Quizzer Cash - Solution Printed Ko

AUDIT OF CASH - QUIZZERS
PROBLEM NO. 1
In connection with your examination, the Pound Company presented to you the following
information regarding its Cash in Bank account for the month of December, 2005:
a) Balances per bank statements: November 30, P107,800, and December 31,
P115,200.
b) Balances of cash in bank account in company’s books: November 30, P82,725, and
December 31, P113,400.
c) Total receipts per books were P1,110,950 of which P6,050 was paid in cash to a
creditor on December 24.
d) Total charges in the bank statement during December were P1,094,850.
e) Undeposited receipts were: November 30, P45,300 and December 31, P50,600.
f) Outstanding checks were: November 30, P13,375, and December 31, P9,650, of
which a check for P2,500 was certified by the bank on December 26.
g) NSF checks returned, recorded as reduction of cash receipts, were:

 Returned by bank on December, recorded also in December, P5,200.
 Returned by bank on December but recorded in January, P4,300
h) Collections by bank not recorded by Company were P60,750 in November and

P58,200 in December.
i) Bank service charges not entered in company’s books were: November 30, P3,750
and December 31, P2,100.
j) A check for P4,750 of Found Company was charged to Pound Company in error.
k) A check drawn for P4,200 was erroneously entered in the books as P2,400.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
1. How much is the adjusted cash balance as of November 30, 2005?
a. P107,800 b. P139,725 c. P75,875 d.
P137,225
2. How much is the adjusted book receipts for December, 2004?
a. P1,102,350 b. P1,113,600 c. P1,056,950 d.
P1,108,400
3. How much is the adjusted book disbursements for December, 2004?
a. P1,084,725 b. P1,078,675 c. P1,089,925 d. P1,084,725
4. How much is the adjusted cash balance as of December 31, 2004?
a. P158,650 b. P153,900 c. P165,200 d.
P163,400
5. How much is the cash shortage of December 31, 2004?
a. P1,800 b. P9,500 c. P4,750 d. P0
SUGGESTED ANSWERS: B, B, C, D, D
PROBLEM NO. 2
Your audit senior instructed you to prepare a four column proof of cash receipts and
disbursements for the month of August, 2005.
The bank reconciliation prepared by Franc Company at July 31 is reproduced below: (All
book adjustments were recorded in August).
Bank balance P52,000 Book balance P40,000
Add:
Proceeds of note
receivable collected
Add deposit in transit, July 31 900 by 8,000
bank in July
Deposit made in bank
on
July 31 not 1,000
recorded in
books until August
Total 52,900 Total 49,000
Less outstanding checks: Less bank service 100
charge
No. 436 P200
450 1,800
451 1,400
454 600 4,000 .
Adjusted balance P48,900 Adjusted balance P48,900
Upon inquiry about the client’s August 31 bank reconciliation, you were informed that it has
been lost and that the client is too busy at this time to prepare another. Your senior told
you to get the August bank statement and paid checks and to prepare the August 31
reconciliation so that you may complete the August proof of cash.
The August bank statement is reproduced below:
Kapuso Bank
Account Name: Franc Company
Date Debits Credits
July 31
August 1 1,800 900
August 6 1,400
August 9 600 10,000
August 12 140 DM 140
August 15 1,000
August 20 700 14,000
August 27 1,440
August 29 100 EC 100 EC
August 31 440 SV
August 31 300 DM
1,820
SV – Service Charges; DM – Debit Memo; EC – Error
Corrected; CM – Credit Memo
The paid checks accompanying this bank statement (all clearing in August) were (checks
listed in order of payment by bank).
No. 450 P1,800 No. 455 P1,000 No. 458 P1,440
451 1,400 456 700 459 1,820
454 600
The check register revealed that the last check issued in August was no. 460 for P1,000
and that check no. 457 was for P2,400.
Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on
September 1.
The debit memo on August 12 and August 31 were customer NSF checks returned by the
bank. The check on August 12 was immediately redeposited without entry. The check
returned on August 31 was redeposited by the client in the bank on September 1 without
entry.
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above
data, you are to provide the answers to the following:
1. How much is the unadjusted book receipts for August?
a. P25,140 b. P42,400 c. P35,540 d.
P43,300
2. How much is the unadjusted book disbursements for August?
a. P8,460 b. P9,740 c. P8,760 d.
P8,360
3. How much is the adjusted book receipts for August?
a. P33,640 b. P33,450 c. P34,400 d.
P33,400
4. How much is the adjusted book disbursements for August?
a. P9,100 b. P8,900 c. P9,200 d.
P9,340
5. How much is the adjusted cash balance as of August 31, 2005?
a. P73,940 b. P73,060 c. P73,400 d.
P73,200
SUGGESTED ANSWERS: B, A, D, A, D
PROBLEM NO. 3
You were able to obtain the following information in connection with your audit of the Cash
account of the Piso Company as of December 31, 2005:
November 30 December 31
a. Balances per bank P742,800 P774,696
b. Balances per books 619,304 670,392
c. Outstanding checks 254,096 300,184
d. The bank statement for the month of December showed total credits of P5,401,800
while the cash receipts per books totaled P9,341,780.
e. NSF checks are recorded as a reduction of cash receipts. NSF checks which are
later redeposited are then recorded as regular receipts. Data regarding NSF checks
are as follows:
1. Returned by the bank in Nov. and recorded by the company in Dec., P1,000.
2. Returned by the bank in Dec. and recorded by the company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the company in Jan., P9,200.
f. Check of Sopi Company amounting to P9,292 was charged to the company account
by the bank in error on December 31.
g. A bank memo stated that the company’s account was credited for the net proceeds of
TM’s note for P8,060. This is not yet recorded on the books.
h. The company has hypothecated its accounts receivable with the bank under an
agreement whereby the bank lends the company 80% of the hypothecated accounts
receivable. The company performs accounting and collection of the accounts.
Adjustments of the loan are made from daily sales reports and deposits.
i. The bank credits the company account and increases the amount of the loan for 80%
of the reported sales. The loan agreement states specifically that the sales report
must be accepted by the bank before the company is credited. Sales reports are
forwarded by the company to the bank on the first day following the date of sale. The
bank allocates each deposit 80% to the payment of the loan, and 20% to the
company account. Thus, only 80% of each day’s sales and 20% of each collection
deposits are entered on the bank statement. The company accountant records the
hypothecation of new accounts receivable (80% of sales) as a debit to Cash and a
credit to the bank loan as of the date of sales. One hundred percent of the collection
on accounts receivable is recorded as a cash receipt; 80% of the collection is
recorded in the cash disbursements books as a payment on the loan. In connection
with the hypothecation, the following facts were determined:
 Included in the undeposited collections is cash from the hypothecation of accounts
receivable. Sales were P162,000 on November 30, and P169,000 at December
31, the balance was made up of from collections of P128,440 which was entered
on the books in the manner indicated above.
 Collections on accounts receivable deposited in December, other than deposits in
transit, totaled P4,800,000.
j. Interest on the bank loan for the month of December charged by the bank but not
recorded in the books, amounted to P24,560.
QUESTIONS:
a. P618,304 b. P514,624 c. P488,704 d.
P359,104
a. P5,427,488 b. P9,370,240 c. P9,505,440 d. P9,350,260
a. P9,255,992 b. P9,246,700 c. P9,349,452 d. P5,406,700
a. P509,492 b. P612,244 c. 602,952 d.
P636,804
5. How much is the cash shortage as of December 31, 2005?
a. P19,980 b. P20,550 c. P97,200 d. P0
SUGGESTED ANSWERS: C, B, B, B, D
PROBLEM NO. 4
The Rupiah Corporation was organized on January 15, 2005 and started operation soon
thereafter. The Company cashier who acted also as the bookkeeper had kept the
accounting records very haphazardly. The manager suspects him of defalcation and
engaged you to audit his account to find out the extent of the fraud, if there is any.
On November 15, when you started the examination of the accounts, you find the cash on
hand to be P25,700. From inquiry at the bank, it was ascertained that the balance of the
Company’s bank deposit in current account on the same date was P131,640. Verification
revealed that the check issued for P9,260 is not yet paid by the bank. The corporation
sells at 40% above cost.
Your examination of the available records disclosed the following information:

Capital stock issued at par for cash P1,600,000
Real state purchased and paid in full 1,000,000
Mortgage liability secured by real state 400,000
Furniture and fixtures (gross) bought on which there
is still balance 145,000
unpaid of P30,000
Outstanding notes due to bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount still due from customers 426,900
Inventory of merchandise on November 15 at cost 469,600
Expenses paid excluding purchases 303,780
QUESTIONS:
Based on the above and the result of your audit, compute for the following as of November
15, 2005:
A B C D
1. Collections from sales 1,615,040 2,041,940 1,153,600 1,188,140
2. Payments for purchases 1,207,204 922,180 1,854,620 1,391,780
3. Total cash disbursements 3,273,400 2,625,984 2,810,560 2,340,960
4. Unadjusted cash balance 1,007,180 537,580 74,740 722,156
5. Cash shortage 389,500 859,100 574,076 0
SUGGESTED ANSWERS: D, D, C, B, A
- End of AP-5907Q –
Charis Marie F. Urgel BSA – IV

“CASH AND CASH EQUIVALENTS”
PROBLEM NO. 1 – Composition of cash and cash equivalents
The following data pertain to PRTC Corporation at December 31, 2015:
Current account at Metrobank P 1,800,000

Current account at Allied Bank (100,000)
Payroll account 500,000
Foreign bank account (in equivalent pesos) 800,000
Savings deposit in a closed bank 150,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from employees 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Money order 30,000
Petty cash fund (P4, 000 in currency and expense
receipts for P6, 000) 10,000
Pension fund 2,000,000
DAIF check of customer 15,000
Customer’s check dated 1/1/16 80,000
Time deposit – 30 days 200,000
Money market placement (due 6/30/16) 500,000
Treasury bills, due 3/31/16 (purchased 12/31/15) 200,000
REQUIRED:
Determine the cash and cash equivalents to be reported on the entity’s December 31,
2015 statement of financial position.
SOLUTIONS:
Current account at Metrobank 1,800,000
Foreign bank account (in equivalent pesos) 800,000
Money order 30,000
Petty cash fund 4,000
Time deposit – 30 days 200,000
Treasury bills, due 3/3/16 (purchased12/31/15) 200,000
Cash and cash equivalents – Dec. 31, 2015 3,584,000
PROBLEM NO. 2 – Computation of adjusted cash and cash equivalent
You were able to gather the following from the December 31, 2015 trial balance of PRTC
Corporation in connection with your audit of the company:
Cash on hand P 372,000

BPI current account 950,000
Security Bank current account No. 01 1,280,000
Security Bank current account No. 02 (40,000)
PNB saving s account 500,000
PNB time deposit 300,000
Cash on hand includes the following items:
a. Customer’s check for P60,000 returned by bank on December 26, 2015 due to
insufficient fund but subsequently redeposited and cleared by the bank on January
8, 2016.
b. Customer’s check for P30,000 dated January 2, 2016, received on December 29,
2015.
c. Postal money orders received from customers, P36,000.
The petty cash fund consisted of the following items as of December 31, 2015.
Currency and coins P 2,100

Employees’ vales 1,600
Currency in an envelope marked “collections for charity”
with names attached 1,200
Unreplenished petty cash vouchers 800
Check drawn by PRTC Corporation, payable to the petty cashier 4,600
P10,300
Included among the checks drawn by PRTC Corporation against the BPI current account
and recorded in December 2015 are the following:
a. Check written and dated December 29, 2015 and delivered to payee on January 2,
2016, P50,000.
b. Check written on December 27, 2015, dated January 2, 2016, delivered to payee on
December 29, 2015, P86,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31, 2015.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
REQUIRED:
1. Compute for the adjusted balances of following:

a. Cash on hand
b. Petty cash fund
c. BPI current account
d. Cash and cash equivalent
2. Adjusting entries as of December 31, 2015
SOLUTIONS:
A. Cash on Hand
Unadjusted cash on hand 372,000
Less: Returned customer’s check (60,000)
Customer’s check dated Jan. 2, 2016 (30,000)
Adjusted cash on hand 282,000
B. Petty cash fund

Petty cash fund total 10,300
Employee’s vales (1,600)
Currency in an envelope marked “collections
for charity” (1,200)
Unreplenished petty cash vouchers ( 800)
Adjusted petty cash fund 6,700
C. BPI current account

Unadjusted BPI current account 950,000
Unreleased check 50,000
Postdated check delivered 86,000
Adjusted BPI account 1,086,000
D. Cash and cash equivalents

Cash on hand 282,000
BPI current account 1,086,000
Security Bank current account 1,240,000
PNB Time deposit 300,000
Adjusted cash and cash equivalents 2,914,700
Adjusting Entries
a. Accounts Receivable 90,000
Cash on hand 90,000
b. Advances to employees 1,600

Expenses 800
Cash short/over 900
c. BPI current account 50,000

Accounts payable 50,000
d. Accounts Receivable 86,000

Cash on hand 86,000
PROBLEM NO. 3 – Cash count and shortage computation
In connection with the audit of the financial statements of Rupee Company for the year
ended December 31, 2015, you performed a surprise count of the petty cash fund and
undeposited collections under the custody of Ms. Jessie at 8:15 a.m. on January 2, 2016.
Your count disclosed the following:
Bills and coins
Bills Coins
P100 10 pieces P1.00 410 pieces
50 80 pieces 0.50 324 pieces
20 70 pieces o.25 64 pieces
10 54 pieces
Unused postage stamp – P730
Checks
Date Payee Drawer Amount
Dec. 30 Cash Ms. Jessie P 2,400
Dec. 30 Rupee Company Robert 28,000
Dec. 31 Rupee Company Jay Ar, Sales Manager 3,300
Dec. 31 Rupee Company Francis 35,000
Dec. 31 Rupee Company Ryan 16,600
Dec. 31 German Corp. Rupee Company 54,000
Expense Vouchers
Date Payee Description Amount
Dec. 23 Jay Ar, sales manager Cash advance for trip to
Baguio City P14,000
Dec. 27 Central Post Office Postage stamps 3,200
Dec. 29 Messengers Transportation 300
Dec. 29 PC Express Computer repair 1,600
Other items found inside the cash box:
a. Two pay envelopes which had been opened and the contents aggregating P15,000
representing unclaimed salaries had been removed.
b. The sales manager’s liquidation report for the Baguio trip:
Cash advance received on Dec. 23 P14,000

Less: Hotel accommodation P9,000
Bus fare for two 800
Cash given to Roy, salesman 600 10,400
Balance P 3,600
Accounted for as follows:

Cash returned by Roy to the sales manage P 240
Personal check of sales manager 3,360
Total P 3,600
Additional information:
a. The custodian is not authorized to cash checks.

