
CASH DISBURSEMENTS
General
2020
10 Bruce Sanster 11/30/2020 502
15 Rent 503 20,000
31 Payroll 505 210,000
Total Per audit 230,000
Less: Per records 140,000
Adjustments 90,000
Problem 17
Comprehensive Problem and Documentation
(Adapted from )
You are contacted by PAASA CORPORATION to audit its financial statements for the year 2020. The company starts
its operations on July 1 of the same year. Currently, you are auditing the Cash and Cash Equivalent account with a
balance of P 830,500 as of December 31, 2020. Its analysis is presented below:

Un-deposited Receipts 60,000
Cash in Bank – Metro Bank 550,500
Cash Equivalents 200,000
830,500
. PETTY CASH FUND

Your petty cash count on January 3, 2021 at 9AM in front of the petty cash custodian, Nancy Sicuat, reveals the
following:
Currencies and Coins

Petty Cash Vochers:
Date Nature of Payments Amount
12/27/2020 Supplies purchased from NBS 1,200
12/28/2020 Vale – Juan del Pilar, Clerk 1,000
12/28/2020 Vale – Andres Rizal, Messenger 800
12/29/2020 Postage Stamps 500
2/1/2021 Repair of computer – Toby’s Computer Shop 1,500
Unused Postage Stamps
You also found the following inside the petty cash box:
A. Check number 1150 dated 12/28/2016 payable to Nancy Sicuat issued by PAASA
Corporation.
B. Empty envelope with names of her co-employees which represents contribution for the
birthday cake of Cory Pot, their company accountant
. UNDEPOSITED RECEIPTS
Your cash count of undeposited receipts under the custody of the cashier, Keno Cupit, is P 61,000. Further
inquiry revealed that at 8:55 AM, few minutes prior to your cash count, Nancy Sicuat changed the Petty Cash
Fund P 1,000 peso bill from undeposited receipts of Keno Cupit. The P 1,000 peso bill was included in your count
of undeposited receipts. Unfortunately, Nancy Siquat did not receive the change from Keno since you controlled
already all physical cash in their custody for this morning’s cash count. The resulted to a cash overage of Keno
but a cash shortage of Nancy.
. CASH IN BANK - METROBANK

The cashbook of PAASA Corporation during December 2020 is presented below:
Date Transactions Ref. No. Receipts Payments

2020
16 Bank service charge - November DM No. 887 500
20 Collection – Check No. 1455 5,500
TOTAL 445,500 375,500
You received the Bank Statement for December 2020 on January 2, 2021. It showed the following details:
Date Transactions Ref. No. Withdrawals Deposits

2020
21 Deposit – Check # 1455 5,500
23 Returned Check # 1455 5,500
23 Service Charges DM # 1250 1,500
24 Redeposit – Check # 1455 5,500
28 Bank loan proceeds CM # 1050 200,000
TOTAL 357,000 591,000
. CASH EQUIVALENTS
The breakdown of cash equivalent is as follows:
Certificate of Time Deposits dated December 1, 2020 (Term: 3 months)
Certificate of Time Deposits dated November 2, 2020 (Term: 6 months)
Total
Required:
. Complete the TOP SCHEDULE or LEAD SHEET for cash below. This is indexed as Working Paper A (WP-
A). In case the net adjustment is a negative amount for each cash item (more cash decrease than cash
increase depending on the accounts), put the amount inside the parenthesis. In case the net adjustment is
zero or none, indicate the figure “0”.
PAASA CORPORATION
Working Paper for Cash and Cash Equivalents
12.31.2020
WP Per Book Net

Reference 12.31.2020 Adjustments
Petty Cash Fund A1 20,000 -4,500
Undeposited Receipts A2 60,000 1,000
Cash in Bank - Metrobank A3 550,500 198,500
Cash Equivalents A4 200,000 -50,000
Total Cash and Cash Equivalents 830,500 145,000
. Compute the petty cash fund shortage as at December 31, 2020. Show computation below in good form.
Use the solution guide below. This is indexed as Working Paper – A1.
PAASA CORPORATION
Petty Cash Count Sheet
12.31.2020
As accounted for:
Petty Cash Vouchers (Total amount)
Replenishment Check
Others, if any (specify)
Total
Less: To be accounbted for
Petty Cash Fund per book
Shortage
. Prepare the adjusting entries in relation to petty cash fund at December 31, 2020. In case AJE is not
necessary, indicate “NO AJE REQUIRED”.

2020 (AJE NO. 1)
Dec 31 Supplies (P 1,200 + P 500) 1,700
Advances to employees (P 1,000 + P 800) 1,800
Petty Cash Fund
Unrecorded PCF Disbursements.
(AJE NO. 2)
31 Receivable from Cashier 1,000
Petty Cash Fund
Petty Cash shortage.
(AJE NO. 3)
31 Supplies Expense 200
Supplies
Used postage stamps.
. Prepare the adjusting entry for Undeposited Receipts at December 31, 2020. In case AJE is not necessary,

2020 (AJE NO. 4)
Dec 31 Undeposited Receipts 1,700
Other Income
Overage in undeposited receipts
. Prepare the Bank Reconciliation at December 31, 2020. Use the solution gudie below which is marked as
Working Paper - A3
PAASA CORPORATION
Bank Reconciliation Statement
12.31.2020
Book
Unadjusted balances at December 31, 2020 550,500
Deposit in transit
Outstanding checks
Bank service charges -1,500
Adjusted balances at December 31, 2020 749,000
. Prepare Proof of Cash for the month of December, 2020. Use the solution guide below which is marked
Working Paper - A4
PAASA CORPORATION
Proof of Cash
December
Dec. 1 Receipts Payments
Unadjusted book balance 480,500 445,500 375,500
Bank Service Charges:
November -500 -500
December 1,500
NSF Check returned, redeposited,
and cleared in December 5,500 5,500
Adjusted book balance 480,000 651,000 382,000
Unadjusted bank balance 470,000 591,000 357,000

Deposit in transit:
November 70,000 -70,000
December 130,000
Outstanding checks
November -60,000 -60,000
December 85,000
Adjusted bank balance 480,000 651,000 382,000
. Prepare the adjusting entries in relation to Cash in Bank – Metro Bank at December 31, 2020. In case AJE
is not necessary, indicate “NO AJE REQUIRED”.

