DO THE DRILL

AUDIT OF CASH AND CASH EQUIVALENTS

DRILL 1
The cash account and bank statement for Pag-Asa Company for the month of October were as follows:

CASH ACCOUNT *
Bal. Sept. 30 11,000 Checks 26,500
Deposits 30,000

Other data for September:

Sept 30 cash on hand, P500
Sept 30 outstanding checks, P900
Sept 30 Deposit in transit, P1,400

October 31 cash on hand, P500

BANK STATEMENT SUMMARIZED **

Balance, Sept 30 P10,000

Deposits 21,400
Checks (20,900)
Note collected for Pag-Asa (including 10% interest) 1,100
Customers check - previously deposited and returned by bank as NSF (50)
Bank charges for services (30)

Balance, October 31 P11,520

1. The correct cash balance as of October 31 is:

2. Net Adjustments to cash as of October 31 is:
3. How much is the amount of (shortage) overage:

DRILL 2
Arv Inc Incorporated was established in 2013 as a manufacturing business which is based in Ilo-Ilo. The
audit firm where you’re working was engaged to do the 2015 audit of financial statement. During such
year, Ilo-Ilo was washed out by typhoon which ruined the whole city including Arv Inc Incorporated.

As an auditor, you performed some audit procedures to gather evidences and support your conclusion. A
review was made by your senior audit associate with your working paper and has some comments and
notations which an explanation should be given.

Senior Auditor (SA): Would you able to send confirmation letter to all bank accounts of the client?

Audit Associate (AA): Yes, but there’s a little problem, some of the confirmation letters have no replies
received yet.

SA: Oh! I see, but what did you do?

AA: I send another one, but none of them returned and so I performed alternative procedures, well I think
the best that I can do is to have an inquiry because most of the files were “binaha ng bagyo” huhuhuhu

SA: Would you able to arrive at a conclusion only for that?

AA: No sir, after the inquiry I also made some inspection, examination and other validation of data as
part of my procedures. Like here in C01 (pertaining to procedures made for Cash – C as index). I’ve got a
copy of some bank statements as of December 31 but it was like so “sira na”.

SA: what else’s did you do?

AA: what I did sir is to check the backup files and records of the company in the system for the period
and reproduced it in C01.1 below and also found out that the company is following an imprest system
which the collection cash was intact and disbursements were made in checks.

Jan. 5 Petty cash fund 20,000

Cash in bank 20,000
Established petty cash fund.

SA: Good, is that what you have?

AA: No sir, I also noted the following journal entries and test them:
Descriptions NOTES
Dec 20 Cash 256,100
Sales 256,100 A
Sales for the day.

Descriptions
Dec 29 Accounts payable 816,220
Cash 816,220 B
Paid accounts due to various suppliers.

Descriptions
Dec 31 Cash in bank 140,000
Accounts receivable 140,000 C
To record the deposits of collections made.

Descriptions
Dec 22 Cash 376,080
Accounts receivable 376,080 D
Collection from customer.

Audit Notes:
A – the cashier reported this amount as missing item; hence it was not deposited in the bank.
B – none of the suppliers present the checks in the bank as of December 31, upon inspection of the
checkbook of the company and the subsidiary ledger, it includes another check no. 3475 payable
to supplier Nersy Saw for P155,680. Investigation reveals that this check was originally issued to
Nersy Saw, which Nersy Saw had notified Arv Inc that it was lost. Arv Inc made an order with
the bank to stop the payment of check#3475 and made an adjustment in their books for this
amount.
C – this amount was credited by bank on January 4, 2016.
D – the bank statement showed a receipt on the same date for P116,260 the check was inspected and
noted that the bank made no error for this transaction.

SA: Okay then, how about memos issued or received?

AA: Sir my documentation for some information is presented in C02.

Other information noted:

a. Note receivable of P1,000,000 and interest of P5,000 were collected by the bank in December and a
credit memo issued by bank was dated January 2, 2016.
b. The petty cash box includes expenses receipts totaling to P12,000, these receipts are due for
replenishment.
c. Check of a customer was returned by bank on January 3, 2016 marked “DAIF”, P168,660, but the
check is dated December 26, 2015.
d. The cashier at December 31, 2015 has cash on hand, this represents un-deposited sales receipts,
P53,250.
e. The bank statement for the period ended showed a balance of P799,900.
f. The cash balance per book reveals total debits of P3,120,680 and total credits of P3,200,120.
SA: Is it true that the company does not have enough cash?
AA: Hmmmmmm…..

Based on the information presented above, you help the auditor to answer the following question of the
senior auditor:

1. How much is the cash (shortage) or overage, if any:

2. Total adjustment to cash in the books? (indicate net debit or credit)
3. How much cash on hand should the company report as at December 31 is:
4. The adjusted cash in bank as at December 31 is:
5. Amount of cash presented in the statement of financial position:

DRILL 3

In the course of the audit of FLASH LIGHT Company’s cash in bank for the fiscal year ended October
31, 2018, you ascertained the following information:
September 30 October 31
Cash per books P109,125 P?
Cash per bank statements 1,873,935 2,411,797
Deposits in transit 143,518 225,400
Outstanding checks 485,065 526,960
Bank service charges 12,600 9,000
Insufficient fund check 144,375 –
Company's notes receivable collected by bank 1,256,763 1,415,750

The bank statement and the company’s cash records show the following totals:
Checks and debit memos per bank statement P3,821,528
Cash receipts per cash record ?
Cash disbursements per cash records ?
Deposits and credit memos per bank statement ?

During the course of your audit, you ascertained the following information:
a. The insufficient fund check was re-deposited in the same month. No entries were made to take up the
return and re-deposit.
b. A P180,000 bank credit error in September was corrected by the bank in October, while a P120,680
withdrawal of FLESHRIGHTS Corporation was erroneously debited by the bank to the company’s
account in October.
c. A P23,500 disbursement check was recorded in September as P32,500. The error was discovered and
corrected in October.
d. A P210,000 customer collection was recorded in the books in September as P120,000, the error was
detected and corrected in October.
e. A disbursement of P150,000 in payment of accounts due in October was debited by the bank at
P15,000. The error was detected and corrected in October.
f. A customer paid Flash Light Company thru an online payment on the same bank in which the
customer and Flash Light Company maintained bank accounts. The customer payment was debited by
the bank in Flash Light name in October at P135,500. The customer forwarded the e-receipt thru
email with Flash Light Company’s collection department. The bank in October acknowledged the
payment of the customer and the accountant made the entry in the book upon confirmation of the
bank on October 31 at P135,000.
g. A check for P32,000 from collections made to customer in September was recorded by the accountant
upon collection as P32,900. The error was detected in October but no adjusting entry was made.

Determine the following as a result of your audit:

4. The unadjusted cash balance per book as of October 31 is?
5. The adjusted balance of cash as of September 31 is?
6. The amount of cash presented in the statement of financial position as of October 31 is?
7. The adjusted cash receipt in October is?
8. The unadjusted cash disbursement per book in October is?