b. The last official receipt included in the deposit on December 30 is No. 351 and the last
official receipt issued for the current year is No. 355. The following official receipts are
all dated December 31, 2015.
O.R. No. Amount Form of payment

352 P27,200 Cash
353 35,600 Check
354 7,200 Cash
355 16,600 Check
c. The Petty Cash balance per general ledger is P20,000. The last replenishment of the
fund was made on December 22, 2015.
REQUIRED:
1. Determine shortage or overage, if any

2. Adjusting entries as of December 31
SOLUTIONS:
Requirement No. 1
Rupee Company
CASH COUNT SHEET
January 3, 2016 – 8:15 a.m.
Bills and coins:
Denomination Quantity Amount
Total
100 10 1,000
50 80 4,000
20 70 1,400
10 54 540
1 410 410
.50 324 162
.25 64 16__ P
7,528
Checks:
Date Drawer Amount
Dec.30 Ms. Jessie P 2,400
Dec.30 Robert 28,000
Dec.31 Jay, Ar 3,360
Dec.31 Frances 35,600
Dec.31 Ryan 16,600_
P 85,960
Unreimbursed vouchers:
Date Account Amount
Dec. 23 Advances P 14,000

Dec.27 Postage 3,240
Dec.29 Transportation 300
Dec. 29 Repairs 1,600 19,140
Total cash accounted P 112,628
Less: Accountabilities
Petty cash 20,000
Collections (per official receipt) 86.600
Unclaimed salary 15,000
Excess travel advance 3,360
Unreceipted collection from Robert 28,000 P 152,960
CASH SHORTAGE P 40,332
Requirement No. 2 - Adjusting Entries:
a. Cash 28,000
Accounts receivable 28,000
b. Advances to officers and employees 14,000

Postage expense 3,240
Transportation expense 300
Repairs expense 1,600
c. Unused postage 730
Postage expense 730
d. Cash 54,000
e. Cash 15,000
Salaries payable 15,000
f. Receivable from custodian 40,332

Cash
40,332
g. Travel expenses 10,160

Advances to officers and employees 13,520
PROBLEM NO. 4 – Bank Reconciliation
The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of

December 31. The bank statement as of December 31 showed a balance of P106,000.
Upon comparing the bank statement with cash records, the following facts were
developed:
a. The company’s account was charged on December 26 for a customer’s uncollectible

check amounting to P30,000.
b. A two-month, 17% P60,000 customer’s note dated October 25, discounted on

November 25, was dishonored on December 25, and the bank charged the company
P62,000, which included a protest fee of P2,000.
c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and the
bank but was later corrected by the bank.
d. Check no. 142 for P12,425 was entered in the cash disbursements journal at P12,245
and check no. 156 for P3,290 was entered as P32,900.
e. Bank service charges of P1,830 for December were not yet recorded on the books.
f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had
been collected on December 28; and the bank charged P500. (No entry was made on
the books when the note was sent to the bank for collection).
g. Receipts on December 31 for P24,000 were deposited on January 2.
h. The following checks were outstanding on Dec. 31:

No. 123 P3,000 No. 154 P4,000
No. 143 * 2,000 No. 157 6,000
No. 144 7,000 No. 159 7,000
No. 147 3,000 No. 169 5,000
* Certified by the bank in December
i. A deposit of P20,000 was recorded by the bank on December 5, but it should have
been recorded for Dolor Company rather than Dollar Company.
j. Petty cash of P10,000 was included in the Cash in Bank balance
k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company
expects to recover this amount from the insurance company. The cash receipts were
recorded in the books, but no entry was made for the loss.
l. The December 21 deposit included a check for P20,000 that had been returned on
December 15 marked NSF. Dollar Company had made no entry upon return of the
check. The redeposit of the check on December 21 was recorded in the cash receipts
journal of Dollar Company as a collection on account.
REQUIRED:
1. Bank reconciliation using:

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method
2. Adjusting entries as of December 31, 2015.
SOLUTIONS:
A. Bank to book method Dec. 31
Bank balance 106,000
Deposit in Transit 24,000
Outstanding Checks (35,000)
Bank error - check of another company charged by the bank (20,000)
Customer’s uncollectible check 30,000
Dishonored checks 62,000
Book error – customer’s check (900)
Book error –understatement of cash disbursement 180
Book error – overstatement of cash disbursement (29,610)
Bank charges 1,830
Customer’s note collected by bank (25,500)
Petty cash fund – included in the cash in bank 10,000
Claims from insurance company 60,000
NSF Checks returned 20,000
Book Balance 203,000
B. Book to Bank Method Dec. 31
Book Balance 203,000
Customer’s uncollectible check (30,000)
Dishonored checks (62,000)
Book error – customer’s check 900
Book error – understatement of cash disbursement (180)
Book error – overstatement of cash disbursement 29,610
Bank charges (1,830)
Customer’s note collected by bank 25,500
Petty cash fund – included in the cash in bank (10,000)
Claims from insurance company (60,000)
NSF Checks returned (20,000)
Outstanding Checks (35,000)
Bank error - check of another company charged by the bank (20,000)
Bank Balance 106,000
C. Dec. 31
Unadjusted Book Balance 203,000
Customer’s uncollectible check (30,000)
Dishonored checks (62,000)
Book error – customer’s check 900
Book error – understatement of cash disbursement (180)
Book error – overstatement of cash disbursement 29,610
Bank service charge (1,830)
Customer’s note collected by bank 25,500
Petty cash fund – included in the cash in bank (10,000)
Claims from insurance company (60,000)
NSF Checks returned (20,000)
Adjusted Cash Balances 75,000
Dec. 31
Unadjusted Bank Balance 106,000
Outstanding checks (35,000)
Bank error – check by another company charged by the bank (20,000)
Adjusted Cash Balances 75,000
Adjusting Entries:
a) Accounts Receivable 30,000
Cash in Bank 30,000
b) Notes Receivable – dishonored 62,000
Cash in Bank 62,000
c) Notes Receivable – discounted 60,000

Notes Receivable 60,000
d) Cash in Bank 900

Accounts Receivable 900
e) Accounts Payable 180

Cash in Bank 180
f) Cash in Bank 29,610

Accounts Payable 29,610
g) Bank Service Charge 1,830
Cash in Bank 1,830
h) Cash in Bank 25,500

Bank Service Charge 500
Interest Income 1,000
i) Petty Cash Fund 10,000

Cash in Bank 10,000
j) Claims from insurance company 60,000

Cash in Bank 60,000
k) Accounts Receivable 20,000

Cash in Bank 20,000
PROBLEM NO. 5 - Bank reconciliation and amount of shortage computation
You are conducting an audit of the Swerte Company for the year ended December 31,
2015. The internal control procedures surrounding cash transactions were not adequate.
The bookkeeper-cashier handles cash receipts, maintains accounting records, and
prepares the monthly bank reconciliations.
The bookkeeper-cashier prepared the following reconciliation at the end of the year:
Balance per bank statement P 350,000

Add: Deposit in transit P 175,250
Note collected by bank 15,000 190,250
Total
540,250
Less outstanding checks 246,750
Balance per general ledger P 293,500
In the process of your audit, you gathered the following:
• At December 31, 2015, the bank statement and general ledger showed balances of P
350,000 and P293,500, respectively.
• The cut-off bank statement showed a bank charge on January 2, 2016 for P 30,000
representing correction of an erroneous bank credit.
• Included in the list of outstanding checks were the following:
a. A check payable to a supplier, dated December 29, 2015, in the amount of P
14,750, released on January 5, 2016.
b. A check representing advance payment to a supplier in the amount of P 37,210,
the date of which is January 4, 2016, and released in December, 2015.
• On December 31, 2015, the company received and recorded customer's postdated
check amounting to P 50,000.
REQUIRED:
1. Compute for the following as at December 31, 2015:
a. Adjusted deposit in transit c. Adjusted cash in bank
b. Adjusted outstanding check d. Cash shortage
SOLUTIONS:
a. DIT, beg. P 175,250
Less: postdated checks (50,000)
Adjusted deposit in transit P 125,250
b. Unadjusted outstanding checks P 246,750

Unreleased check (14,750)
Postdated check delivered (37,210)

Adjusted outstanding checks P 194,790
Book balance P 293,500 Bank balance P 350,000

Add: Add: DIT
125,250
Unreleased check 14,750 Total 475,250
Postdated check 37,210 Less: OC (194,790)
Credit memo 15,000 Erroneous bank
Total 360,460 credit ( 30,000)
Less: Adjusted bank bal. P
250,460
Postdated check received (50,000)
Cash Shortage (60,000)
Adjusted book balance P 250,460
Adjusting Entries:

Cash in bank 50,000
b. Cash in Bank 14,750

c. Cash in Bank 37,210

d. Cash in bank 15,000

Account Receivable 15,000
e. Receivable from cashier 60,000

Cash in bank 60,000
PROBLEM NO. 6 – Cash shortage computation
You were engaged to audit the books of Davao Company. From the records of the
company, you gathered the following information:
Davao Company started operations on October 2, 2015 with the owners investing
P150,000 cash. Monthly bank reconciliation statements have not been prepared; however,
bank statements for October, November and December were made available to you. Your
analysis of these bank statement; showed total bang; credits (deposits) of P575,000
including the owners' initial investment and a bank loan, details of which are in additional
data. The bank statement in December, 2015 showed an ending balance of P91,500.
Examination of the paid checks disclosed that checks totaling P4,500 were issued by the
company in December, 2015, and were presented for payment only in January, 2016.
Cash count of the cashier's accountability amounted to P5,000. You were told by the
cashier that these were collection; from credit sales on December 30, 20I5, deposited on
January 2, 2016:
Additional information are as follows:
a. At counts receivable subsidiary ledgers had a total balance of P70,000 at December

31, 2015. P5,000 of this was ascertained to be uncollectible.
b. Suppliers' unpaid invoices for merchandise totaled P15,000; while an account for store
fixtures bought for P50,000 had an unpaid balance of P5,000.
c. Merchandise inventory at December 31, 2015 amounted to P30,000 but P5,000 of these
were spoiled with no resale value.
d. The bank statement in October showed a bank credit for P98,000, dated October 2,
2015. Inquiry from the cashier disclosed that the amount represents proceeds of a 90-
day, discounted bank note. P 80,000 of this loan was paid by check in December,
2015.
e. Operating expenses paid during the period totaled P 180,000; while merchandise
purchases amounted to P250,000.
f. The gross profit rate is 120% of cost.
REQUIRED:
Determine the cash shortage as of December 31, 2015.
SOLUTIONS:
Unadjusted balance per bank, Dec. 31 91,500

Outstanding checks ( 4,500)
Deposit in transit 5,000
Adjusted balance per bank 92,000
Cash balance per books, Dec. 31 122,000
Cash over (short) ( 30,000)
Cash receipts:
Owner’s investment 150,000
Proceeds from loan 98,000
Collections from customers 414,000
Total 662,000
Cash disbursements:
Purchases (250,000 – 15,000) 235,000
Store fixtures (50,000 – 5,000) 45,000
Loan payment 80,000
Expenses paid 180,000 540,000
Cash balance per books, Dec. 31 122,000
PROBLEM NO. 7 - Proof of cash
You were able to obtain the following information during your audit of Euro Company
Reconciling items:
Nov. 30 Dec. 31
Undeposited collections P 200,000
P120,000 Outstanding checks
80,000 60,000 Customer's notes
collected by bank 100,000 120,000
Bank service charges 2,000 3,000
Erroneous bank debits 10,000 20,000
Erroneous bank credits 40,000 30,000
NSF checks not redeposited 5,000 7,000 Customers
check deposited December 10,
returned by bank on December 16 marked NSF,
and redeposited immediately;
no entry made on books for return or redeposit 10,000
Unadjusted balances:
Books ?
P90,000
Bank 230,000
?
December Transactions:
Bank Books
Receipts P420,000
P270,000 Disbursements
500,000 407,000
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month of December

SOLUTIONS:
A. Bank to Book Method
Nov. 30 Receipts Disbursement Dec. 31
Bank balance 230,000 420,000 500,000 150,000
Deposit in Transit
November 200,000 (200.000)
December 120,000 120,000
Outstanding Checks
November (80,000) (80,000)
December 60,000 (60,000)
Error – bank debits
November 10,000 (10,000)
December (20,000) 20,000
Error – bank credits
November (40,000 (40,000)
December (30,000) (30,000)
Bank charges
November 2,000 2,000
December (3,000 3,000
Customer’s note collected by
bank
November (100,000) 100,000
December (120,000) (120,000)
NSF Checks returned
November (5,000 5,000
December (7,000) 7,000
NSF Checks redeposited (10,000) (10,000)
Book Balance 227,000 270,000 407,000 90,000
B. Book to Bank Method

Book Balance 227,000 270,000 407,000 90,0000
Bank charges
November (2,000) (2,000)
December 3,000 (3,000)
Collections by bank not
recorded to book
November 100,000 (100,000)
December 120,000 120,000
Check of another company
erroneously charged by the
bank
NSF Checks returned
November (5,000) (5,000)
December 7,000 (7,000)
Error
Deposit in Transit
November (200,000) 200,000
December (120,000) (120,000)
Outstanding checks
November 80,000 80,000
December (60,000) 60,000
Error – bank debits
November (10,000) 10,000
December 20,000 (20,000)
Error – bank credits
November 40,000 40,000
December 30,000 30,000
NSF Checks Redeposited 10,000 10,000
Bank Balance 230,000 420,000 500,000 150,000
C. Adjusted Balance Method
Unadjusted Book Balance 227,000 270,000 407,000 90,000
Bank charges
November (2,000) (2,000)
December 3,000 (3,000)
recorded to book
November 100,000 (100,000)
December 120,000 120,000
bank
NSF Checks returned
November (5,000) (5,000)
December 7,000 (7,000)
Error
Adjusted book Balances 320,000 290,000 410,000 200,000

Unadjusted Bank Balance 230,000 420,000 500,000 150,000
Deposit in Transit
November 200,000 (200,000)
December 120,000 120,000
Outstanding checks
November (80,000) (80,000)
December 60,000 (60,000)
Bank debits error
November 10,000 (10,000)
December (20,000) 20,000
Bank credits error
November (40,000) (40,000)
December (30,000) (30,000)
NSF checks returned;
redeposited (10,000) (10,000)
Adjusted Bank Balances 320,000 290,000 410,000 200,000
Adjusting Entries:
1. Cash in Bank 120,000
2. Bank Service Charge 3,000
Cash in Bank 3,000
3. Accounts Receivable 7,000