2020 (AJE NO. 5)
Dec 31 Bank Sservice Charge 1,500
Cash in Bank
Service Charge for December, 2020.
(AJE NO. 6)
31 Cash in Bank 200,000
Loan Payable
Proceeds of bank loan in December, 2020.
. Prepare the adjusting entries for Cash Equivalents at December 31, 2020. In case AJE is not necessary,

2020 (AJE NO. 7)
Dec 31 Short-Term Investment 50,000
Cash Equivalents
Reclassification of short-term investment.
MULTIPLE CHOICE PROBLEMS - CASH (DO-IT-YOURSELF)

MCQ PROBLEM 1
In connection with your audit of Happy-Cee Company of its financial statements for the year ended December 31,
2020, it provided you the following information concerning its cash and cash equivalents and some other items:

Certificate of deposits, term: 12 months 800,000
Postage Stamps 600
Post-dated check, customer 10,000
Utility deposit to gas company, refundable 5,000
Cash advance received from customer 8,000
NSF Check, C Company 20,000
Cash advance to company executive, collectible upon demand 200,000
Bank B, checking account, overdraft 20,000
IOUs from employees 12,000
Question 1:
What amount of cash and cash equivalents should Agenda Company report in its December 31, 2020 statement of financial posi
A. P 2,869,000
B. P 2,874,000
C. P 2,882,000
D. P 2,909,000
SOLUTION:
Cash and Cash Equivalents at December 31, 2020 2,909,000
MCQ PROBLEM 2
The statement of financial position of Hark Corporation at December 31, 2020 showed a cash balance of P 1,835,000. An
examination of the accounting books disclosed the following:
. From January 1 to 7, 2021, cash sales of P 240,000 from various customers were predated as of December 27 to 29,
2020, and debited to Cash account.
. Customers’ checks with a total of P 90,000 deposited with and retuned by the bank with a mark “NSF” on December 3
2020. These checks were not reflected in the accounting books.
. Two (2) checks of P 56,000 each in payment of liabilities were prepared and recorded on December 29, 2020 but with
by the company treasurer.
. Five (5) post-dated checks from customers with a total amount of P 68,000 are being held by the cashier as part of ca
Based on company’s experience, post-dated checks from these customers are immediately realized into cash.
. Officers’ personal checks with a total amount of P 54,000 were redeemed on December 31, 2020 but returned to cash
on January 3, 2021.
. The cash account includes P 400,000 being reserved for the purchase of office furniture and equipment which will be
delivered soon.
The cash account includes P 400,000 being reserved for the purchase of office furniture and equipment which will be
delivered soon.
Question 2:
The cash balance to be shown on the December 31, 2020 statement of financial position should be
A. P 1,835,000
B. P 1,383,000
C. P 1,095,000
D. P 1,149,000
SOLUTION:
Cash balance, December 31, 2020, per SFP 1,835,000
Cash sales of 2021 recorded as cash sales of 2020 -240,000
Customers’ NSF Checks -90,000
Undelivered checks (P 56,000 each x 2 checks) 112,000
Customers’ post-dated checks -68,000
Cash reserved for acquisition of office furniture and equipment -400,000
Cash balance at December 31, 2020 in SFP 1,149,000
MCQ PROBLEM 3
The following table is a summary of the cash receipts and disbursements of Triple K Corporation for the last six months of year 2
Months Receipts Payments

July 204,000 120,000
August 140,000 220,000
September 240,000 136,000
October 344,000 184,000
November 520,000 244,000
December 560,000 360,000
1,928,000 1,336,000
The bank balance on July 1, 2020 was P 400,000 and on December 31, 2020, it is P 1,048,000. No checks were outstanding on
1. Checks outstanding on December 31, 2020 were P 84,000. Undeposited checks on December 31, 2020, are P 48,000 which a
included in the December receipts. Bank deposits for the six months totaled P 1,828,000.
Question 3:
Based on the foregoing information, the cash shortage as of December 31, 2020 will be:
A. P 12,000
B. P 60,000
C. P 0
D. P 132,000
SOLUTION:
Book Bank
Unadjusted balances, 12/31/2020 1,144,000 1,048,000
Outstanding checks, 12/31/2020 -84,000
Deposit in transit, 12/31/2020 48,000
Total 1,144,000 1,012,000
Shortage 132,000
Balance 1,144,000 1,144,000
Supporting computation:
Cash balance per book, July 1, 2020 (reconciled balance) 400,000
Cash Receipts from July to December (correct total) 2,008,000
Cash Disbursements from July to December (correct total) -1,264,000
Cash balance per book, December 31, 2020 (correct balance) 1,144,000
MCQ PROBLEM 4
During the audit of Summer Corporation, the following bank reconciliation for the month of November 30, 2020 was presented to
Bank balance, November 30, 2020 1,804,000

