CPA REVIEW SCHOOL OF THE PHILIPPINES AP-9208-3

Manila

AUDITING PROBLEMS CPA Review

AUDIT OF CASH
(PART 3 OF 3)

PROBLEM 1

The auditor for RAKI-RAKI, INC. examined the petty cash fund immediately after the close of
business, June 30, 2022, the end of the company’s fiscal year. The following fund composition
was arrived at:
Currency P1,272
Fund vouchers:
Office supplies expense 388
Travel expense 240
Office equipment repairs 170
Loans to officers and employees 400
A check drawn by Raki-Raki, Inc., payable to the order of Jingle, fund custodian 1,100
An employee’s check, returned by bank, stamped NSF 230
A sheet of paper bearing the signatures of several employees, together with
their contributions (total P200) for a gift for a departing employee.
Attached to the paper is currency of 200
P4,000
The petty cash fund general ledger account has an imprest balance of P4,000.

Required:
1. What audit adjustment should be prepared as of June 30, 2022?
2. At what amount should the cash fund be shown in the balance sheet as of June 30, 2022?

PROBLEM 2

You are assigned to the petty cash count for the KURDAPIA COMPANY at December 31, 2022.
The contents of the fund are listed below. The custodian of the fund is Annie Bartolome, (Office
Secretary). The balance of the petty cash fund per the company’s general ledger is P30,000.
Such fund is being maintained on an imprest basis.

Bills
Five hundred-peso bills; 13
One hundred-peso bills; 20
Fifty-peso bills; 44
Twenty-peso bills; 30
Coins
One-peso coins; 12 rolls of 20 and 10 loose
An IOU signed by the company treasurer for P3,750.
Postage stamps of various denominations – P750.
(The voucher is also for P750.)
A receipted bill from NCR Bulletin newspaper for advertising – P420.
A receipted bill from NB Store for copy paper – P660.
A receipted bill from Refill Gas Stations for gas and oil for the company’s delivery truck – P6,540.

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A check signed by Melvin Cruz, an employee, dated December 28, 2022 – P1,050.
A check signed by Celine Dilon, sales manager, dated January 20, 2023 – P990.
A notation on a sheet of paper as follows: Proceeds of employees’ contributions for office party
– P3,630.
A receipted bill from Bona Restaurant for refreshment served at employees’ party, December 24,
2022 – P2,010.

What amount should be reported as cash shortage or cash overage?

PROBLEM 3
You have been asked by the proprietor of the SANDOVAL CO. to verify the accountability of the
cashier-bookkeeper, who was allowed to take a vacation leave a few days ago.

A. The bank reconciliation statements prepared by the cashier-bookkeeper are presented below:
November 30, 2022
Balance per bank statement P21,500
Cash on hand 500
Total 22,000
Outstanding checks:
No. 2520 P 2,000
2521 1,400
2522 1,900 (3,300)
Erroneous bank charge 2,000
Erroneous bank credit (500)
Book balance P20,200

December 31, 2022

Balance per bank statement P 135,000
Cash on hand 6,300
Total 141,300
Outstanding checks:
No. 2674 P31,000
2675 10,300
2676 5,000 (41,300)
Erroneous bank charge 3,000
Erroneous bank credit (600)
Book balance P102,400

B. The Cash in Bank account in the general ledger shows the following debits and credits during
December:

Cash in Bank
Dec. Dec.
1 Balance P20,200 1 Checks issued P2,000
2 Received from customers 4,500 5 Checks issued 5,200
7 Received from customers 5,000 14 Checks issued 31,000
12 Received from customers 20,000 24 Checks issued 46,000
17 Received from customers 30,000 28 Checks issued 7,600
23 Received from customers 9,000
27 Received from customers 70,000
31 Received from customers 48,500 31 Balance 102,400
Total P198,200 Total P198,200

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C. The following summarized transactions were taken from the bank statement for the month of
December 2022:

Balance, December 1, 2022 P16,500

Total deposits P173,700
The total deposits per bank statement include:
a. Collection of notes receivable P5,000
b. Correction of November erroneous bank charge 2,000
c. December 10 deposit of Lava, Inc. credited in error
to SANDOVAL 600
Total P7,600
Total checks P65,200
The total checks per bank statement include:
a. Correction of November erroneous bank credit P 500
b. December check of Nile Co. charged in error
to SANDOVAL 3,000
Total P3,500

D. Cash on hand per count in the morning of January 2, 2023, amounted to P6,300.

E. Before leaving his company for a one-week vacation, the proprietor had left several signed
blank checks that the cashier-bookkeeper had cashed for his personal use.

Questions:
1. What is the adjusted cash balance on November 30, 2022?
A. P16,500 B. P13,200 C. P20,200 D. P14,500
2. The amount of unaccounted receipts in December is
A. P11,000 B. P13,200 C. P9,000 D. P15,100
3. The amount of unrecorded/unsupported disbursements in December is
A. P15,100 B. P10,900 C. P7,000 D. P5,000
4. What is the total cash shortage as of December 31, 2022?
A. P26,000 B. P15,100 C. P33,000 D. P7,000
5. What is the adjusted cash balance on December 31, 2022?
A. P102,400 B. P125,000 C. P87,400 D. P111,400

PROBLEM 4

On January 10, 2023, you started the audit of the financial records of the KEMIRARA COMPANY
for the year ended December 31, 2022. From your investigation, you discovered the following:

1. The bookkeeper acts also as the cashier. Her December 31, 2022, year-end cash
reconciliation contained the following items:
Cash per ledger, Dec. 31, 2022 P184,200
Cash per bank, Dec. 31, 2022 194,550
Checks outstanding 15,660
Amnesia Co. check charged by the bank in error
Dec. 20, 2022; corrected by the bank on Jan. 5, 2023 450
Cash in transit, credited by the bank on Jan. 2, 2023 2,160

2. The cash account balances per ledger as of December 31, 2022 were:
Cash P184,200
Petty cash 450

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3. The count of the cash on hand at the close of the business on January 10, 2023, including
the petty cash, was as follows:
Currency and coins P1,155
Expense vouchers 60
Employees’ IOU’s dated Jan. 5, 2023 165
Customers’ checks in payment of account 870

4. From January 2, 2023 to January 10, 2023, the date of your cash count, total cash receipts
appearing in the cash records were P25,800. According to the bank statement for the period
from January 2, 2023 to January 10, 2023, total deposits were P22,800.

5. On July 5, 2022, cash of P1,200 was received on account from a customer; the Allowance
for Doubtful Accounts was charged and Accounts Receivable was credited.

6. On December 5, 2022, cash of P900 was received on account from a customer; Inventory
was charged and Accounts Receivable was credited.

7. Cash of P2,190 received during 2022 was not recorded.

8. Checks received from customers from January 2, 2023 to January 10, 2023, totaling P1,260,
were not recorded but were deposited in the bank.

9. On July 1, 2022, the bank refunded interest of P60 because a note of the Kemirara Company
was paid before maturity. No entry was made for the refund.

10. In the cashier’s petty cash, there were receipts for collection from the customers on January
9, 2023, totaling P2,550; these were unrecorded and undeposited.

11. In the outstanding checks, there is one for P150 made payable to a trade creditor;
investigation shows that this check had been returned by the creditor on November 14,
2022 and a new check for P300 was issued in its place; the original check for P150 was
made in error as to amount.

Required:
1. Compute the correct bank balance as of December 31, 2022.
2. Compute the cash shortage as of December 31, 2022.
3. Compute the cash shortage for the period January 1, 2023 to January 10, 2023.

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