Cash in Bank 7,000
In your audit of the cash account of Cebu Company, you were requested by the client to
prepare a four-column reconciliation of receipts, disbursements, and balances to
reconstruct the balances per books.
Nov. 30 Dec. 31
a. Balances per bank P14,010 P19,630
b. Deposits in transit 2,740 3,110
d. Bank collections not in books 1,200 1,600
e. Bank charges not in books 950 640
f. Of the checks outstanding on December 31, one check for P700 was certified at the
request of the payee.
g. Receipts for December, per bank statement P281,070.
h. DAIF check from customer was charged by the bank on December 28, and has not
been recorded P 800.
i. DAIF check returned in November and recorded in December P1,050.
j. DAIF check returned and recorded in December, P900.
k. Check of Cibo Company charged by the hank in error, P2,010.
l. Receipt on December 6 paid out in cash for travel expenses, P 750 Recorded as
receipts and disbursements per books.
m. Error in recording customer's check on December 20, P165 instead P465.
n. Error in disbursements journal for December, P3,250 instead of P325:

You noted in your audit that the DAIF checks returned by the bank recorded as a reduction
on the cash receipts journal instead of recording it at cash disbursements journal;
redeposits are recorded as regular cash receipts.
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month December


SOLUTIONS:
Bank balance 14,010 281,070 275,450 19,630
Deposit in Transit
November 2,740 (2,740)
December 3,110 3,110
Outstanding Checks
November (4,260) (4,260)
December 3,870 (3,870)
Certified check request of
the payee (700) 700
bank (2,010) 2,010
Cash receipts used as
payment 750 750
Bank charges
November 950 950
December (640) 640
recorded to book
November (1,200) 1,200
December (1,600) (1,600)
NSF Checks returned
November and recorded in
Dec. 1,050 (1,050)
December and recorded in
Dec. (900) (900)
December and not
recorded (800) 800
Book error –
overstatement of recording
customer’s check (300) (300)
Book error – overstatement
of disbursement 2,925 (2,925)
Book Balance 13,290 279,540 274,635 18,195

Book Balance 13,290 279,540 274,635 18,195
Bank charges
November (950) (950)
December 640 (640)
recorded to book
November 1,200 (1,200)
NSF Checks returned
Dec. (1,050) 1,050
Dec. 900 900
December and not
recorded 800 (800)
Book error –
customer’s check 300 300
of disbursement (2,925) 2,925
Deposit in Transit
November (2,740) 2,740
December (3,110) (3,110)
Outstanding checks
December (3,870) 3,870
the payee 700 (700)
bank 2,010 (2,010)
payment (750) (750)
Bank Balance 14,010 281,070 275,450 19,630
Adjusted Balance Method
Bank charges
December 640 (640)
recorded to book
November 1,200 (1,200)
NSF Checks returned
Dec. (1,050) 1,050
Dec. 900 900
December and not
recorded 800 (800)
Book error –
customer’s check 300 300
of disbursement (2,925) 2,925
Adjusted Cash Balances 12,490 282,190 273,100 21,580

Deposit in Transit
November 2,740 (2,740)
Outstanding checks
November (4,260) (4,260)
December 3,870 (3,870)
the payee (700) 700
bank (2,010) 2,010
payment 750 750
Adjusting Entries:
a. Cash in Bank 1,600
b. Bank Service Charge 640

Cash in Bank 640
c. Accounts Receivable 800

Cash in Bank 800
d. Cash in Bank 300
Accounts Receivable 300
e. Cash in Bank 2,925

In connection with your examination, the MQM Company presented to you the following
information regarding its Cash in Bank account for the month of December 2015:
a) Balances per bank statements: November 30, P215,600, and December 31, P230,400.
b) Balances of cash in bank account in company's books: November 30, P165,450, and
December 31, 226,800.
c) Total receipts per books were P2,221,900 of which P12,100 was paid in cash to a
creditor on December 24.
d) Total charges in the bank statement during December were P2,189,700.
e. Undeposited receipts were: November 30, P90,600 and December '11, P101,200.
f) Outstanding checks were: November 30, P26,750, and December 31, P19,300: of
which a check for P5,000 was certified by the hank on December 26.
g) NSF checks returned, recorded as reduction of cash receipts, were:

• Returned by bank on December, recorded also in December, P10,400.
• Returned by bank on December but recorded in January, P8,600
h) Collections by bank not recorded by Company were P121,500 in November and

P116,400 in December:
i) Bank service charges not entered in company's books were: November 30, P7,500 and
December 31, P4,200.
j) A check for P9,500 of QMQ Company was charged to MQM Company in error.
k) A check drawn for P8,400 was erroneously entered in the books as P4,800.
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month. December


SOLUTIONS:
Bank balance 215,600 2,204,500 2,189,700 230,400
Deposit in Transit
November 90,600 (90,600)
December 101,200 101,200
Outstanding Checks
November (26,750) (26,750)
December 14,300 (14,300)
Cash payment to creditor 12,100 12,100
Bank charges
December (4,200) 4,200
recorded to book
November (121,500) 121,500
December (116,400) (116,400)
bank (9,500) 9,500
NSF Checks returned
November (10,400) (10,400)
December (8,600) 8,600
Error (3,600) 3,600
Book Balance 165,450 2,221,900 2,160,550 226,800
Book Balance 165,450 2,221,900 2,160,550 226,800
Bank charges
November (7,500) (7,500)
December 4,200 (4,200)
recorded to book
November 121,500 (121,500)
December 116,400 116,400
bank 9,500 (9,500)
NSF Checks returned
November 10,400 10,400
December 8,600 (8,600)
Error 3,600 (3,600)
Deposit in Transit
November (90,600) 90,600
December (101,200) (101,200)
Outstanding checks
November 26,750 26,750
December (14,300) 14,300
Cash payment to creditor (12,100) (12,100)
Bank Balance 215,600 2,204,500 2,189,700 230,400

Unadjusted Book Balance 165,450 2,221,900 2,160,550 226,800
Bank charges
November (7,500) (7,500)
December 4,200 (4,200)
recorded to book
November 121,500 (121,500)
December 116,400 116,400
NSF Checks returned
November 10,400 10,400
December 8,600 (8,600)
Error 3,600 (3,600)
Adjusted Cash Balances 279,450 2,227,200 2,179,850 326,800

Unadjusted Bank Balance 215,600 2,204,500 2,189,700 230,400
Deposit in Transit
November 90,600 (90,600)
December 101,200 101,200
Outstanding checks
November (26,750) (26,750)
December 14,300 (14,300)
bank (9,500) 9,500
Cash payment to creditor 12,100 12,100
Adjusted Bank Balances 279,450 2,227,200 2,179,850 326,800
Adjusting Entries:

Cash in Bank 8,600
b. Cash in bank 116,400

c. Bank Service Charge 4,200

Cash in Bank 4,200
d. Cash in bank 3,600

You obtained the following information on the current account of Baht Company during
your examination of its financial statements for the year ended December 31, 2015.
The bank statement on November 30, 2015 showed a balance of P76,500. Among the
bank credits in November was customer's note for P25,000 collected for the account of the
company which the company recognized in December among its receipts. Included in the
bank debits were cost of checkbooks amounting to P300 and a P10,000 check which was
charged by the bank in error against Baht Co. account. Also in November you ascertained
that there were deposits in transit amounting to P20,000 and outstanding checks totaling
P42,500.
The bank statement for the month of December showed total credits of P104,000 and total
charges of P51,000. The company's books for December showed total receipts of
P183,900, disbursements of P101,800 and a balance of P121,400. Bank debit memos for
December were: No. 143 for service charges, P400 and No. 145 on a customer's returned
check marked "DAIF" for P6,000.
On December 31, 2015 the company placed with the bank a customer's promissory note
with a face value of P30,000 for collection. The company treated this note as part of its
receipts although the bank was able to collect on the note only in January, 2016.
A check for P990 was recorded in the company cash payments books in cash payments
book as P9,900.
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month of December

SOLUTIONS:

Bank balance 76,500 104,000 51,000 129,500
Deposit in Transit
November 20,000 (20,000)
December 54,900 54,900
Outstanding Checks
November (42,500) (42,500)
December 90,490 (90,490)
Erroneous bank debit – Nov. 10,000 (10,000)
Bank charges
November 300 300
December (400) 400
bank (25,000) 25,000
NSF Checks returned –
Dec. (6,000) 6,000
Book errors – Uncollected
customer’s note treated as
receipt 30,000 30,000
Error on recording check 8,910 (8,910)
Book Balance 39,300 183,900 101,800 121,400
Book Balance 39,300 183,900 101,800 121,400
Bank charges
December 400 (400)
bank 25,000 (25,000)
NSF Checks 6,000 (6,000)
Book error – uncollected
receipt (30,000) (30,000)
Error on recording check (8,910) 8,910
Deposit in Transit
November (20,000) 20,000
December (54,900) (54,900)
Outstanding checks
November 42,500 42,500
December (90,490) 90,490
Erroneous bank debit – Nov. (10,000) 10,000
Bank Balance 76,500 104,000 51,000 129,500
Bank charges
December 400 (400)
bank 25,000 (25,000)
NSF Checks 6,000 (6,000)
Book error – uncollected
receipt (30,000) (30,000)
Error on recording check (8,910) 8,910

Deposit in Transit
November 20,000 (20,000)
December 54,900 54,900
Outstanding checks
November (42,500) (42,500)
December 90,490 (90,490)
Erroneous bank debit – Nov. 10,000 (10,000)
Adjusting Entries:
a. Bank Service Charge 400
Cash in Bank 400
b. Accounts Receivable 6,000

Cash in Bank 6,000
c. Notes Receivable 30,000

Cash in Bank 30,000
d. Accounts payable 8,910

Cash in bank 8,910

Hangover Company received the following bank statement on August 1, 2015:
DATE DEBITS CREDITS
BALANCE
July I 66,405
2 2,502 63,903
3 2,240 1,050 62,713
5 2,106 64,819
6 5,535 70,354
8 5,817 76,171
9 8,181 67,990
10 4,317 72,307
11 6,819 4,926 65,488
12 7,425 62,989
13 62,989
15 3,509 66,498
16 9,777 56,721
17 6,221 7,702 58,202
18 6,484 51,718
19 3,418 55,136
20 5,310 60,446
22 6,492 66,938
23 5,546 61,392
24 61,392
25 8,735 52,657
26 8,246 60,903
27 9,385 70,288
29 7,060 63,228
30 63,228
31 6,405 8,987 65,810
TOTALS P77,395 P76,800
Hangover's cash account shows the following information for the month of July, 2015:
The June 30, 2015 balance was P62,150.
DATE DEBITS CREDITS

July 1 3,729 165
2 5,535
3 8,181
5 5,817
6 4,317
8 6,819
9 4,926 7,425
12 3,509
13 9,391
15 7,702
16 6,221
17 3,418 6,484
18 5,310
19 6,492
20 5,074
22 8,735
23 8,246
26 8,913 6,885
29 5,152 5,913
30 2,238
31 5,857
TOTALS P 75,304 P 77,150
1. Hangover makes a journal entry for service charges, direct deposits, and interest
earned in the month subsequent to the month the items are reflected on the bank
statement.
2. Barek Co. makes a direct deposit of P675 to Hangover's account at the bank on the
30th of every month. This payment, which is Tent revenue to Hangover, is not recorded
by Hangover until the bank statement is received.
3. On the 23rd of July, an NSF check for P472 was returned by the bank. The check was
redeposited on July 27th, and no entry was made by Hangover.
4. Check no. 1145 dated July 29 was written for P1,492 of wages, but recorded by
Hangover on its books as P1,000.
5. On July 16, the bank recorded a withdrawal of P386 for Hangover that should have
been for Handover Company.
6. The bank service charge for June was P165 and for July was P175.
7. The interest earned on June was P3,054 and in July was P3,160.
8. During June, Hangover wrote check no. 1095 for P9,850 for rent expense but recorded
the check on its books as P8,955. Hangover discovered the mistake in July, when the
cancelled checks were returned with the June bank statement but neglected to correct
the error on the books at that time.
9. At the end of June, Hangover had P3,156 of deposits in transit, and checks totaling
P4,742 that had not cleared the bank. In addition, all of Hangover's transactions with
the bank after July 29 have not cleared the bank.
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month of July

2. Adjusting entries as of July 31, 2015
Solutions:
Bank balance 66,405 76,800 77,395 65,810
Deposit in Transit
June 3,156 (3,156)
July 2,238 2,238
Outstanding Checks
June (4,742) (4,742)
July 5,857 (5,857)
Erroneous bank debit – Nov. (386) 386
Bank charges
June 165 165
July (175) 175
Direct Deposit (675) (675)
Dec. (472) (472)
Error Check 1145 (492) 492
Interest earned
June (3,054) 3,054
July (3,160) (3,160)
Error on recording check 895 895
Book Balance 62,150 75,304 77,150 60,304

Book Balance 62,150 75,304 77,150 60,304
Bank charges
December 175 (175)
Direct deposit 675 675
NSF Checks 472 472
Error check 1145 492 (492)
Interest earned
June 3,054 (3,054)
July 3,160 3,160
Error on recording check (895) (895)
Deposit in Transit
November (3,156) 3,156
December (2,238) (2,238)
Outstanding checks
December (5,857) 5,857
Erroneous bank debit – Nov. 386 (386)
Bank Balance 66,405 76,800 77,395 65,800

June 30 Receipts Disbursement July 31
Bank charges
June (165) (165)
July 175 (175)
Direct deposit 675 675
NSF Checks 472 472
Error check 1145 492 (492)
Interest earned
June 3,054 (3,054)
July 3,160 3,160
Error on recording check (895) (895)

Deposit in Transit
November 3,156 (3,156)
Outstanding checks
November (4,742) (4,742)
December 5,857 (5,857)
Erroneous bank debit – Nov. (386) 386
Adjusting Entries:
a. Cash in Bank 675
Rent income 675
b. Wages expense 492

Cash in Bank 492
c. Bank Service Charge 175

Cash in Bank 175
d. Cash in Bank 3,160

Interest income 3,160
e. Rent expense 895

Cash in Bank 895
Celtics Company had the following bank reconciliation on June 30, 2015:
Balance per bank statement, June 30, 2015 P 3,000,000

Add: Deposit in transit 400,000
Total 3,400,000
Less: Outstanding checks 900,000
Balance per book, June 30 P 2,500,000
The bank statement for the month of July 2015 showed the following:
Deposits (including P200,000 note collected for Celtics) P9,000,000
Disbursements (including P140,000 NSF
check and PI0,000 service charge) 7,000,000
All reconciling items on June 30, 2015 cleared through the bank in July its outstanding
checks totaled P600,000 and the deposits in transit amounted to P1,000,000 on July 31,
2015.
REQUIRED:
Determine the following:
1. Cash receipts per books in July
2. Cash disbursement per books in July
3. Cash balance per books at July 31
4. Adjusted cash balance at July 31
SOLUTIONS:
1. Deposits per bank statement for July P 9,000,000
Note collected by bank in July (200,000)
Deposit in transit- June 30 (400,000)
Deposit in transit- July 31 1,000,000
Cash receipts per book for July P 9,400,000
2. Disbursements per bank statement for July P 7,000,000