Add: Deposit in transit 415,000
Total 2,219,000
Less:Outstanding checks 630,000
Bank credit recorded in error 2,000 632,000
Book balance, November 30, 2020 1,587,000
During the month of December 2020, total bank credits were P 2,610,000 while total bank debits were P 2,242,000. The Decemb
31, 2020 bank statement balance was P 2,172,000.
All items that were outstanding as of November 30, cleared through the bank in December, including bank erroneous credit. In
addition, P 250,000 in checks were outstanding as of December 31, 2020.
Question 4:
What is the balance of cash per book at December 31, 2020?
A. P 1,922,000
B. P 1,924,000
C. P 2,172,000
D. P 2,422,000
SOLUTION:
The method to be used is bank to book method.
No reconciling items for the books during December.
Only outstanding check is the reconciling item for the bank during December,
Bank balance, November 30, 2020 (given) 1,804,000

Total bank credits during December (Receipts) 2,610,000
Total bank debits during December (Disbursements) -2,242,000
Bank balance, December 31, 2020, unadjusted (also given) 2,172,000
Less: Outstanding checks, December 250,000
Book balance, unadjusted, December 31, 2020 1,922,000
Question 5:
What is the amount of disbursements per books during December 2020?
A. P 2,490,000
B. P 1,860,000
C. P 2,242,000
D. P 1,862,000
SOLUTION:
Bank total debits during December 2,242,000
Outstanding checks of November cleared in December -630,000
Bank credit error in November corrected in December -2,000
Checks disbursed by book in December and paid by bank in December 1,610,000
Outstanding checks at December 31 250,000
Amount of disbursements per books during December 2020 1,860,000
MCQ PROBLEM 5
You gathered the following information during your engagement to audit the financial statements of Lei Company for the year end
December 31, 2020:
• The company started its operation on October 2, 2020 with Lei Bernardo investing P 240,000 cash.
• Bank statements for the last quarter of the year are presented to you but they admitted that monthly bank reconciliatio
have not been prepared.
• The bank statement in December 2020 showed an ending balance of P 101,000.
• During your examination of paid checks, you found out that checks totaling P 9,000 were issued by the company in
December 2020 and were presented for payment only in January 2021.
• Cash count of the cashier’s accountability amounted to P 16,400. You were told by the cashier that P 10,000 of these
checks, were cash sales on December 29, 2020 and deposited on January 3, 2021. The balance in currency and coin
represents petty cash fund.
Further review of accounting records, the following additional information were discovered:
1) Accounts Receivable subsidiary ledgers had a total balance of P 140,000 at December 31, 2020.
2) Merchandise inventory at December 31, 2020 amounted to P 60,000.
3) Supplier’s unpaid invoices for merchandise totaled P 120,000.
4) The bank statement in October showed a bank credit for P 200,000, dated October 2, 2020 representing bank loan proceed
120-days discounted bank note. P 140,000 of this loan was paid by check in December 2020.
5) Operating expenses paid during the period totaled P 180,000; while merchandise purchases amounted to P 480,000.
6) The gross profit rate is 25% based on sales.
Question 6:
How much is the adjusted balance per bank as of December 31, 2020?
A. P 92,000
B. P 102,000
C. P 268,000
D. P 271,000
SOLUTION:
Book Bank
October 2, 2020 cash investment 240,000
October bank credit – Bank Loan Proceeds 200,000
December payment of bank loan by check -140,000
Operating Expenses paid -180,000
Collection of customers’ accounts 420,000
Payment of suppliers’ accounts (See No. 8) -360,000
Unadjusted book balance, 12/31/2020 180,000
Unadjusted bank balance, 12/31/2020 101,000

Outstanding checks - December -9,000
Deposit in transit- December 10,000
Adjusted bank balance,12/31/2020 102,000
Computation of cash receipts from customers:

Accounts Receivable, December 31, 2020 -140,000
Credit sales (See No.9) 560,000
Accounts Receivable, October 2, 2020 0
Collection of customers’ accounts 420,000
Question7:
How much is the total payment for merchandise purchased in 2020?
A. P 360,000
B. P 380,000
C. P 500,000
D. P 620,000
SOLUTION:
Accounts Payable, 12/31/2020 -120,000
Purchase of merchandise 480,000
Accounts Payable, 10/2/2020 0
Payment of suppliers’ accounts 360,000
Question 8:
How much is the cost of goods sold in 2020?
A. P 380,000
B. P 420,000
C. P 500,000
D. P 560,000
SOLUTION:
Merchandise inventory,12/31/2020 -60,000
Purchases of merchandise 480,000
Merchandise inventory, 10/2/2020 0
Cost of goods sold 420,000
Question 9:
How much is the total sales in 2020?
A. P 440,000
B. P 528,000
C. P 560,000
D. P 968,000
SOLUTION:
Cost of goods sold 420,000
Divide by gross cost rate (100% - 25%) 75%
Credit sales 560,000
Question 10:
How much is the amount of cash shortage as of December 31, 2020?
A. Nil
B. P 71,600
C. P 118,000
D. P 155,000
SOLUTION:
Book Bank
Unadjusted balances, 12/31/2018 180,000 101,000
Outstanding checks - December -9,000
Deposit in transit- December 10,000
Petty Cash Fund (P 16,400 – P 10,000) -6,400
Adjusted bank balance,12/31/2018 173,600 102,000
Cash shortage 71,600
Total 173,600 173,600
MCQ PROBLEM 6

