AUDIT OF CASH

ILLUSTRATIVE PROBLEMS 1 - 5
PROBLEM 1
The “CASH” account of Don Corporation’s ledger on December 31, 2021 showed the following:
a. Petty cash fund (including P7,500 unreplenished
voucher of which P2,400 is dated January 3, 2022) P 15,000
b. Redemption Fund Account – PNB 500,000
c. Traveler’s check 100,000
d. Money order 10,000
e. Treasury bill, purchased December 1, 2021 (due on Feb. 1, 2022) 50,000
f. Time deposit due on March 31, 2022 50,000
g. 180-day Treasury bill, due March 15, 2022 120,000
h. Note receivable in the possession of a collecting agency 20,000
i. PNB – Checking Account #211-009-091 325,900
j. Cash on hand, including customer postdated check of P15,000 23,000
k. Savings deposit, earmarked for acquisition of equipment 210,000
l. A check payable to San Ignacio Incorporated, dated January 5, 2022,
that was included in the December 31 PNB Checking Account #211-009-091 50,000
m. Bond Sinking Fund (used to finance the maturing long-term obligation
on March 31, 2022) 150,000
n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)
o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2021
not mailed until January 5, 2022 20,000
p. Advances to Officers/Employees for Seminars (no liquidation is
required) 80,000
q. Money market placement (due June 30, 2022) 600,000
r. Listed stock held as temporary investment 100,000
s. Check #789 in payment to Suppliers, dated January 5, 2022 and
recorded December 31, 2021. 35,000
t. Customers’ certified checks 10,000
u. Pension Fund 150,000
TOTAL 2,568,900

QUESTIONS
1. The entry to correct/adjust item F is:
a. Investment 50,000
Cash 50,000
b. Other assets 50,000
Cash 50,000
c. Short-term investment 50,000
Cash 50,000
d. No adjustment

2. The entry to correct/adjust item L is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Other liabilities 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment
3. The entry to correct/adjust item M is:
a. Investment 150,000
Cash 150,000
b. Other assets 150,000
Cash 150,000
c. Short-term investment 150,000
Cash 150,000
d. No adjustment

4. DON CORPORATION’S cash and cash equivalents balance at December 31, 2021 is:
a. Overstated by P1,950,100 c. Overstated by P 1,845,100
b. Overstated by P 1,895,100 d. Overstated by P 1,795,100

5. DON CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 618,800 b. P 623,800 c. P 673,800 d. P 723,800

PROBLEM 2
The following items are found in the cash account of Corrs Company at December 31, 2021. The company’s
controller asks your opinion whether the items listed below should be considered as part of cash account and come
up with adjusting entry to adjust the cash account.

1. Customers’ check dated December 25, 2021, P25,000.

2. Company’s check (P30,000) dated December 26, 2021 which was drawn in payment for merchandise purchased
on that date but not delivered until January 3, 2022. This check was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount. The company records the
transaction as credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2022 to redeem the bonds payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2022 in payment of account, P50,000. This was recorded in the company’s
disbursement ledger at December 31, 2021.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2021), P100,000
14. Treasury Bills that matures on February 1, 2022, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for December).

QUESTIONS
1. The entry to correct/adjust item number 3 is:
a. Accounts receivable 4,000
Sales discounts 4,000
b. Sales discounts 4,000
Accounts receivable 4,000
c. Accounts receivable 4,000
Sales 4,000
d. No adjustments
2. The entry to correct/adjust item number 10 is:
a. Accounts payable 50,000
Cash 50,000

b. Other liabilities 50,000

Cash 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item number 17 is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Accounts receivable 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustments

4. The entry to correct/adjust item number 16 is:

a. Accounts receivable 20,000
Cash 20,000
b. Cash 20,000
Accounts payable 20,000
c. Cash 20,000
Accounts receivable 20,000
d. No adjustments