NSF check in July (140,000)
Service charge in July ( 10,000)
Outstanding checks- June 30 (900,000)
Outstanding checks- July 31 600,000
Cash Disbursements per book for July P 6,550,000
3. Balance per book- June 30 P 2,500,000

Book receipts for July 9,400,000
Book disbursements for July (6,550,000)
Balance per book- July 31 P 5,350,000
4. Balance per book- July 31 P 5,350,000

Note collected by bank in July 200,000
NSF customer check in July (140,000)
Service charge in July ( 10,000)
Adjusted cash balance P 5,400,000
You were able to obtain the following information in connection with your audit of the Cash
account of the Syria Company as of December 31, 2015:
November 30 December31
a. Balances per bank P 480,000 P
420,000
b. Undeposited collections 244,000 300,000
c. The bank statement for the month of December showed total credits of P240,000.
e. DAIF checks are recorded as a reduction of cash receipts. DAIF checks which are later
redeposited are then recorded as regular receipts. Data regarding DAIF checks are as
follows:
1. Returned by the bank in Nov, and recorded by the
company in Dec., P10,000.
2. Returned by the bank in Dec. and recorded by the
company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the
company in Jan., P29,000.
f. Check of Syrio Company amounting to P 90,000 was charged to the company's

account by the bank in error on December 31.
g. A bank memo stated that the company's account was credited for the net proceeds of a
customer's note for P 106,000.
h. The company has hypothecated its accounts receivable with the bank under an
agreement whereby the bank lends the company 80% of the hypothecated accounts
receivable. The company performs accounting and collection of the accounts.
Adjustments of the loan are made from daily sales reports and deposits.
i. The bank credits the company account and increases the amount of the loan for 80%
of the reported sales. The loan agreement states specifically that the sales report must
be accepted by the bank before the company is credited. Sales reports are forwarded
by the company to the bank on the first day following the date of sale. The hank
allocates each deposit 80% to the payment of the loan, and 20% to the company
account. Thus, only 80% of each day's sales and 20% of each collection deposits are
entered on the bank statement. The company accountant records the hypothecation of
new accounts receivable (80% of sales) as a debit to Cash and a credit to the bank
loan as of the date of sales. One hundred percent of the collection on accounts
receivable is recorded as a cash receipt; 80% of the collection is recorded in the cash
disbursements books as a payment on the loan. In connection with the hypothecation,
the following facts were determined:
• Included in the undeposited collections is cash from the hypothecation of accounts

receivable. Sales were P180,000 on November 30, and P200,000 at December 31.
The balance was made up from collections which were entered on the books in the
manner indicated above.
• Collections on accounts receivable deposited in December, other than deposits in
transit, totaled P725,000.
j. Interest on the bank loan for the month of December charged by the bank but not
recorded in the books, amounted to P38,000.
REQUIRED:
Determine the following:
1. Unadjusted balance per books as of November 30

2. Unadjusted book receipts for December
3. Unadjusted book disbursements for December
4. Unadjusted balance per books as of December 31
SOLUTIONS:
June 30 Receipts Disbursement July 31
Unadjusted Book Balance (1.) 504,000 (2.)735,000 (3.)700,000 (4.)539,000
Nov. and recorded on Dec. (10,000) 10,000
Dec. and recorded on Dec. 25,000 25,000
Dec. and recorded on Jan. 29,000 (29,000)
Customer’s note collected
by bank 106,000 106,000
Anticipated loan proceeds
from AR Hypothecation
Nov. 30 sales (180,000 x
80%) (144,000) 144,000
Dec. 31 sales (200,000 x
80%) (160,000) (160,000)
Anticipated loan payment
from undeposited
collections
Nov. 30 (100,000 x 80%) 80,000 80,000
Dec. 31 (140,000 x 80%) (112,000) 112,000
Interest charge from bank
loan 38,000 (38,000)

Deposit in Transit
November 100,000 (100,000)
December 140,000 140,000
Outstanding checks
November (150,000) (150,000)
December 120,000 (120,000)
Erroneous bank debit –
Dec. (90,000) 90,000
Deposits with loan payment
(725,000 x 80%) 580,000 580,000
PROBLEM NO. 14 - Three-dated bank reconciliation
The client, Noel Corporation, obtained bank statements for November 30 and December
31, 2015 and reconciled the balances. You obtained directly the statements of January 12,
2016 and obtained the necessary confirmation. You have found that there are no errors in
addition or subtraction in the client's books.
11/30/15 12/ 31/15

Balance, bank statement P344,420 P275,020
Balance, company records 271,260 226,010
Deposits in transit 35,000 ?
Outstanding checks 88,240 ?
12/1-31/15 1/1-12/16
Receipts, cash records P 963,230 P 292,500
Credits, bank statement 941,010 321,490
Disbursements, cash records 1,008,480 177,570
Charges, bank statement 1,010,410 230,180
The following information also was obtained:
a) Check no. 804 for P340 cleared by the bank in December as P1,340. This was found in
proving the bank statement. The bank made the correction on January 8, 2016.
b) A note of P20,000, sent to the bank for collection on November 15, 2015, was collected
and credited to the account on November 28. 2015, net of a collection fee of P80. The
note was recorded in the cash receipts on December 21, 2015, at which date the
collection fee was entered as a disbursement.
c) The client records returned checks in red in the cash receipts journal. The checks listed
in the table were returned by the bank.
Amount Returned Recorded Redeposited

Co. A P3,270 12/6/15 No entries
12/8/15
Co. B 6,730 12/ 27/15 1/3/16 1/15/16
d) Two payroll checks for employee's vacations totaling P5,500 were drawn on January 3,
2016, and cleared the bank on January 8, 2016. These checks were not entered in the
client’s records because semi-monthly payroll summaries are entered only on the 15 th
and the last day of each month.
REQUIRED:
1. Compute for the following:
a. Deposits in transit as of December 31, 2015
b. Outstanding checks as of December 31, 2015
c. Deposits in transit as of January 12, 2016
d. Outstanding checks as of January 12, 2016
2. Prepare a 4-column bank reconciliation for the month of December 2015 and for the
period January 1 to 12, 2016 using the adjusted balance method.
SOLUTIONS:
a. Deposit in Transit beginning 35,000
Dec. Book Receipts 963,230
Less: Receipts not representing
collection in Dec.
Customer’s note collected
by bank 20,000 20,000 943,230
Total 978,230
Less: Deposits created by the bank
Dec. Bank Receipts 941,010
NSF Checks 3,270 3,270 937,740
Deposit in Transit Dec. 31, 2015 40,490
b. Outstanding checks beginning 88,240

Dec. Book Disbursement 1,008,480
Less: Disbursement not representing
checks issued in Dec.
Bank Service Charge 80 80 1,008,400
Total 1,096,640
Less: Checks paid by the bank 1,010,410
Bank error in check payment 1,000
NSF Checks – Customer A 3,270
NSF Checks – Customer B 6,730 11,000 999,410
Outstanding Checks Dec. 31, 2015 97,230
c. Deposit in Transit beginning 40,490

Dec. Book Receipts 292,500
Less: NSF Checks – Customer B 6,730 6,730 299,230
Total 339,720
Less: Deposits created by the bank 321,490
Correction of error in check payment 1,000 320,490
Deposit in Transit January 12, 2016 19,230
d. Outstanding checks beginning 97,230

Dec. Book Disbursement 177,570
Add: unrecorded payroll checks 5,500 5,500 183,020
Total: 280,300
Less: Checks paid by the bank 230,180
Outstanding checks January 12, 2016 50,120
2. Adjusted Balance Method

Unadjusted Book Balance 271,260 963,230 1,008,480 226,010
Bank charges
November (80) (80)
NSF check – customer B 6,730 (6,730)
bank 20,000 (20,000)
Adjusted Cash Balances 291,180 943,230 1,015,130 219,280

Unadjusted Bank Balance 344,420 941,010 1,010,410 275,020
Deposit in Transit
November 35,000 (35,000)
December 40,490 40,490
Outstanding checks
November (88,240) (88,240)
December 97,230 (97,230)
Erroneous bank debit – Nov. (1,000) 1,000
NSF checks rdedeposited (3,270) (3,270)
Adjusted Bank Balances 291,180 943,500 1,015,670 219,280
3. Adjusted Balance Method

Dec. 31 Receipts Disbursement Jan. 12
NSF Checks returned and
redeposited (6,730) 6,730
Unrecorded payroll in Jan. 5,500 (5,500)
Deposit in Transit
December 40,490 (40,490)
January 19,230 18,230
Outstanding checks
December (97,230) (97,230)
January 50,120 (50,120)
Erroneous bank debit – Dec. 1,000 (1,000)
PROBLEM NO. 15 - Theory
Select the best answer for each of the following:
1. Who is responsible, at all times, for the amount of the petty cash fund?
a. General cashier
b. President of the company
c. Petty cash custodian
d. Chairman of the Board of Directors
ANSWER - C
2. What is the effect of not replenishing the petty cash fund at year-end and not making the
appropriate adjusting entry?
a. A detailed audit is necessary.

b. The petty cash custodian should turn over the petty cash to the general cashier.
c. Cash will be overstated and expenses understated.
d. Expenses will be overstated and cash will he understated.
ANSWER - C
3. The primary purpose of sending a standard confirmation request to financial institutions

with which the client has done business during the year is to.
a. Detect kiting activities that may otherwise not be discovered.
b. Corroborate information regarding deposit and loan balances.
c. Provide the data necessary to prepare a proof of cash.
d. Request information about contingent liabilities and secured transactions.
ANSWER - B
4. The auditor should ordinarily mail confirmation requests to all banks with which the client
has cc ducted any business during the year regardless of the year-end balance since
a. The confirmation form also seeks information about indebtedness to the bank.
b. This procedure will detect kiting activities which otherwise not be detected.
c. The mailing of confirmation forms to all such banks is required by GAAS.
d. This procedure relieves the auditor of any responsibility with respect to non-detection of
forged checks.
ANSWER - A
5. How will the auditor most likely utilize the bank reconciliation as evidence in the audit of
cash?
a. The auditor tests deposits-in-transit and outstanding items to other corroborating
evidence.
b. The auditor sends the reconciliation to the bank for independent verification.
c. The auditor performs the reconciliation for the client to record the proper cash balance.
d. The auditor traces the book balance of the reconciliation to the cutoff bank statement.
ANSWER - A
6. The auditor will send a standard bank confirmation to which of the following?
a. Financial institutions for which the client has a balance greater than P0 at the end of the
year.
b. Financial institutions with which the client has transacted during the year.
c. Financial institutions of customers using the lockbox.
d. Financial institutions used by significant shareholders.
ANSWER – B
7. An auditor who is engaged to examine the financial statements of a business enterprise

will request cutoff bank statement primarily in order to.
a. Verify the cash balance reported on the bank confirmation inquiry form.
b. Verify reconciling items on the client's bank reconciliation.
c. Detect lapping.
d. Detect kiting.
ANSWER – B
8. Which of the following cash transfers would appear as a deposit in transit on the
December 31, 2015 bank reconciliation?
Bank Account A Bank Account B
Disbursing Date (Month/Day) Receiving Date (Month/Day)
Per Bank Per Books Per Bank Per
Books
a. 12/31 12/30 12/31
12/30
b. 1/2 12/30 12/31
12/31
c. 1/3 12/31 1/2
1/2
d. 1/3 12/31 1/2
12/31
ANSWER – D
9. Which of the following transfers would not appear as an outstanding check on the
Disbursing Date (Month/ Day) Receiving Date (Month/ Day)
Per Books Per Bank Per Books Per Bank
a. 12/31 12/30
12/31 12/30
b. 1/2 12/30 12/31
12/31
c. 1/3 12/31 1/2
1/2
d. 1/3 12/31 1/2
12/31
ANSWER – B
Use the following information for the next two questions.

The information below was taken from the hank transfer schedule prepared during the
audit of Khaye Ting Company's financial statements for the year ended December 31,
2015. Assume all checks are dated and issued on December 30, 2015.
Disbursements Receipts
No. From To Per Books Per Bank Per
Books Per Bank
101 Pbcom HSBC 12/30 1/4 12/30
1/3
102 UCPB MBank 1/3 1/2
12/30 12/31
103 HSBC PSBank 12/31 1/3
1/2 1/2
104 MBank PNB 1/2 1/2 1/2
12/31
10. Which of the following checks might indicate kiting?

a. Check Nos. 101 and 103
b. Check Nos. 102 and 104
c. Check Nos. 101 and 104
d. Check Nos. 102 and 103
ANSWER – B
11. Which of the following checks illustrate deposits/transfers in transit at December 31?
a. Check Nos. 101 and 102
b. Check Nos. 101 and 103
c. Check Nos. 102 and 104
d. Check Nos. 103 and 104
ANSWER - B
12. Which of the following cash transfer results in a misstatement of cash at December 31,
2015?
From To Per Books Per Banks Per
Books Per Banks
a. PBCOM HSBC 12/31/15 1/4/16 12/31/15
12/31/15
b. UCPB MB 1/4/16 1/5/16 12/31/15
1/4/16
c. HSBC PBANK 12/31/15 1/5/16 12/31/15
1/4/16
d. MBANK PNB 1/4/16 1/11/16 1/4/16
1/4/16
ANSWER - B
CHAPTER 3 - Audit of Cash &
Cash Equivalents
Problem 1
The “CASH” account of Don Corporation’s ledger on December 31, 2006 showed the following:
a. Petty cash fund (including P7,500 unreplenished

voucher of which P2,400 is dated January 3, 2007) 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, 2006 (due on Feb. 1, 2007) 50,000
f. Time deposit due on March 31, 2007 50,000
g. 180-day Treasury bill, due March 15, 2007 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, 2007,
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, 2007) 150,000
n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)
o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2006
not mailed until January 5, 2007 20,000
p. Advances to Officers/Employees for Seminars (no liquidation is
required)
80,000
q. Money market placement (due June 30, 2007)
600,000
r. Listed stock held as temporary investment
100,000
s. Check #789 in payment to Suppliers, dated January 5, 2007 and
recorded December 31, 2006. 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
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-tem investment 150,000
Cash 150,000
d. No adjustment
4. DON CORPORATION’S cash and cash equivalents balance at December 31, 2006 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, 2006
is:
a. P 618,800 b. P 623,800 c. P 673,800
d. P 723,800
Solution
a. Operating expenses 5,100

Cash 5,100
b. Investment 500,000
Cash 500,000
c. No adjustment
d. No adjustment
e. No adjustment
f. No adjustment
g. Short-term investment 120,000
Cash 120,000
h. Notes receivable 20,000
Cash 20,000
i. No adjustment
j. Accounts receivable 15,000
Cash 15,000
k. Cash – restricted 210,000
Cash 210,000
l. No adjustment
m. Investment – current 150,000
Cash 150,000
n. No adjustment
o. No adjustment
p. Operating expenses 80,000
Cash 80,000
q. Short-term investment 600,000
Cash 600,000
r. Short-term investment 100,000
Cash 100,000
s. No adjustment
t. No adjustment
u. Investment 150,000
Cash 150,000
Answer:
1. D 2. D 3. C 4. A 5. A
Problem 2
The following items are found in the cash account of Ivie Company at December 31, 2006.
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, 2006, P25,000.