Unused documentary stamps 120
Checks:
Payable to Cash dated February 24, 2020, drawn by J. Zamora 2,000
Payable to PTC dated September 20, drawn by BB Company 4,700
Payable to PTC dated September 27, drawn by J. Pineda 3,920
Payable to Maynilad dated September 30, 2020, drawn by PTC 1,800
Petty Cash Vouchers marked paid with attached expense receipts 3,200
Review of accounting books, the ledger balances of undeposited receipts at September 30, 2020 was P 26,940 while the petty ca
fund has an imprest balance of P 10,000.
Question 11:
What was the amount of cash shortage or overage of the cashier as at September 30, 2020?
A. P 480 shortage
B. P 3,220 shortage
C. P 3,320 shortage
D. No shortage/overage
SOLUTION:
As accounted for:
Unused postage stamps (disbursed from PCF or UDC without receipts)
Unused documentary stamps (disbursed from PCF or UDC without receipts)
Petty Cash Vouchers marked paid with attached expense receipts
Check payable to PTC dated September 20, drawn by BB Company
Check payable to PTC dated September 27, drawn by J. Pineda
Total
Less: To be accounted for:
Undeposited Receipts per ledger 26,940
Petty cash fund imprest balance per ledger 10,000
Cash shortage of the cashier at September 30, 2020
MCQ PROBLEM 7
The following information are related to cash account of Powerful Company for the month of December, 2020:
Cash balance per ledger

Cash balance per bank statement
Proceeds of bank loan discounted on December 1, 2020 for one year at 14%
Debit memo for a checkbook
Undeposited collections on december 31
Deposit of December 2 was incorrectly recorded by bak at P 7,654;
Erroneous bank debit
Check issued in payment of an account payable had been recorded as P 3,456;
The ledger account for cash was the only cash account kept by the company;
it included a petty cash account comprised of the following items:
Currency and coins 400
Supplies 200
Transportation 300
Postage 100
Erroneous bank credit
Deposit of December 29 omitted from bank statement
Oustanding checks (including certified check of P 3,000)
Question 12:
Based from the foregoing information, how much is the net adjustment to the cash account as of December 31, 202
A. Net debit of P 21,906
B. Net debit of P 21,446
C. Net credit of P 20,696
D. Net credit of P 20,906
SOLUTION:
Bank balance:
Undeposited collections - December 31 59,954
Overstatement of Bank Credit for Deposit 3,230
(P 7,654 - P 4,567) -3,087
Erroneous bank debit 375
December 29 deposited not credited by bank 8,774
Outstanding checks net of credited checks -10,000
Adjusted bank balance 52,746
Less: Balance per ledger/book 30,840
Net debit adjustments 21,906
MCQ PROBLEM 8
You were approached by your parish priest to determine if there is a cash shortage or overage of the parish finance
of September 30, 2020. He stated that he does not maintain a good internal control over its cash transactions. The
parish records show a balance of cash on hand and in bank of P 100,380. You counted the cash on hand amountin
P 58,240. A pledge of P 800 was collected by the bank and for which a service charge of P 60 did not appear in the
parish records. The statement balance is P 74,000. Outstanding checks amounted to P 27,400.
Question 13:
Based from the foregoing information, there is a cash chortage or cash overage of
A. P 46,600 cash shortage
B. P 46,600 cash overage
C. P 3,720 cash shortage
D. P 3,720 cash overage
SOLUTION:
Book Bank
Undeposited cash on hand 58,240
Pledge collected 800
Bank charge for collection -60
Outstanding checks -27,400
Corrected balances 101,120 104,840
Overage 3,720
MCQ PROBLEM 9
In your audit of the cash account of Kurt Company, you have asceryained the following data relative to the debits pe
books and credit per bank:

but taken up in the books in February 5,000
to P 40,000 but was taken up in the books as 4,000
P 20,000 but was taken up in the books as 4,000
amounting to P 3,000 but was taken up in the books as 30,000
Erroneous bank credit - February 2,500
Erroneous bank charge - January 1,000
Deposit in transit - January 31 50,000
Question 14:
How much is the undeposited collections at the end of the February?
A. P 47,500
B. P 31,500
C. P 15,500
D. P 46,500
SOLUTION:
Deposit in transit, January 31 50,000
Book debits for February 400,000
but taken up in the books in February -5,000
January errors corrected in February:
to P 40,000 recorded as P 4,000 -36,000
Check by the company issued in January
amounting to P 3,000 recorded as P 30,000 -27,000
February errors corrected in March:
P 20,000 recorded as P 4,000 16,000 348,000
Total 398,000
Less: Bank credits for February 360,000
but taken up in the books in March -6,000
Erroneous bank credit - February -2,500
Erroneous bank charge - January corrected
in February -1,000 350,500
Undeposited Collections at the end of February 47,500
but taken up in the books in February -5,000
to P 40,000 but was taken up in the books as
P 4,000; corrected in February
(P 40,000 - P 4,000) -36,000
P 20,000 but was taken up in the books as
P 4,000. (P 20,000 - P 4,000) 16,000
amounting to P 3,000 but was taken up in the books as
P 30,000; corrected in February
(P 30,000 - P 3,000) -27,000 354,000
Less: Bank credit in February

Erroneous bank credit - February -2,500
Erroneous bank charge - January corrected
in February -1,000
Deposit in transit - January 31 -50,000 306,500
Undeposited Collections at the end of February 47,500
MCQ PROBLEM 10
Based on the followig information, the causes of the disvrepancies between the book credits and the bank debits are
ascertained:
Book credits in May 85,800