5. CORRS COMPANY’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 771,000 b. P 741,000 c. P 721,000 d. P 691,000

PROBLEM 3
Your audit of the December 31, 2021, financial statements of Akari Corporation reveals the following:
1. Current account at PBCom P (35,000)
2. Current account at PNB 65,000
3. Treasury bills (acquired 3 months before maturity) 200,000
4. Treasury bills (maturity date is 12/31/22) 500,000
5. Payroll account 175,000
6. Foreign bank account - restricted (translated using the
12/31/21 exchange rate) 900,000
7. Postage stamps 600
8. Employees’ checks marked “DAIF” 10,000
9. IOU from the vice-president 50,000
10. Credit memo from a supplier for a purchase returns 25,000
11. Traveler’s check 60,000
12. Money order 10,000
13. Company’s check dated 12/30/21 but not mailed at year-end 30,000
14. Petty cash fund (P4,000 in currency and expense receipts for
(P6,000) 10,000
QUESTIONS
1. The entry to adjust the employees’ checks marked “DAIF” is: (DAIF = Drawn Against Insufficient Fund)
a. Accounts receivable 10,000
Cash 10,000
b. Cash 10,000
Accounts receivable 10,000
c. Employees’ advances 10,000
Cash 10,000
d. Cash 10,000
Employees’ advances 10,000

2. AKARI CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 560,000 b. P 544,000 c. P 514,000 d. P 509,000

PROBLEM 4
The controller of Kryzzie Company is attempting to determine the amount of cash to be reported on its December
31, 2021 balance sheet. The following information is provided:
a. Commercial savings account of P1,000,000 and a commercial checking account balance of P900,000 are held at
Phil. Banking Corporation.
b. Money market fund account held at Allied Bank, P600,000
c. Travel advance of P180,000 for executive travel for the first quarter of next year (employee to reimburse
through salary reduction)
d. A separate fund in the amount of P1,500,000 is restricted for the retirement of long-term debt.
e. Petty cash fund, P5,000
f. An IOU from David Santos, a company officer, in the amount of P10,000.
g. A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At
the present time, the company has no other deposits at this bank.
h. The company has two certificates of deposit, each totaling P500,000. These certificates of deposit have a
maturity of 120 days.
i. Kryzzie Company has received a check that is dated January 12, 2022 in the amount of P125,000.
j. Currency and coins on hand amounted to P5,300.

QUESTIONS
1. KRYZZIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 1,910,300 b. P 2,400,300 c. P 2,510,300 d. P 3,510,300

2. The travel advance of P180,000 for executive travel should be classified as:
a. Accounts receivable c. Prepaid expenses
b. Travel expenses d. Advances to employees

PROBLEM 5
Present journal entries to record the following transactions in the books of Yanyan Corporation, which uses a
calendar year as accounting period. Assume that the company is using the imprest method in accounting for petty
cash fund:

a. A petty cash fund was set up on November 1, 2021 in the amount of P2,400.

b. On November 29, 2021, a check was issued to replenish the fund, the composition of which was as follows:
Currency – bills and coins 166
Vouchers showing expenditures for:
Office supplies 270
Charges from purchase of supplies 124
Repairs and maintenance 350
Wages paid to casual employees 950
Charges from purchase of goods to be sold 400
c. On December 18, 2021, the fund was replenished and correspondingly increased to P3,000; its composition
included the following:
Currency – bills and coins 158
Vouchers showing expenditures for:
Store supplies 304
Accounts payable 914
Charges from purchased of goods to be sold 242
Miscellaneous expenses 782

d. An examination on December 31, 2021, disclosed the following composition of the fund, although it was not
replenished on this date:
Currency – bills and coins 958
Check of office manager, dated January 5, 2022 1,000
Vouchers showing expenditures for:
Office supplies 126
Miscellaneous expenses 90
Accounts payable 800

e. On January 5, 2022, the check of office manager was cashed and the proceeds were added to the petty cash
fund.

f. On January 6, 2022, replenished disbursement from December 18, 2021 to January 5, 2022.

QUESTIONS
1. The entry to record the November 29 replenishment of petty cash fund is:
a. Operating expenses 1,694
Freight-in 400
Cash short/over 140
Cash 2,234
b. Operating expenses 2,234
Petty cash fund 2,234
c. Operating expenses 1,694
Freight-in 400
Cash short/(over) 140
Petty cash fund 2,234
d. No entry since the company is using an impress fund system.

2. The adjusted Petty Cash Fund balance of YANYAN CORPORATION at December 31, 2021 is:
a. P 3,000 b. P 1,958 c. P 984 d. P 958

3. The entry to record the December 31, 2021 adjustment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042

b. Operating expenses 216

Accounts payable 800
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
 Petty cash fund 2,042
d. No entry since there is no replenishment yet.
4. The entry to record the January 6, 2022 replenishment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042
b. Operating expenses 216
Accounts payable 800
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
Cash 2,042
d. No entry since the account has been adjusted on December 31.