2. Company’s check (P30,000) dated December 26, 2006 which was drawn in payment for
merchandise purchased on that date but not delivered until January 3, 2007. 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, 2007 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, 2007 in payment of account, P50,000. This was
recorded in the company’s disbursement ledger at December 31, 2006.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2006), P100,000
14. Treasury Bills that matures on February 1, 2007, 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

c. Accounts receivable 4,000
Sales 4,000
d. No adjustments

Cash 50,000
b. Other liabilities 50,000
Cash 50,000
c. Cash 50,000
d. No adjustment

Cash 50,000
b. Cash 50,000
c. Cash 50,000
d. No adjustments

Cash 20,000
b. Cash 20,000
c. Cash 20,000
d. No adjustments
5. IVIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2006 is:
a. P 771,000 b. P 741,000 c. P 721,000s
d. P 691,000
Solution
Item 1 - Cash
Item 2 - Cash
Item 3 - Cash
Item 4 - Other Assets
Item 5 - Investment
Item 6 - Investment – current
Item 7 - Cash
Item 8 - Cash
Item 9 - Current liability
Item 10 – Offset to cash
Item 11 – Offset to Cash
Item 12 – Unused supplies
Item 13 – Cash as cash equivalents
Item 14 – Short-term investment
Item 15 – Cash
Item 16 – Cash
Item 17 – property recorded as disbursement
Answer:
1. B 2. A 3. D 4. D 5. D
Problem 3
Your audit of the December 31, 2006, financial statements of Mato 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 12/31/07) 500,000
5. Payroll account
175,000
6. Foreign bank account - restricted (translated using the
12/31/06 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 12/30/06 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:

Cash 10,000
b. Cash 10,000
c. Employees’ advances 10,000
Cash 10,000
d. Cash 10,000
Employees’ advances 10,000
2. MATO CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2006
is:
a. P 560,000 b. P 544,000 c. P 514,000 d. P
509,000
Solution
Current account at PNB 65,000

Treasury bills acquired 3 mos. Before maturity 200,000
Money order 10,000
Company’s undelivered check 30,000
TOTAL 544,000
Answer:
1. C B. B
Problem 4
The controller of Pacatang Company is attempting to determine the amount of cash to be
reported on its December 31, 2006 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. Pacatang Company has received a check that is dated January 12, 2007 in the amount of
P125,000.
j. Currency and coins on hand amounted to P5,300.
Questions
1. PACATANG COMPANY’S adjusted cash and cash

equivalents balance at December 31, 2006 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
Solution
Commercial savings account P1,000,000
Commercial checking account 900,000
Currency and coin on hand 5,300
Amount of cash to be reported on balance sheet at 12.31.03 P1,910,300
(2) Money market fund acct. M/S or Temp. Investments

(3) Travel advance for executive travel (employee to
reimburse through salary deduction) Advances to Employees
(4) Bond Retirement Fund Long-term Investment
(6) IOU from company officer Advance to officers
(7) Bank overdraft (the co. has no other deposits at this bank)
Current Liabilities
(8) Certificates of deposit (maturity of 120 days Marketable securities
(9) Postdated check January 12, 2004 Receivable
Answer:
1. A 2. D
Problem 5
Present journal entries to record the following transactions in the books of Marites 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, 2006 in the amount of P2,400.
b. On November 29, 2006, 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 purchased of supplies 124
Repairs and maintenance 350
Wages paid to casual employees 950
Charges from purchased of goods to be sold 400
c. On December 18, 2006, the fund was replenished and correspondingly increased to
P3,000; its composition included the following:
Store supplies 304
Accounts payable 914
Charges from purchased of goods to be sold 242
Miscellaneous expenses 782
d. An examination on December 31, 2006, disclosed the following composition of the fund,
although it was not replenished on this date:
Check of office manager, dated January 5, 2007 1,000
Office supplies 126
Miscellaneous expenses 90
e. On January 5, 2007, the check of office manager was cashed and the proceeds were added
to the petty cash fund.
f. On January 6, 2007, replenished disbursement from December 18, 2006 to January 5,

2007.
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 fun d 2,234
c. Operating expenses 1,694
Freight-in 400
Cash short/(over) 140
d. No entry since the company is using an impress fund
system.
2. The adjusted Petty Cash Fund balance of MARITES CORPORATION at December 31, 2006
is:
a. P 3,000 b. P 1,958 c. P 984
d. P 958
3. The entry to record the December 31, 2006 adjustment

of petty cash fund is:
a. Operating expenses 216
Cash short/over 26
b. Operating expenses 216
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Advances – employees 1,000
d. No entry since there is no replenishment yet.
4. The entry to record the January 6, 2004 replenishment

of petty cash fund is:
a. Operating expenses 216
Cash short/over 26
b. Operating expenses 216
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Advances – employees 1,000
Cash 2,042
d. No entry since the account has been adjusted on
December 31.
Solution
a. Petty cash fund 2,400
Cash 2,400
b. Operating expenses 1,694 TCAF 2,260
Freight-in 400 Accountability
2,400
Cash short/over 140 Shortage
140
Cash 2,234
c. Operating expenses 1,086 TCAF 2,400
Accounts payable 914 Accountability 2,400
Freight-in 242 Shortage
0
Cash 2,242
Petty cash fund 600
Cash 600
d. Operating expenses 216 TCAF 2,994
Advances to employees 1,000 Accountability 3,000
Accounts payable 800 Shortage
26
Cash short/over 26
Reversing entry – January 1

Operating expenses 216
Advances to employees 1,000
Cash short/over 26
e. No entry
f. Operating expenses 216
Cash short/over 26
Cash 1,042
Answer:
1. A 2. D 3. C 4. B
Problem 6
Your audit of the petty cash (P10,000) of Juliet Company as of December 31, 2006 revealed
the following: (cash count date is January 3, 2007 at 5:00 pm)
Bills: 10 - P500 bill 15 - P100 bill 18 - P50

15 - P20 5 - P10
Coins: P180 in P5 pieces; P42 in P1.00 pieces; P23 in
P0.25 pieces.
IOU’s submitted were:
Dec. 18 Nap R. - P 750
Dec. 28 Ruel R. 125
Dec. 30 Sonny S. 500
Cashed checks:
Dec. 28, 2006 check drawn by the manager
P 1,125
Dec. 28, 2006 check drawn by an employee
500
Dec. 30, 2006 check drawn by a customer
350
Jan 1, 2007 check drawn by an employee
1,250
The cashier informed you that owing to the lack of cash it was necessary for him to open
certain payroll envelopes unclaimed by employees and use the cash found herein. They
were as follows:
Dec. 15, 2006 - Ed A. P 1,250
Dec. 30, 2006 - Andoy 1,750
Dec. 30, 2006 - Macky 650
Dec. 30, 2006 - Paz 1,000
The cashier also informed you that all cash sales receipts were passed through his fund and
that cash sales tickets Nos. 2059 to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4 for
P350, 500 and P545, respectively, had not yet been turned over to the general cashier.
The petty cash vouchers found in the petty cash box were as follows:
Dec. 30, 2006 Transportation
P515
Dec. 30, 2006 Token gifts to visitors
650
Dec. 30, 2006 Freight for office supplies purchase
215
Jan. 1, 2007 Freight for mdse. purchased
125
Jan. 2, 2007 Freight for mdse. sold
575
Questions
1. JULIET COMPANY’S cash shortage at December 31, 2006 is:

a. P 2,072.75 b. P 1,370.00 c. P 1,027.75
d. P 327.75
2. The adjusted petty cash balance of JULIET COMPANY at December 31, 2006 is:
a. P 10,000 b. P 9,625 c. P 5,975
d. P 4,625
3. The entry to adjust the unclaimed payroll at December 31, 2006 is:
a. Petty Cash Fund c. Cash
Salaries expense Accrued salaries
b. Salaries expense d. Accrued salaries
Petty cash fund Cash
4. The cashed check dated January 1, 2007

a. Should be adjusted since it was dated January 1, 2007, hence a postdated check.
b. Should be adjusted since it was received December 31, 2006 but the check is dated
January 1, 2007, hence a postdated check.
c. Should not be adjusted since the check is dated January 1, 2007.
d. Should not be adjusted since the check was received December 31, 2007.
5. The Cash account (excluding PCF) of JULIET COMPANY is

understated at December 31, 2006 by:
a. P 4,650 b. P 4,900 c. P 6,045
d. P 6,370
Solution
Cash Count Due to custodian 1,370
Bills 7,750 Petty cash fund 1,370
Coins 245
IOUs 1,375 Advances to employees 1,375
Checks 3,225 Petty cash fund 1,375
Vouchers 2,080
TCAF 14,675 Cash 350
Accountability Sales 350
PCF per ledger (10,000)
Unclaimed payroll ( 4,650) Advances to employees 1,250
Undeposited sales ( 1,395) Petty cash fund 1,250
Cash shortage 1,370
Cash 4,650
Accrued salaries 4,650
Operating expenses 1,380

ANSWER:
1. B 2. D 3. C 4. B 5. B
Problem 7
You are making an audit of the Darwin Corporation for the past calendar year. The balance of
the Petty Cash account at December 31, 2006 was P1,300. Your count of the imprest cash
count made at 8:30 am on January 3, 2007, in the presence of the petty cash custodian,
revealed:
Currency and coins 571.38
Checks:
Date Maker Bank
12/28/06 Macky, vice-president PNB 360.00
12/29/06 Andy, employee DBP 60.00
12/31/06 Bobot, customer RCBC 153.80
01/02/07 Neil, customer PNB 121.36
01/10/07 Jeff, employee PNB 60.00
(check received Dec. 29)
(These checks were all considered good when deposited after dates shown on the
checks. The first four checks were actually deposited Jan. 3; the last check was
deposited Jan. 11; all five checks proved to be good.)
Vouchers:
Dec. 11 #261 Richard, shipping clerk – temporary advance for the use
of the receiving department. Your count of Mr. Richard’s fund revealed:
currency – P28.80; merchandise freight bills, P31.20. P 60.00
Dec. 28 # 301 Postage
12.00
Dec. 29 # 302 Freight bill on merchandise purchases
47.30
Dec. 31 # 305 Freight bill on office supplies
88.93
Jan. 2 # 500 Freight bill on merchandise purchases
29.36
IOU Dec. 21 Mabel, employee 36.00
Sales Invoices (for cash sales, collections handled by the petty cashier):
Invoice # 315 Dec. 30
P 120.00
328 Dec. 31
153.80
334 Jan. 2
121.36
(As a general rule, the petty cashier endeavored to turn over the proceeds of cash
sales to the general cashier on the 10 th, 20th and last days of each month. Proceeds
on these sales were recorded and deposited by the general cashier.)
Postage Stamps:
Three one-peso stamps. The petty cashier handled postage stamps. These stamps
represent the unused stamps purchased on Voucher # 301.
Questions
1. The petty cash fund shortage at December 31, 2006 is:
a. P 216.39 b. P 123.83 c. P
98.03 d. P 95.03
2. The adjusted petty cash fund balance of DARWIN

CORPORATION at December 31, 2006 is:
a. P 900.74 b. P 960.74 c. P
1,174.54 d. P 1,234.54
3. DARWIN CORPORATION’S operating expenses found in

the petty cash fund at December 31, 2006 is:
a. P 208.23 b. P 205.75 c. P
174.03 d. P 97.93
4. The Cash account (excluding PCF) of DARWIN

CORPORATION is understated at December 31, 2006 by:
a. P 395.16 b. P 273.80 c. P
153.80 d. P 120.00
Solution
Cash count
Currency and coins 571.38 Due to custodian 95.03
Checks 755.16 PCF 95.03
Vouchers 237.59
IOU 36.00 Cash 273.80
TCAF 1,600.13 Sales (SI#328 & 315) 273.80
Accountability
PCF per ledger (1,300.00) Adv. to employee 60.00
Undeposited sales ( 395.16) PCF 60.00
Cash shortage 95.03
Adv. to employee 60.00
Operating expenses 100.93
Freight-in 47.30
PCF 208.23
Freight-in 31.20

PCF 36.00
Unused postage 3.00

Operating expenses 3.00
Answer:
1. D 2. A 3. D 4. B
Problem 8
In connection with your audit of the financial statements of Reyes Corporation

for the year ended December 31, 2006, you conducted a surprise count of the
company’s petty cash and undeposited collections at 9:10 am on January 3,
2007. You count disclosed the following:
Bills and counts
Bills Coins
P100.00 5 pieces P1.00 205 pieces
50.00 40 pieces 0.50 162 pieces
20.00 35 pieces 0.25 32 pieces
10.00 27 pieces
Postage stamps (unused) - P365
Checks
Date Payee Maker
Amount
Dec. 30 Cash Custodian
P 1,200
Dec. 30 Reyes Corp. Karren, Inc.
14,000
Dec. 31 Reyes Corp. Sheryl, sales manager
1,680
Dec. 31 Reyes Corp. Victor Corp.
17,800
Dec. 31 Reyes Corp. Ma. Karen, Inc.
8,300
Dec. 31 Merry Corp. Reyes Corp.
27,000
(not endorsed)
Unreimbursed vouchers
Date Payee Description
Amount
Dec. 23 Sheryl, sales mgr. Advance for trip
P 7,000
Dec. 28 Post Office Postage stamps
1,620
Dec. 29 Messengers Transportation
150
Dec. 29 Ace, Inc. Computer repair
800
1. Unclaimed pay envelope of Jeanette. Indicated on the pay slip is his net salary of P7,500.
Your inquiry revealed that Jeanette’s salary is mingled with the petty cash fund.
2. The sales manager’s liquidation report for this Baguio Trip.

Cash Advance received on Dec. 23 P 7,000
Less: Hotel accomodation, meals, etc. P 4,500
Cash given to Carlo, salesman 300
5,200
Balance P
1,800
Cash returned by Carlo to the sales manager
P 120
Personal check of the sales manager
1,680
Total
P 1,800
1. The custodian is not authorized to cash checks.