Bank debits in May 97,650
recorded in the books of the depositor as 7,500
of the depositor in May 2,300
April bank service charges, taken up in the books in May 30
(ADA), but taken up in the books of the depositor in June 3,000
Oustanding checks as of May 31 4,500
Question 15:
How much is the outstandinng checks at the beginning of the period?
A. P 4,500
B. P 5,300
C. P 12,880
D. P 11,880
SOLUTION:
Outstanding checks, May 1 (squeeze figure) 12,880
Book credits for May 85,800
recorded in the books of the depositor as P 7,500 -1,800
April bank service charges, taken up in the books in May -30 83,970
Total
Less: Bank debits in May 97,650
of the depositor in May -2,300
(ADA), taken up in the books of the depositor in June -3,000 92,350
Oustanding Checks, May 31 (given) 4,500
MCQ PROBLEM 11
Reconciliation of Jordan East Corporation's bank account at May 31 of the current year is:
Book Bank
Unadjusted balances 2,190,000 2,600,000
Bank service charge -10,000
Erroneous bank charge 40,000
Oustanding checks -100,000
Credit memo for collection of note 600,000
Adjusted balances 2,780,000 2,780,000
June data are as follows:

Book Bank
Checks recorded 2,500,000 2,200,000
Corrections of erroneous bank cvredit in May 60,000
Deposits recorded 1,800,000 1,600,000
Correction of erroneous bank charge 40,000
Service charges recorded 50,000
Credit Memo for collection by bank 600,000 550,000
NSF Checks retruned with June 30 statement
(wil be redeposited) 100000
Based on the above date and the result of your audit, compute the following:
Question 16:
How much is the total outstanding checks on June 30?
A. P 400,000
B. P 510,000
C. P 190,000
D. P 340,000
Question 17:
How much is the total deposit in transit on June 30?
A. P 510,000
B. P 500,000
C. P 100,000
D. P 90,000
Question 18:
How much is the total adjusted cash receipts in June?
A. P 2,350,000
B. P 2,400,000
C. P 2,190,000
D. P 2,030,000
Question 19:
How much is the total adjusted cash disbursements in June?
A. P 2,650,000
B. P 2,410,000
C. P 2,500,000
D. P 2,350,000
Question 20:
How much is the total adjusted cash balance as of June 30?
A. P 2,480,000
B. P 2,280,000
C. P 2,370,000
D. P 2,490,000
MULTIPLE CHOICE QUESTIONS - THEORY (DO-IT-YOURSELF)

Substantitive Audit Procedures for Cash
. When conducting surprise cash count, the auditor should simultaneously count all cash funds, marketable
securities and other negotiable assets to prevent
A. Time out
B. Defalcation
C. Substitution
D. Misappropriation
. A cash shortage may be conealed by transporting funds from one location to another or by converting negotiab
assets to cash. Because of this, which of the following is vital?
A. Simultaneous confirmations
B. Simultaneous bank reconciliations
C. Simultaneous verifications
D. Simultaneous surprise cash count
. Which of the following misstatements is most likely to be uncovered during an audit of a client’s bank
reconciliation?
A. Duplicate payment of a vendor’s invoice.
B. Billing a customer at a lower price than indicated by company policy.
C. Failure to record a collection of a note receivable by the bank on the client’s behalf.
D. Payment to an employee for more than the hours actually worked.
. Which of the following is the focus of an audit of cash for most companies?
A. General cash account.
B. Payroll cash account.
C Petty cash account.
D. Money market account.
. The audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees
with the general ledger can be tested by which of the following procedures?
A. Performing tests for kiting.
B. Receiving and testing a cutoff bank statement.
C. Footing the outstanding checks list and the list of deposits in transit.
D. Examining the minutes of the board of directors for restrictions on the use of cash.
. Cash is important to auditors primarily because of the potential for:

A. errors.
B fraud.
C. liquidity.
D. expenditures.
. A partial-period bank statement and the related canceled checks, duplicate deposit slips, and other documents
included in bank statements, mailed by the bank directly to the CPA firm’s office, is called:
A. a four-column proof of cash.
B. a year-end bank statement.
C. a cutoff bank statement.
D. a short-period bank statement.
. When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to
A. comparing all September 30 reconciling items with canceled checks and other documents in the October
bank statement.
B. comparing all canceled checks and deposit slips in the October bank statement with the October cash
disbursements and receipts records.
C. carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff
statement.
D. determining that all outstanding checks had cleared by the date of the bank cutoff statement.
. Which of the following would normally not be discovered as part of the audit of the bank reconciliation?
A. Failure to bill a customer.
B. Failure to include a deposit in transit on the bank reconciliation.
C. Duplicate payment of a vendor’s invoice.
D. Payment to an employee for more hours than she worked.
. A proof of cash represents:

A. a test of controls and substantive test of transactions.
B. a substantive test of transactions.
C. a substantive test of transactions and test of details of balances.
D. a test of details of balances.
.
Which of the following balance-related audit objectives typically is assessed as having high inherent risk for ca
A. Existence.
B Cutoff.
C. Detail tie-in.
D. Presentation and disclosure.
. The general cash account is considered significant in almost all audits:

A. where the ending balance is material.
B. even when the ending balance is immaterial.
C. except those of not-for-profit organizations.
D. where either the beginning or ending balance is material.
. Because cash is the most desirable asset for people to steal, it has a higher:
A/ control risk.
B. inherent risk.
C. detection risk.
D. liquidity risk.
. Testing the reasonableness of the cash balance at year-end is less important when the year-end bank
reconciliation is verified:
A. on a 100% basis.
B by someone in client’s organization who is independent of the treasurer’s function.
C. by someone in client’s organization who is independent of the controller’s function.
D. by the owner/manager.
.
A major consideration in the audit of the general cash balance is the possibility of fraud. The auditor must exte
his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there a
A. large cash balances at the end of the year.
B. large cash receipts and disbursements during the year.
C. no imprest accounts used for payroll.
D. inadequate internal controls.
. The starting point for the verification of the balance in the general bank account is to obtain:
A. a bank reconciliation from the client.
B. the client’s cash account from the general ledger.
C. a cutoff bank statement directly from the bank.
D. the client’s year-end bank statement and reconcile it.
. In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details
balance procedures?
A. Trace the book balance on the reconciliation to the general ledger.
B. Trace outstanding checks to subsequent period bank statements.
C. Perform a four-column proof of cash.
D. Review financial statements to make sure that material savings accounts and certificates of deposit are d
. The audit procedure which requires the auditor to record the last check number used on the last day of the yea
and subsequently trace to the outstanding checks and the cash disbursements records is performed to satisfy
audit objective of:
A. detail tie-in.
B. existence.
C. completeness.
D. cutoff.
. The direct receipt of a confirmation from every bank with which the client does business is:
A. required by auditing standards for every audit.
B. not necessary unless material fraud is suspected.
C. typically done but not required by auditing standards.
D. necessary for every audit except when there are an unusually large number of active accounts.
. The reason for testing the client’s bank reconciliation is to verify whether the client’s recorded bank balance is
same amount as the actual cash in bank, except for deposits in transit, checks outstanding, and other reconcil
items. The information needed to complete the tests of the reconciliation are provided by the:
A. client’s records and ledgers for the year under audit.
B. cutoff bank statement.
C. client’s records and ledgers for the subsequent year.
D. canceled checks for the year under audit.
MULTIPLE CHOICE QUESTIONS - THEORYS (DO-IT-YOURSELF)

Internal Control for Cash
. Two clerks sharing the same cash register is a violation of which internal control principle?
A. Insure assets
B. Establish responsibilities
C. Maintain adequate controls
D. Apply technological controls
. The reconciliation of the cash register tape with the cash in the register is an example of
A. other controls.
B. independent internal verification.
C. establishment of responsibility.
D. segregation of duties
. Which of the following is not an internal control procedure for cash?

A. Payments should be made with cash.
B. There should be limited access to cash.
C. The amount of cash on hand should be kept to a minimum.
D. Cash should be deposited daily.
. At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares the cash count with
recorded sales for the day, and (3) makes notations of differences on a special report that is forwarded, along
the cash, to the accounting department. This procedure is
A. acceptable practice, adhering to internal control principles
B. designed to provide adequate internal control over cash
C. unacceptable practice, not following internal control principles
D. follows the broad principle of internal control of insuring assets
. There are three employees in the accounting department: payroll clerk, accounts payable clerk, and accounts
receivable clerk. Which one of these employees should not make the daily deposit?
A. payroll clerk
B. account payable clerk
C. accounts receivable clerk
D. none of them
. There are several elements to internal controls. Which of the following would not address the issue of having c
transactions reported in the accounting records?
A. One employee would have access to the cash register.
B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a
prenumbered form.
C. Ask customers to report to a manager if they do not receive a sales receipt or invoice.
D. The person behind the cash register should also be responsible for making price adjustments.
. Which one of the following documents is not needed to process a payment to a vendor?
A. vendor invoice
B. packing slip
C. check request
D. purchase order
. Which of the following assets require the strongest of internal controls?

A. inventory
B. credit cards
C. computer equipment
D. cash
. For internal control purposes, which of the following individuals should be given preference in the distribution o
payroll checks?
A. Bookkeeper
B. Payroll clerk
C. Receptionist
D. Cashier
. Which of the following would mandate proper internal control over the cash payroll function?
A. The payroll clerk should fill the envelopes with cash and write computation of the net wages.
B. Unclaimed pay envelopes should be retained by the paymaster.
C. Each employee should be asked to sign a receipt.
D. A separate checking account for the payroll be maintained.
. For the purpose of proper accounting control, postdated checks remitted by customers should be
A. Restrictively endorsed
B. Returned to customer
C. Recorded as a cash sale
D. Placed in the joint custody of two officers.
. Which of the following is an effective internal accounting control over cash payments?
A. Signed checks should be mailed or delivered under the supervision of the check signor.
B. Spoiled checks which have been voiced should be disposed of immediately.
C. Checks should be prepared only by persons responsible for cash receipts and cash disbursements.
D. A check sigining machine with two signatures should be utilized.
. Which of the followijg is a standard internal accounting control for cash disbursements?
A. Checks should be signed by the controller and at least one other employee of the company.
B. Checks should be sequentially numbered and the numerical sequence should be accounted for by the pe
preparing bank reconciliations.
C. Checks amd supporting documents should be marked "PAID" immediately after the check is returned with
bank statement.
D. Checks should be sent directly to the payee by the employee whp prepares documents that authorize che
preparation.
. Internal control over cash receipts is weakened when an employee who receives customer mail receipts also
A. records credits to individual accounts receivable.
B. prepares initial cash receipts records.
C. prepares bank deposit slips for all mail receipts.
D. maintains a petty cash fund.
. Contact with banks for the purpose of opening company bank accounts should normally be the responsibility o
corporate
A. Board of Directors
B Treasurer
C. Controller
D. Executive Committee
. As compared to manual processing, electronic processing of cash transactions generally makes kiting:
A. impossible to accomplish.
B. easier to accomplish
C. more difficult to accomplish
D. neither easier, nor more difficult to accomplish.
. An example of an internal weakness is to assign to a department supervisor the responsibility of