2. The last official receipt included in the deposit on December 30 is No. 4351 and the last
official receipt issued for the current year is No. 4355. The following official receipts are all
dated December 31, 2006.
OR No. Amount Form of Payment

4352 P 13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check
3. The petty cash balance per general ledger is P10,000. The last replenishment of the fund
was made on December 22, 2006.
Questions
1. REYES CORPORATION’S cash shortage/overage at

December 31, 2006 is:
a. P 61,166 short c.
P 34,166 over
b. P 20,166 short d.
P 22,514 over
2. The adjusted petty cash balance of REYES

a. P 4,964 b. P 2,110 c. P
1,200 d. P 430
3. The undeposited sales/collection of REYES CORPORATION at December 31, 2006 is:

a. P 66,480 b. P 64,800 c. P 57,300 d. P
43,300
Solution
Bills and coins 3,764
Checks 69,980
Vouchers 9,570
TCAF 83,314
Accountability
PCF per ledger (10,000)
Undeposited sales – with receipts (43,300)
Unclaimed payroll ( 7,500)
Unendorsed check (27,000)
Undeposited sales – without receipts (14,000)
Check endorsed by sales manager ( 1,680)
Cash shortage (20,166)
Due to custodian 20,166

Cash 20,166
Cash 57,300
Sales (with and without receipts) 57,300
Cash 7,500
Accrued salary 7,500



Answer: 1. B 2. B 3. C
Problem 9
Mary Jane is the cashier of Adlawan Corporation. AS representative of the Zarate and
Associates, CPAs, you were assigned to verify her cash on hand in the morning of January 3,
2007. You began to count at 9:00 AM in the presence of Mary Jane. In the course of your
counting, you found currencies in paper bills and coins together with checks, vouchers, and
other items, which are mentioned below:
Bills: (2) P500; (8) P100; (12) P50; (5) P20
Coins: P 5.00 11 loose

1.00 24 loose
0.25 5 rolls and 32 loose (50 pieces to a roll)
0.10 10 rolls and 15 loose (50 pieces to a roll)
0.05 14 rolls and 20 loose (40
pieces to a roll)
Checks:
Date Maker Payee
Amount
12/22/06 Vivian, Asst. Mgr Adlawan Corp.
P 6,000
12/26/06 Mary Jane, cashier Adlawan Corp.
4,000
IOUs:
Date Maker
Amount
12/20/06 Yap, Janitor
P 500
12/22/06 Felix, clerk
750
12/24/06 Ablay, bookkeeper
500
PETTY CASH VOUCHERS FOR REPLENISHMENT

Date Payee Accounts
Charged Amount
12/16/06 Wagan, messenger Advances to
employees P1,000.00
12/17/06 Maren and Co. Supplies
545.00
12/18/06 Eeman Liner Freight in
982.50
12/18/06 Posts Office Supplies
300.00
12/20/06 Alejandre, carpenter Repairs
2,950.00
12/21/06 Violan Miscellaneous
expense 554.00
Your investigation also disclosed the following:
1. The balance of petty cash fund per books is P20,000.00.
2. Cash sale of January 2, 2007 amounted to P8,650 per sales records, while cash receipts
book and bank deposit slip showed that only P7,650 was deposited in the bank on
January 3, 2007
3. The following employees’ pay envelopes had been opened and the money removed.
Each envelope was marked “Unclaimed” - Ernesto, P332.50; Secinando, P447.50.
Questions
1. The petty cash shortage of ADLAWAN CORPORATION at

a. P 2,748.50 b. P 1,748.50 c. P
968.50 d. P 188.50
2. The adjusted petty cash balance of ADLAWAN
a. P 10,950 b. P 11,950 c. P
11,730 d. P 12,730
3. The undeposited sales/collection of ADLAWAN

a. P 8,650 b. P 7,650 c. P 1,000
d. P 0
Solution
Cash count
Bills and coins 2,730.00 Due to custodian 968.50
Checks 10,000.00 Petty cash fund 968.50
IOUs 1,750.00
PCF Vouchers 6,331.50 Adv. to employees 1,750.00
TCAF 20,811.50 Petty cash fund 1,750.00
Accountability
PCF per ledger (20,000.00) Adv. to employees 1,000.00
Uneposited sales ( 1,000.00) Operating expenses 4,349.00
Unclaimed payroll ( 780.00) Freight-in 982.50
Cash shortage 968.50 Petty cash fund 6,331.50
Cash 780.00
Accrued salary 780.00
Answer:
1. C 2. A 3. D
Problem 10
In your year-end audit of Angela Corp., the cashier showed a cash accountability of
P1,100,000 as at December 31, 2006. The following transactions were extracted in the books
of the company, in summary form:
Accounts receivable, beginning

P 275,000
Accounts receivable, end
385,000
Sales (80% on credit)
1,850,000
Accounts written-off
25,000
Recovery of accounts written-off, included in the
collection
of account receivable
15,000
Depreciation of fixed assets
150,000
Inventory, end
185,000
Inventory, beg
203,000
Cost of sales
960,000
Income tax accrued
18,500
Payment of bank loan
200,000
Subscription receivable
250,000
Subscribed capital stock
950,000
Purchases of fixed assets
320,000
Proceeds from short-term bank loan
300,000
Accounts payable, end
425,000
Accounts payable, beg.
200,000
Questions
1. The correct cashier’s accountability at December 31, 2006 is:

a. P 1,493,000 b. P 1,123,000 c. P
793,000 d. P 423,000
2. ANGELA CORPORATION’S cash account at December31, 2006 is:

a. Understated by P 307,000 c. Overstated by P 693,000
b. Understated by P 393,000 d. Overstated by P 677,000
Solution
Proceeds from collection of accounts receivable 1,360,000 *

Proceeds from cash sales 370,000
Proceeds from bank loan 300,000
Proceeds from issuance of capital stock (P950,000 – P250,000) 700,000
Payment of accounts payable ( 717,000) **
Payment of short-term bank loan ( 200,000)
Purchase of fixed assets ( 320,000)
Total Accountability 1,493,000
Total Cash 1,100,000
Cash shortage 393,000
* Accounts Receivable
Beg. bal 275,000 Collection 1,360,000 squeeze figure
Cr. Sales 1,480,000 Write-off 25,000
Recovery 15,000 ________
1,770,000 1,385,000
End bal 385,000
** Accounts payable *** Beg.

Inv. 203,000
Payment 717,000 Beg. bal. 200,000 Purchases 942,000
_______ Purchases 942,000 *** TGAS
1,145,000
717,000 1,142,000 End inv.
185,000
End bal. 425,000 COS
960,000
Answer:
1. A 2. B
Problem 11
The following data are gathered from the cash books and bank statement received from Davao
Bank by Grace Company:
The cash in bank ledger account shows a debit balance of P290,438.50 as of May 31.
The bank statement shows a credit balance of P318,560 as of May 31.
An examination of the checks encashed by the bank shows that the following checks are not
presented for payment:
No. 187, P3,608; No. 189, P15,499; No. 191, P4,400;
No. 192, P1,545.50, No. 193, P23,001
A certified check for P24,750 payable to creditor, was encashed by the bank during May.
The bank statement shows a deduction of P10,802 for check No. 184. The check was actually
made out at P10,208.
A check deposited on May 27 for P34,100 was returned by the bank on May 28 marked Refer
to Maker.
A non-interest bearing note for P44,000 was collected by the bank for the account Grace
Company. Collection fee deducted by the bank is P330.
A deposit for P20,900 was recorded in the books twice.
Check No. 179 for P26,400 was erroneously recorded in the books as P46,200.
Interest on an outstanding loan payable, deducted by the bank on May 31, P1,320.
Collections on May 31 to be deposited on June 1, P26,488.
Questions
1. GRACE COMPANY’S adjusted cash balance at May 31,

2006 is:
a. P 341,939.50 b. P 283,288.50 c. P
297,588.50 d. P 273,168.50
2. The recorded cash of GRACE COMPANY at May 31 is:

a. Understated by P 17,270 c.
Overstated by P 7,150
b. Understated by P 7,150 d.
Overstated by P 17,270
Solution
Unadjusted Book balance 290,438.50 Unadjusted Bank balance 318,560.00

Returned check (34,100.00) Outstanding checks (48,053.50)
Collection of Notes 43,670.00 Error 594.00
Error (20,900.00) Deposit in transit 26,488.00
Error 19,800.00
Error ( 1,320.00) _________
Adjusted book balance 297,588.50 Adjusted bank balance 297,588.50
Adjusting entry:

Cash 34,100
Cash 43,670
Collection fee 330
Notes receivable 44,000
Cash 20,900
Cash 19,800
Interest expense 1,320
Cash 1,320
Answer:
1. C 2. B
Problem 12
The following data pertaining to the cash transactions and bank account of Abiso Company for
May 2006 are available to you:
Cash balance, per accounting records, May 31, 2006 P 51,582

Cash balance, per bank statement, May 31, 2006 95,874
Bank service charge for May 327
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2006 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customer’s promissory note; principal amount P24,000,
collected by the bank, taken up in the books with interest 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount
of
3,600
Stolen check lacking an authorized signature, deducted from Abiso’s
account by the bank in error 2,400
Customer’s checks returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the checks; no entry has
been made in the accounting records to record the returned check 2,280
Questions
1. The adjusted cash in bank balance of ABISO COMPANY

at May 31, 2006 is:
a. P 87,570 b. P 90,000 c. P
90,570 d. P 90,900
2. The cash in bank balance of ABISO COMPANY at May 31,
2006 is:
a. Understated by P39,318 c.
Understated by P38,418
b. Understated by P38,988 d.
Understated by P35,988
Solution
Book Bank
Unadjusted balance 51,582 95,874
Service charge ( 327)
DM – printed checks ( 375)
Loan proceed 17,100
Proceed from note collection 24,300
Bank error ( 2,700)
Bank error 2,400
NSF ( 2,280) __________
Adjusted balance 90,000 90,000
Adjusting entry:
Service charge 327

Cash 327
Service charge 375

Cash 375
Cash 17,100
Prepaid interest 900
Bank loan 18,000
Cash 24,300
Note receivable 24,000
Interest income 300

Cash 2,280
Answer:
1. B 2. C
Problem 13
In connection with an audit, you are given the following bank reconciliation.
BANK RECONCILIATION
December 31, 2006
Balance per ledger, 12/31/03 P 34,349.72
Add: Collections received on the last day of
December and charged to “Cash in Bank”
on books but not deposited
5,324.50
Debit memo for customer’s checks returned
unpaid (check is on hand but no entry has been
made on the books) 4,000.00
Debit memo for bank service charge for December
1,000.00
P 46,674.22
Deduct:
Outstanding checks P
18,625
(see details below)
Credit memo for proceeds of a note receivable
which had been left at the bank for collection
but which has not been recorded as collected
8,000
Check for an account payable entered on books
as P12,625 but drawn and paid by bank as
16,225 3,600
32,225.00
Computed balance P
14,449.22
Unlocated difference
36,601.00
Balance per bank (check to confirmation) P 51,050.22
LIST OF OUTSTANDING CHECKS

December 31, 2006
Check No. Amount
14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
P 18,625
Questions:
1. The adjusted cash balance at December 31, 2006 is:

a. P 33,749.72 b. P 34,949.72 c. P
37,749.72 d.P40,949.72
2. A check for an account payable entered on books as P12,625 but drawn and paid by bank
as 16,225
a. Should not be included in the reconciliation since the bank already gave the money to
the payee.
b. Should not be included in the reconciliation since bank’s record is always followed.
c. Should be included as deduction in the book reconciliation since this is considered as
book error, thus a reconciling item.
d. Should be included as addition in the book reconciliation since this is considered as
book error, thus a reconciling item.
3. The outstanding checks at December 31, 2006 is:

a. P 15,025 b. P 18,625 c. P 19,025
d. P 22,625
4. The cash balance of the company per record at December 31, 2006 is:
a. Overstated by P600 c.
Understated by P 3,400
b. Overstated by P1,200 d. Overstated
by P 6,600
Solution
Bank Book
Unadjusted balance 51,050.22 34,349.72
Returned checks ( 4,000.00)
Service charge ( 1,000.00)
Collection of note receivable 8,000.00
Deposit in transit 5,324.50
Outstanding checks (22,625.00)
Book error ____________ ( 3,600.00)
Adjusted balance 33,749.72 33,749.72
Adjusting entry

Cash 4,000
Service charge 1,000

Cash 1,000
Cash 8,000
Note receivable 8,000

Cash 3,600
Answer:
1. A 2. C 3. D 4. A
Problem 14
The cash books of Grace Corporation show the following entries during the month of June
2006.
Cash Receipts Journal Check Register
Date Amount Date Check No.
Amount
June 1Balance 762,000 June2 801 15,625
4Deposit 113,000 3 802 7,526
4Deposit 811,000 5 803 229,205
7Deposit 152,200 7 804 169,555
10 Deposit 11,300 8 805 74,936
10 Deposit 12,700 10 806 274,600
11 Deposit 73,000 11 807 34,842
17 Deposit 110,075 13 808 250,000
18 Deposit 3,725 14 809 1,070,000
18 Deposit 65,000 17 810 167,300

19 Deposit 26,463 19 811 3,130
20 Deposit 133,037 21 812 82,730
27 Deposit 273,628 23 813 127,200
30 Deposit 92,400 25 814 93,080
30 815
720
The bank statement for the month of June 2006 shows:
Checks No. Deposits Date Amount

Balance May 31
798,000
924,000 June 5
1,722,000
800 36,000 6
1,686,000
804 169,555 7 1,516,445
805 74,936 217,200 8
1,658,709
801 16,525
803 229,205 9 1,412,979
807 34,842 97,000 12
1,475,137
924 75,000
200 40,400 CM 13
1,440,337
(collection charge)
809 1,070,000 14 370,337
808 250,000 15 120,337
198,000 CM 16
318,337
810 167,300 113,800 19 264,837
812 82,730 159,500 21 341,607
806 274,600 24 67,007
273,628 28
340,635
811 3,130
DM 300 30
337,205
Upon investigation, the following are discovered:
CM - Represents a 60-day, 6% note for P40,000 collected by the bank for the account of Grace
Company.
CM - Represents a 60-day, 6% own note for P200,000 discounted by Grace Corporation with
the bank and not yet recorded in the books.
DM - Represents bank service charge for the month.
Check No. 924 represents a check signed by Graciele Company.
Collection charge – represents collection fee charged by the bank.
Questions
1. The unadjusted cash ledger balance of GRACE

CORPORATION at June 30, 2006 is:
a. P 114,079 b. P 113,179 c. P
39,079 d. P 38,179
2. The unadjusted cash bank balance of GRACE