A. Reviewing and approving time reports for subordinate employees
B. Authorizing payroll checks for terminated employees.
C. Initiating requests for salary adjustments for subordinate employees.
D. Distributing payroll checks to subordinate employees.
. Operating control over the check signature plate normally should be the responsibility of the
A. Secretary
B. Chief Accountant
C. Vice President for Finance
D. Treasurer
. The mailing of disbursement checks and remittance advices should be controlled by the employee who
A. Signed the checks last
B. Approved the vouchers payment
C. Matched the receiving reportsm ourchase orders and vendors' invoices
D. Verified the mathematical accuracy of the vochers and remittance advices.
. A company receives numerous checks in the mail every day. Which of the following would be a weak internal
control procedure for this company?
A. All employees are required to take vacations.
B. The person opening the mail prepares a duplicate deposit slip.
C. The person opening the mail records the cash receipts to the customer account receivables.
D. The person who makes the bank deposit does not perform the bank account reconciliation.
unts
for Cash at December 31,
ailed to creditors on
mailed on December 31,
00,000 was collected on

ou in connection to your
20,000
1,000,000
6,800,000
108,000
752,000
oration on its December

and records of Sagada
ch might be on hand with

d so forth as disclosed
Amount
500
500
12,000
3,500
1,500
Amount
750
500
225
204
250
167
plenishment was dated
by the sales records while

was deposited in the bank.
17,091.75
17,500.00
-408.25
Payee Amount
500
500
12,000
13,000
us Company for the year
00 which were removed.
to P 1,100. The last

1 to 15, 2020.
to each of the
tion, on September 30,
age on September 30,

poration, at the close of
e on September 30, 2020?
on September 30, 2020
ortage on September 30,

3,300
3,000
5,000
2,700
ber 31, 2019 was P 24,000.

ain accounts are presented
Accounts
Payable
750,000
6,000,000
6,750,000
700,000
6,050,000
h receipts book were

urrent account.
he cashbook with
atement and in cash
n the statement.
g in the cashbook with
nk statement and in
AJE NO. 1
AJE NO. 2
AJE NO. 3
aring in the statement.
Ending
12/31/2020
69,850
200
-46
-10,000
60,004
80,004
6,400
-26,400
60,004
he month of April 2020.

0 (written on March 20,
cash position at
redit of P 1,000 on the

t was P 155,500.
for P 1,907.10, #8623 for
ollowing reconciliations:
ven a bank reconciliation
nk on January 15, 2021.

he bank on January 15
ing December 31, 2020, P
per books in January,
292,190
76,410
215,780
48,000
263,780
f P 5,000,000. At
balances:
was deposited on January

r 31, 2020, were P 380,200
ation was P 100,000.
ined from a customer on
cember have not been
nt was P 450,000 and the
ount. It was corrected by
ovember – Receipts, P
Disbursements, P
ecember 31, 2020?
Ending
12/31/2020
97,700
-2,450 AJE NO. 1
-250 AJE NO. 2

95,000
95,000 Copied froom adjusted bank balances
100,000
-40,000
35,000
95,000
n as of December 31,
December 31, 2020 would
ur audit of its Cash in Bank
0; December 31 – P
ecember 31 – P 229,500.
by the bank on November
0 in November and P
12,500 for December.

t recorded in the
Ending
12/31/2020
1,576,500
-112,500 AJE NO. 1
225,000 AJE NO. 2
1,689,000
2,025,000
229,500
-765,000
-25,500
225000
1,689,000
30,000 = P 1,974,000
25,000 – P 1,950,000 = P 765,000

u find the entries in that book and in the customers'
Net Cash
11,250
16,000
2,000
8,000
20,000
7,840
14,700
11,660
6,000
26,260
10,000
29,200
9,000
2,000
173,910
ach account, which was the balance due at April 30. The
Net Cash
11,250 Correctly recorded

2,000
15,000 Fictitious discount
11,760 Error in net cash
6,000
27,000 Fictitious discount
Error in net cash
10,000
29,400 Error in net cash
9,000
175,250
173,910
1,340 AJE NO. 1
ded in CRB with 2% discount
corded in CRB; must be at gross amount
corded in CRB; must be at gross amount

ecember 2020 are presented below. You are asked to
ements.
Sales
Discount Net Cash
2,200 107,800
3,400 166,600
5,700 184,300
400,000
11,300 838,700
Accounts
250,000 5,000 245,000

140,000 2,800 137,200
20,000
52,000 52,000
120,000
532,000 7,800 664,200
t November 30 or at December 31.

Ending
12/31/2020
1,200,000 Given (information C)
-52,000
1,148,000
1,148,000 Beginning balance computed workback
20,000
5,300
90,000
1,263,300
-115,300
50,000
-75,300
-90,000
-115,300
Sales
Discount Net Cash
2,200 107,800 Correctly recorded

0 170,000 No discount of P 3,400
3,800 186,200 P 3,800 not P 5,700 (overstated by P 1,900)
400,000
6,000 864,000
11,300 838,700
-5,300 25,300
Over Under
Accounts
250,000 5,000 245,000 Cancelled check

140,000 2,800 137,200 Cancelled check
20,000 Cancelled check
52,000 52,000 Outstanding check, 12/31
210,000 Cancelled check; should be P 210,000 not P 120,000
442,000 7,800 664,200
532,000 7,800 664,200 These are the correct footing of cash disbursements book
-90,000 0 0
Over
020. The company starts

uivalent account with a
Nancy Sicuat, reveals the
3,000
5,000
300
11,000
500
is P 61,000. Further
hanged the Petty Cash
was included in your count
Keno since you controlled
a cash overage of Keno
Balance
480,500
460,500
610,500
560,500
530,500
610,500
490,500
490,000
495,500
460,500
540,500
670,500
550,500
he following details:
Balance
470,000
540,000
520,000
510,000
660,000
630,000
710,000
590,000
570,000
540,000
545,500
540,000
538,500
544,000
624,000
824,000
704,000
150,000
50,000
200,000
as Working Paper A (WP-

sh decrease than cash
ase the net adjustment is
Per Audit
12.31.2020
15,500
61,000
749,000
150,000
975,500
To WTB
tion below in good form.
3,000
5,000
11,000
0
19,000
20,000
-1,000
A1
. In case AJE is not
Credit
3,500
1,000
200
ase AJE is not necessary,
Credit
3,500
elow which is marked as
Bank
704,000
130,000
-85,000
749,000
A3
below which is marked

Dec. 31
550,500
-1,500
200,000
749,000
704,000
130,000
-85,000
749,000
A4
ber 31, 2020. In case AJE
Credit
1,500
200,000
e AJE is not necessary,
Credit
50,000
YOURSELF)
ended December 31,
some other items:
h balance of P 1,835,000. An
e predated as of December 27 to 29,
nk with a mark “NSF” on December 31,
rded on December 29, 2020 but withheld
eing held by the cashier as part of cash.

mmediately realized into cash.
cember 31, 2020 but returned to cashier
urniture and equipment which will be

tion for the last six months of year 2020.
00. No checks were outstanding on July

mber 31, 2020, are P 48,000 which are
ovember 30, 2020 was presented to you:
bits were P 2,242,000. The December
ncluding bank erroneous credit. In

ents of Lei Company for the year ended
g P 240,000 cash.
mitted that monthly bank reconciliations
00 were issued by the company in
by the cashier that P 10,000 of these, in

21. The balance in currency and coins,
2020 representing bank loan proceeds for

r 2020.
hases amounted to P 480,000.
ding Corporation (PTC), on September
2020 was P 26,940 while the petty cash
24,420
100
120
3,200
4,700
3,920
36,460
36,940
-480
month of December, 2020:
30,840
59,954
25,800
5
3,230
4,567
375
6,345
1,000
6,500
8,774
13,000
account as of December 31, 2020?
or overage of the parish finances as

over its cash transactions. The
nted the cash on hand amounting to
rge of P 60 did not appear in the
to P 27,400.
wing data relative to the debits per
ok credits and the bank debits are
T-YOURSELF)
sh
nt all cash funds, marketable
another or by converting negotiable
audit of a client’s bank
iation, foots correctly and agrees

eposit slips, and other documents
ce, is called:
ly misstated, it is appropriate to
nt has a October 31 year-end, these
other documents in the October
tement with the October cash
the use of the bank cutoff
ank cutoff statement.
f the bank reconciliation?
s having high inherent risk for cash?

when the year-end bank
y of fraud. The auditor must extend

y of a material fraud when there are:
nt is to obtain:
hich of the following test of details of
and certificates of deposit are disclosed separately.
er used on the last day of the year

s records is performed to satisfy the
s business is:
ber of active accounts.
lient’s recorded bank balance is the

s outstanding, and other reconciling
provided by the:
T-YOURSELF)
rol principle?
2) compares the cash count with the

al report that is forwarded, along with
nts payable clerk, and accounts

posit?
not address the issue of having cash
hould be reconciled on a
pt or invoice.
ng price adjustments.
en preference in the distribution of
ayroll function?
on of the net wages.
ustomers should be
e check signor.
s and cash disbursements.
ee of the company.
hould be accounted for by the person
ly after the check is returned with the
res documents that authorize check
ves customer mail receipts also
d normally be the responsibility of the

s generally makes kiting:
he responsibility of
nsibility of the
led by the employee who
owing would be a weak internal
ccount receivables.
ount reconciliation.

MODULE 5 - Audit of Cash and Related Accounts

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STRAIGHT PROBLEMS

Demand deposit 160,000

mailed on December 31,

00,000 was collected on

Petty Cash Fund which consists of the following:

Treasury Bills as follows:

Cash in Bank accounts:

oration on its December

UNREPLENISHED PETTY CASH VOUCHERS:

ch might be on hand with

plenishment was dated

by the sales records while

Name of Fund : Indeposited Collections and Petty Cash Fund

Currencies - detailed omitted 4,600

During your audit, you gathered the following information:

00 which were removed.

to P 1,100. The last

Coins and currency 12,310

Coins and currency 3,950

Coins and currency 4,950

Coins and currency

tion, on September 30,

age on September 30,

poration, at the close of

e on September 30, 2020?

on September 30, 2020

Schedule 1 - Collection from Subscription of Ordinary Shares

Related transactions during the year 2020 are as follows:

Date Check No. Transactions Withdrawal Deposit Balance

LUZON MANUFACTURING COMPANY

LUZON MANUFACTURING COMPANY

Date Account Names Debit Credit

Beginning December, 2020

Bank Balance, unadjusted

Outstanding checks – December 1

atement and in cash

g in the cashbook with

aring in the statement.

Date Items Checks Deposits Balances

The following is from Cebu’s bank statement for April:

Date Items Checks Deposits Balances

Balance per books, November 30, 2020 189,016.20

redit of P 1,000 on the

Balance per bank 152,670

Schedule 1 - Computation of Outstanding Checks at December 31, 2020

from January 1-15, 2021

n January 15, 2021.

Merchandise Inventory 2,150,000

Bank balance, December 31, 2020 403,756

was deposited on January

Beginning December, 2020

Bank Balances, unadjusted

. The necessary adjusting journal entries at December 31, 2020.

Date Account Names Debit Credit

ation was P 100,000.

ined from a customer on

cember have not been