CORPORATION at June 30, 2006 is:
a. P 261,305 b. P 336,305 c. P
337,205s d. P 412,205
3. The deposit in transit of GRACE CORPORATION at June

30, 2006 is:
a. P 92,400 b. P 104,500 c. P
182,000 d. P 0
4. The outstanding checks of GRACE CORPORATION at

June 30, 2006 is:
a. P 302,806 b. P 228,526 c. P
227,806 d. P 153,526
5. The adjusted cash balance of GRACE CORPORATION at

June 30, 2006 is:
a. P 277,879 b. P 276,079 c. P
261,305 d. P 201,079
6. The error made in check number 801 is known as:

a. Fundamental error c.
Transplacement error
b. Balance sheet error d.
Transposition error
7. In the discounting of P200,000 note, the company should credit

a. Notes receivable discounting c. Notes
payable
b. Notes Receivable d. Notes
discounting
Solution
Unadjusted book bal. 39,079 Unadjusted bank bal. 337,205
Error – Deposit in transit
92,400
Check # 801 – P 15,625 Outstanding checks:
Correct 16,525 ( 900) # 802 7,526
Collection fee ( 200) # 813 127,200
DM ( 300) # 814
93,080
CM 40,400 # 815
720 (228,526)
CM 198,000 Error
75,000
Adjusted balance 276,079 Adjusted balance
276,079
Adjusting entry:
Cash 900
Cash 40,200
Collection fee 200
Interest income 400
Service charge 300
Cash 300
Cash 198,000
Interest expense 2,000
Notes payable 200,000
Answer:
1. C 2. C 3. A 4. B 5. B
6. D 7. B
Problem 15
The bank portion of the bank reconciliation for Angelo Company at October 31, 2006 was as
follows:
Angelo Company
Bank Reconciliation
October 31, 2006
Cash Balance per Bank P
12,367.90
Add: Deposit in transit
1,530.20
P
13,898.10
Less: Outstanding checks
Check Number Check Amount

2451 P 1,260.40
2470 720.10
2471 844.50
2472 426.80
2474 1,050.00 4,301.80
Adjusted cash balance per bank P

9,596.30
The adjusted cash balance per bank agreed with the cash balance per books at October 31.
The November bank statement showed the following checks and deposits.
Bank Statement
Checks Deposits
Date Number Amount Date
Amount
11-1 2470 720.10 11-1
1,530.20
11-2 2471 844.50 11-4
1,211.60
11-5 2474 1,050.00 11-8
990.10
11-4 2475 1,640.70 11-13
2,575.00
11-8 2476 2,830.00 11-18
1,472.70
11-10 2477 600.00 11-21
2,945.00
11-15 2479 1,750.00 11-25
2,567.30
11-18 2480 1,330.00 11-28
1,650.00
11-27 2481 695.40 11-30
1,186.00
11-30 2483 575.50 Total
16,127.90
11-29 2486 900.00
Total 12,936.20
The cash records per books for November showed the following:
Cash Receipts
Cash Payments Journal
Journal____
Date Number Amount Date Number Amount
Date Amount
11-1 2475 1,640.70 11-20 2483 575.50
11-3 1,211.60
11-2 2476 2,830.00 11-22 2484 829.50
11-7 990.10
11-2 2477 600.00 11-23 2485 974.80
11-12 2,575.00
11-4 2478 538.20 11-24 2486 900.00
11-17 1,472.70
11-8 2479 1,570.00 11-29 2487 398.00
11-20 2,954.00
11-10 2480 1,330.00 11-30 2488 800.00
11-24 2,567.30
11-15 2481 695.40 Total 14,294.10
11-27 1,650.00
11-18 2482 612.00
11-29 1,186.00
11-30 1,225.00
Total 15,831.70
The bank statement contained two bank memoranda:
1. A credit of P2,105.00 for the collection of a P2,000 note for Angelo Company plus interest
of P120 and less a collection fee of P15. Angelo company has not accrued any interest on
the note.
2. A debit for the printing of additional company checks, P50.
At November 30, the cash balance per books was P11,123.90, and the cash balance per the
bank statement was P17,604.60. The bank did not make any errors, but Angelo Company
made two errors.
Note: The correction of any errors pertaining to recording checks should be made to Accounts
Payable. The correction of any errors relating to recording cash receipts should be made to
Accounts Receivable
Questions
1. The unadjusted cash ledger balance of ANGELO

COMPANY at November 30, 2006 is:
a. P 11,133.90 b. P 12,990.90 c. P
13,188.90 d. P 13,377.90
2. The unadjusted bank balance of ANGELO COMPANY at

November 30, 2006 is:
a. P 12,828.90 b. P 13,008.90 c. P
13,188.90 d. P 17,614.60
3. The outstanding checks of ANGELO COMPANY at

a. P 5,659.70 b. P 5,830.70 c. P
5,839.70 d. P 6,028.70
4. The deposit in transit of ANGELO COMPANY at November 30, 2006 is:

a. P 1,225 b. P 1,216 c. P 1,234
d. P 1,396
5. The adjusted book balance of ANGELO COMPANY at

a. P 11,133.90 b. P 12,990.90 c. P
13,188.90 d. P 13,377.90
Solution
Unadjusted bank bal. 17,614.60 Unadjusted book bal. 11,133.90

Deposit in transit 1,225.00 CM – notes collected
2,105.00
Outstanding checks: DM – service charge ( 50.00)
#2451 1,260.40 Error –
overstatement of
#2473 426.80 recorded receipts
( 9.00)
#2478 538.20 Error-
understatement of
#2482 612.00 disbursement
( 180.00)
#2483 829.50
#2484 974.80
#2488 800.00 ( 5,839.70)
_________
Adjusted balance 12,990.90 Adjusted balance
12,990.90
Adjusting entry:
Cash 2,105
Service charge 15
Interest income 120
Service charge 50
Cash 50
Accounts receivable 9
Cash 9
Cash 180
Answer:
1. A 2. D 3. C 4. A 5. B
Problem 16
The following information pertains to the cash of Jenny Company:
Nov 31
Dec. 31
Balance shown on bank statement P 27,380
P 26,960
Balance shown in general ledger before
reconciling the bank account 25,780
25,000
Outstanding checks 8,630
10,150
Deposits in transit 6,850
12,450
For Dec.
Deposits shown in bank statement P
55,880
Charges shown on bank statement
56,300
Cash receipts shown in company’s books
53,980
Cash payments shown in company’s books
54,760
The bank service charge was P180 in November (recorded by the company during December)
and P240 in December (not yet recorded by the company).
Included with the December bank statement was a check for P5,000 that had been received on
December 25 from a customer on account. The returned check marked “NSF” by the bank,
has not yet been recorded on the company’s books.
During December the bank collected P7,500 of bond interest for the company and credited the
proceeds to the company’s account. The company earned the interest during the current
accounting period but has not yet recorded it.
During December the company issued a check for P6,960 for equipment. The check, which
cleared the bank during December, was incorrectly recorded by the company for P8,960.
Questions
1. The adjusted cash receipts of JENNY COMPANY at

December 31 is:
a. P 61,480 b. P 53,980 c. P
50,280 d. P 46,480
2. The adjusted cash disbursements of JENNY COMPANY at

December 31 is:
a. P 63,980 b. P 61,980 c. P
57,820 d. P 54,780
3. In a proof of cash, the NSF check:

a. Should be added in the December 31 column since this was returned back by the bank.
b. Should be deducted in the December 31 column since this was returned back by the
bank.
c. Should be deducted in the December 31 column since this was returned back and not
paid by the bank, thus not considered as receipts.
d. Should be added in the December 31 column since this was returned back and not paid
by the bank, thus not considered as receipts.
4. The adjusted December 31 cash balance of JENNY

COMPANY is:
a. P 29,760 b. P 29,260 c. P
27,260 d. P 25,600
5. The adjusted November 31 cash balance of JENNY

COMPANY is:
a. P 29,160 b. P 27,260 c. P
26,160 d. P 25,600
6. The check issued but was incorrectly recorded as P8,960

should be adjusted by:
a. Accounts payable 2,000 c. Cash
2,000
Cash 2,000
b. Equipment 2,000 d. Cash
2,000
Cash 2,000
Equipment 2,000
Solution
Nov. 30 Receipts Disburs. Dec. 31
Balance per book 25,780 53,980 54,760 25,000
Service charge – Nov. 30 (180) (180)
- Dec. 31 240 (240)
NSF check 5,000 (5,000)
Interest earned 7,500 7,500
Book error __________ _________ (2,000) 2,000
Adjusted Balance 25,600 61,480 57,820 29,260
Nov. 30 Receipts Disburs. Dec. 31

Balance per bank 27,380 55,880 56,300 26,960
Outstanding check – Nov. (8,630) (8,630)
- Dec. 10,150 (10,150)
Deposit in transit - Nov 6,850 (6,850)
- Dec __________ 12,450 _________ 12,450
Adjusted balance 25,600 61,480 57,820 29,260
Adjusting entry
Service charge 240

Cash 240

Cash 5,000
Cash 7,500
Cash 2,000
Equipment 2,000
Answer:
1. A 2. C 3. C 4. B 5. D
6. D
Problem 17
ELEFANTE’s check register shows the following entries for the month of December
Date Checks Deposits

Balance
2006
Dec 1 Beginning Balance
P 83,900
5 Deposit P 65,000
7 Check # 14344 32,500
120,800
11 Check # 14345 14,000
106,800
26 Deposit 49,000
29 Check #14346 8,600
147,200
ELEFANTE’s bank reconciliation for November revealed one outstanding check (No.14343) for
P12,000 (written on November 28), and one deposit in transit for P5,550 (made November
29).
The following is from Elefante’s bank statement for December 2006:
Date Checks Deposits

Balance
2006
Dec. 1 Beginning balance
P 95,970
1 Deposit P 5,550
101,300
4 Check No. 14344 P 32,500
68,800
5 Deposit 56,000
124,800
14 Check No. 14345 14,000
110,800
15 Loan Proceeds 500,000
610,800
20 NSF check 7,600
603,200
29 Service charge 1,000
602,200
31 Interest 3,600
605,800
Note: All errors noted in this problem were committed by the Elefante, not the bank. It is also
noted that the company failed to record one deposit in the book.
Questions
1. The unadjusted cash receipts per ledger of ELEFANTE

COMPANY for the month of December is:
a. P 119,620 b. P 114,000 c. P
110,620 d. P 105,000
2. The unadjusted cash receipts per bank of ELEFANTE

COMPANY for the month of December is:
a. P 574,150 b. P 568,600 c. P
565,150 d. P 559,600
3. The adjusted December 1 cash ledger balance of ELEFANTE COMPANY is:
a. P 95,970 b. P 89,520 c. P 83,900
d. P 78,280
4. The adjusted December31 cash bank balance of

ELEFANTE COMPANY is:
a. P 634,420 b. P 628,800 c. P
623,180 d. P 577,620
5. The overstatement of deposit should be:

a. Deducted in the bank December 31 column.
b. Added in the bank December 31 column.
c. Deducted in the book December 31 column.
d. Added in the book December 31 column.
Solution
Dec. 1 Receipts Disburs. Dec. 31
Bank balance 95,970 565,150 55,100 606,020
Deposit in transit – Dec. 1 5,550 (5,550)
- Dec. 31 49,000 49,000
Outstanding checks
Dec. 1 - #14343 (12,000) (12,000)
Dec. 31 - #14343 – P12,000
#14346 - 8,600 __________ ________ 20,600 (20,600)
Dec. 1 Receipts Disburs. Dec. 31

Book balance 83,900 114,000 55,100 142,800
Overstatement of deposit (9,000) (9,000)
Loan proceeds 500,000 500,000
Interest income 3,600 3,600
NSF 7,600 (7,600)
Service charge __________ ________ 1,000 (1,000)
Total 83,900 608,600 63,700 628,800
Unrecorded collection 5,620 ________ _________ 5,620
Adjusting entry

Cash 9,000
Cash 500,000
Notes payable 500,000
Cash 3,600

Cash 7,600
Service charge 1,000

Cash 1,000
Answer:
1. B 2. C 3. B 4. A 5. C
Problem 18
Juliet Company maintains a checking account at the Davao Bank. At July 31, selected data
from the ledger balance and the bank statement are as follows:
Cash in Bank
Per Books Per Bank
Balance, July 1 P 17,600 P 19,200

July Receipts 82,000
July Credits 80,070
July Disbursement 76,900
July Debits . 74,740
P 22,700 P 24,530
Analysis of the bank data reveals that the credits consist of P78,000 of July deposits and a
credit memorandum of P2,070 for collection of a P2,000 note plus interest revenue of P70.
The July debits per bank consist of checks cleared, P74,700 and a debit memorandum of P40
for printing additional company checks.
You also discover the following errors involving July checks: (1) a check for P230 to a creditor
on account that cleared the bank in July was journalized and posted as P320, and (2) a salary
check to an employee for P255 was recorded by the bank for P155.
The June 30 bank reconciliation contained only two reconciling items: deposits in transit,
P1,000 and outstanding checks, P2,600.
Assume that the interest on the note has been accrued.
Questions
1. The deposit in transit of JULIET COMPANY at July 31 is

a. P 5,000 c. P
1,000
b. P 2,930 d.
Cannot be determined
2. The outstanding check of JULIET COMPANY at July 31 is:

a. P 4,700 b. P 4,660 c. P
4,610 d. P 4,520
3. The adjusted cash ledger balance of JULIET COMPANY at July 31 is:

a. P 25,020 b. P 24,820 c. P 24,730 d. P
24,640
4. The adjusted cash bank balance of JULIET COMPANY at

July 31 is:
a. P 25,020 b. P 24,820 c. P 24,730 d. P
24,640
Solution
Book balance 22,700 Bank balance

24,530
CM – collection 2,070 Error – understatement of
DM – service charge ( 40) withdrawal ( 100)
Error – overstatement of Deposit in transit 5,000
disbursement 90 Outstanding checks
(4,610)
Adjusted book balance 24,820 Adjusted bank balance 24,820
DIT – beg. 1,000 OC – beg

2,600
+ Book receipts 82,000 + Book disbursement
78,810
- Bank credits - Bank debits
(excluding all CMs) 78,000 (excluding all DMs) 74,800
DIT – end 5,000 OC – end
4,610
Adjusting entry:
Cash 2,070
Interest income 70
Service charge 40
Cash 40
Cash 90
Accounts payable 90
Answer:
1. A 2. C 3. B 4. B
Problem 19
You are asked to audit the cash of Letty Corporation. Letty Corporation carries its checking
account with Mindanao Bank. The following data are available:
a. Letty Company Cash account for December:
Balance, November 30 P 20,900

Deposits during December 93,400
Checks written during December ( 83,000)
Balance, December 31 P 32,300
b. Bank statement for December:
Balance, November 30
P 20,000
Deposits during December
92,300
Checks cleared during December
( 82,150)
Funds transferred from foreign operations revenue
(in peso amount not yet recorded by Letty Corp.)
25,000
NSF check, Customer Nelly
( 180)
Bank Service charge
( 70)
Balance, December 31
P 54,900
c. Additional data:
1. Balance in Petty Cash account, P200 (not included in Letty Cash account).
2. The deposits of P93,400 by Letty Company are overstated by P100; the bank recorded
the correct amount.
3. The checks cleared by the bank of P82,150 erroneously included a P300 check drawn
by Laity Corporation; the bank has not yet corrected this error.
4. November 30: deposits outstanding, P2,000; and checks outstanding, P1,500.
Questions
1. The deposit in transit of LETTY COMPANY at December

31 is:
a. P 3,100 b. P 3,000 c. P
2,900 d. P 2,000
2. The outstanding checks of LETTY COMPANY at December

31 is:
a. P 1,650 b. P 1,500 c. P
2,050 d. P 2,350
3. The adjusted cash balance of LETTY COMPANY at December 31 is:

a. P 56,050 b. P 55,950 c. P 55,650
d. P 55,550
4. The cash shortage of LETTY COMPANY at December 31

is:
a. P0 b. P 400 c. P 500
d. P 600
Solution
Book balance 31,300 Bank balance
54,900
CM 25,000 Error
300
DM ( 70) Deposit in transit
3,000
NSF ( 180) Outstanding checks
(2,650)
Error ( 100)
______
Total 55,950 Total
55,550
Shortage ( 400)
______
Adjusted balance 55,550
55,550
DIT – beg 2,000 OC – beg

1,500
+ Book receipts 93,300 + Book disbursement
83,000
- Bank deposits 92,300 - Bank disbursement
81,850
DIT – end 3,000 OC – end
2,650
Adjusting entry:
Cash 25,000
Cash – foreign bank 25,000
Service charge 70
Cash 70
Cash 180
Cash 100
Due to custodian 400
Cash 400
Answer:
1. B 2. A 3. D 4. B
Problem 20
In Your audit of the accounts of Cleenenth Company, you find the following facts on December
31, 2006.
Balance of cash in bank account

P1,350,000
Balance of bank statement
1,200,000
Outstanding checks, December 31:
No. 000567 10,000
581 55,000
582 40,000
602 25,000
615 65,000
616 70,000
265,000
Receipts of December 31, deposited the following month
275,000
The bank statement shows the following charges:
Service charge for December
5,000
NSF check received from a customer
85,000
The stub for check number 000581 and the invoice relating thereto show that it was for
P35,000 but was incorrectly recorded as P55,000. This was in payment of the accounts
payable.
Payment has been stopped on check number 000567 which was drawn in payment of accounts
payable. The payee cannot be located.
Included in the bank statement was a canceled check the company had failed to record. The
check was in payment of accounts payable.
Questions
1. The unrecorded disbursement of CLEENETH COMPANY at

a. P 80,000 b. P 50,000 c. P
40,000 d. P 10,000
2. Cancellation of check number 567 should be recorded

as:
a. Debit to Accounts Payable c. Credit
to Accounts Payable
b. Credit to Cash d. No
adjustment/entry
3. Cash shortage of CLEENETH COMPANY at December 31, 2006 is:

a. P0 b. P 50,000 c. P 40,000
d. P 10,000
4. The adjusted cash balance of CLEENETH COMPANY at

a. P 1,290,000 b. P 1,240,000 c. P
1,210,000 d. P 1,180,000
Solution
Balance per book 1,350,000 Accounts payable 50,000
Service charge ( 5,000) Cash 50,000
NSF check ( 85,000)
Overstatement of disburs Service charge 5,000
check # 581 20,000 Cash 5,000
Cancellation of check
# 567 10,000 Accounts receivable 85,000
Total 1,290,000 Cash 85,000
Unrecorded disburs. * ( 50,000)
Adjusted balance 1,240,000 Cash 20,000
Balance per bank 1,200,000
Outstanding checks ( 265,000) Cash 10,000
Deposit in transit 275,000 Accounts payable 10,000
Overstatement of disburs
check # 581 20,000
# 567 10,000
Adjusted balance 1,240,000
* squeeze figure
Answer:
1. B 2. C 3. A 4. B
Problem 21
Dema-ala Company is very profitable small business. It has not, however, given much
consideration to internal control. For example, in an attempt to keep clerical and office
expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a
result, Maria handles all cash receipts, keeps the accounting records, and prepares the monthly
bank reconciliation.
The balance per bank statement on October 31, 2006, was P73,520. Outstanding checks
were: No. 62 for P507, No. 183 for P600, No. 284 for P1,103, No. 862 for P762.84, No. 863 for
P907.20, No. 864 for P661.12. Included with the statement was a credit memorandum of
P800 indicating the collection of a note receivable for Dema-ala Company by the bank on
October 25. Dema-ala Company has not recorded this memorandum.
The company’s ledger showed one cash account with a balance of P87,570.88. The balance
included undeposited cash on hand. Because of the lack of internal control, Maria took for
personal use all the undeposited receipts in excess of P15,182.04. She then prepared the
following bank reconciliation in an effort to conceal her theft of cash.
Cash balance per books, October 31

P 87,570.88
Add: Outstanding checks
No. 862 P 762.84
No. 863 907.20
No. 864 661.12
1,931.16
P 89,502.04
Less: Undeposited receipts
15,182.04
Unadjusted balance per bank, October 31
P 74,320.00
Less: Bank credit memorandum
800.00
Cash balance per bank statement, October 31
P 73,520.00
Questions
1. DEMA-ALA COMPANY’S cash shortage at October 31 is:

a. P 4,210 b. P 3,410 c. P
1,600 d. P 800
2. DEMA-ALA COMPANY’S adjusted cash balance at October

31 is:
a. P 88,370.88 b. P 87,570.88 c. P
86,770.88 d. P 84,160.88
Solution
Book Bank
Unadjusted balance 87,570.88 73,520.00
Collection of note 800.00
Outstanding checks
# 62 P 507.00
#183 600.00
#284 1,103.00
#862 762.84
#863 907.20
#864 661.12 ( 4,541.16)
Deposit in transit _________ 15,182.04
Total 88,370.88 84,160.88
Cash shortage (4,210.00) ________
Adjusted cash balance 84,160.88 84,160.88
Adjusting entry:
Cash 800
Notes receivable 800
Cash 4,210
Answer:
1. A 2. D
Problem 22
On December 15 of the current year, Darwin, who owns Herald Corporation, asks you to
investigate the cash-handling activities in his firm. He thinks that an employee might be
stealing funds. “I have no proof” he say, “but I’m fairly certain that the November 30
undeposited receipts amounted to more than P6,000 although the November 30 bank
reconciliation prepared by the cashier shows only P3,619.20. Also, the November bank
reconciliation doesn’t show several checks that have been outstanding for a long time. The
cashier told me that these checks needn’t appear on the reconciliation because he has notified
the bank to stop payment on them and he had made the necessary payment on the books.
At your request, Darwin showed you the following November 30 bank reconciliation prepared
by the cashier.
Bal. Per bank statement P 2,360.12 Bal. Per Books P 5,385.22

Deposit in transit 3,619.20 Bank Service charge (
30.00)
Outstanding checks Unrecorded bank CM (
600.00)
# 2351 550.10
2353 289.16
2354 484.84 ( 1,224.10)
________
Adjusted Balance P 4,755.22 Adjusted Balance P

4,755.22
You discover that the P600 unrecorded bank credit represents a note collected by the bank on
Darwin’s behalf. It appears in the deposits column of the November bank statement. Your
investigation also reveals that the October 31 bank reconciliation showed three checks that
had been outstanding longer than 10 months: No. 1432 for P300, No. 1458 for P233.45, and
No. 1512 for P126.55.
You also discover that these items were never added back into the cash account in the books.
In confirming that the checks shown on the cashier’s November 30 bank reconciliation were
outstanding on that date, you discover that check No. 2353 was actually a payment of P829.16
and had been recorded on the books for the amount.
To confirm the amount of undeposited receipts at November 30, you request a bank statement
for December 1-12 (called a cut-off bank statement). This indeed shows a December 1 deposit
of P3,619.20.
Questions
1. The amount of fund stolen by the cashier is:

a. P 3,160 b. P 2,500 c. P 1,840 d. P 580
2. The total outstanding checks of HERALD CORPORATION

at November 30 is:
a. P 2,524.10 b. P 1,884.10 c. P
1,864.10 d. P1,224.10
3. The adjusted cash balance of HERALD CORPORATION at November 30 is:
a. P 5,955.22 b. P 5,355.22 c. P 4,115.22 d. P
3,455.22
Solution
Book balance 5,385.22 Bank balance 2,360.12
CM 600.00 Deposit in transit
3,619.20
Service charge ( 30.00) Outstanding checks
Stalled checks #2351 550.10
#1432 300.00 #2353 829.16
#1458 233.45 #2354 484.84 (1,864.10)
#1512 126.55 660.00 ________
Total 6,615.22 Total
4,115.22
Cash shortage (2,500.00) ________
Adjusted balance 4,115.22 Adjusted balance 4,115.22
Adjusting entry:
Cash 600
Notes receivable 600
Service charge 30
Cash 30
Cash 660
Cash 2,500
Answer:
1. B 2. C 3. C
Problem 23
The bank statement for the account of ARNOLD COMPANY at December 31, 2006 showed a
credit balance of P20,000, while the company’s ledger balance of the cash account as of
November 30, 2006 was a debit of P40,000. During December, 2006, the ledger showed two
postings, a debit of P60,000 and a credit of P39,000 from the Cash Receipts and Check
Disbursements Journal, respectively.
Your examination revealed that the cash column of the receipts book was underfooted by
P6,400. The receipts book recorded only the collections from customers and did not include a
bank credit in December for P8,000, representing loan proceeds of a P10,000 promissory note.
An examination of the customers’ subsidiary ledgers showed total credits to individual accounts
amounting to P70,400. The December Check Disbursements Journal which was overfooted by
P500, records only the checks issued by the company. In the month of December, 2006, the
bank charged ARNOLD COMPANY for P5,000 representing a loan guaranteed by the client but
was dishonored by the maker, the company vice-president. The December bank service
charges of P1,200 were erroneously charged by the bank to the account of Ronald Company.
The bank made the correction in January, 2007. The outstanding checks as of December 31,
2006 amounted to P5,600.
On the morning of January 2, 2007, a cash count conducted produced the following:
Bills and coins P

5,200
Three (3) duplicate copies of ARNOLD CO.
official receipts, all dated Jan. 2, 2007 1,800
Checks
2,900
NSF check charged by the bank on Jan. 2, 2007
1,400
Questions
1. The deposit in transit of ARNOLD COMPANY at December

31, 2006 is:
a. P 6,300 b. P 7,700 c. P
8,100 d. P 11,300
2. The cash shortage of ARNOLD COMPANY at December

31, 2006 is:
a. P 54,200 b. P 50,200 c. P
46,200 d. P 36,400
3. The maximum probable cash shortage of ARNOLD COMPANY at December 31, 2006 based
on the records is:
a. P 54,200 b. P 50,200 c. P 46,200 d. P
36,400
4. The adjusted cash balance of ARNODL COMPANY at

a. P 19,500 b. P 21,300 c. P
20,900 d. P 24,500
Solution
Book Bank
Cash shortage 50,200
Unadjusted balance 61,000 20,000 - Bank Recon
Understatement of receipts 6,400 Cash shortage – AR ledger
CM 8,000 -
AR subsidiary
Overstatement of disbursements 500 ledger credit
DM – service charge (5,000) posting
70,400
DM – service charge not recorded - Cash debit
in the book and erroneously postings * 66,400
4,000
recorded by the bank (1,200) (1,200) Maximum Shortage
54,200
Deposit in transit * Cash
debit posting 60,000
(5,200 + 2,900 – 1,800) ______ 6,300 unrecorded
collection 6,400
Total 69,700 19,500
66,400
Cash shortage (50,200) ______
Adjusted cash balance 19,500 19,500
Answer::
1. A 2. B 3. A 4. A
Problem 24
The PAMA CORPORATION engaged your services to audit its account. In your examination of
cash, you find that the Cash account represents both cash on hand and cash in bank. You
further noted that there is very poor internal control of cash.
Your audit covers period ended June 30, 2006. You started the audit on June 15. Upon cash
count on this date, cash on hand amounted to P4,800. Examination of the cash book and other
evidence of transaction disclosed the following:
1. July collections per duplicate receipts, P18,800

2. Total of duplicate deposit slips, all dated, July, P11,000, includes a deposit representing
collections of June 30.
3. Cash book balance at June 30, 2006 is P46,500, representing both cash on hand and
cash in bank.
4. Bank statement for June shows a balance of P42, 400.
5. Outstanding checks at June 30: May checks, No. 183 for P450, and No. 198 for P1,650;
June checks, No. 205 for P600, No. 254 for P400, No. 280 for P5,000, No. 302 for P900,
and No.317 for P2,500.
6. Undeposited collections at June 30, P5,000.
7. An amount of P900 representing proceeds of clean draft on a customer was credited by
bank, but is not yet taken up in the company’s books.
8. Bank service charges for June, P100.
The company cashier presented to you the following reconciliation statement for June, 2006
which he has prepared:
Balance per books, June 30, 2006

P46,500
Add: outstanding checks:
No. 205 P 600
254 400
280 500
302 700
317 1,500
3,600
Total
P49,200
Bank charges
(100)
Undeposited collections
( 5,100)
Balance per bank, June 30, 2006
P44,000
Questions
1. The outstanding checks of PAMA CORPORATION at June

30, 2006 is:
a. P 3,600 b. P 3,700 c. P
5,700 d. P 11,500
2. The cash shortage of PAMA CORPORATION at June 30,

2006 is:
a. P 7,800 b. P 11,400 c. P
12,800 d. P 19,400
3. The cash shortage of PAMA CORPORATION from July 1

to July 15, 2006 is:
a. P 8,000 b. P 7,800 c. P
3,000 d. P 2,800
4. The total cash shortage of PAMA CORPORATION up to July 15, 2006 is:
a. P 14,400 b. P 15,600 c. P 15,800 d. P
19,400
5. The adjusted cash balance of PAMA CORPORATION at

June 30, 2006 is:
a. P 35,900 b. P 39,600 c. P
43,800 d. P 44,900
Solution
Book Bank
Unadjusted balance 46,500 42,400
CM 900
Service charge ( 100) ______
Total 47,300 35,900
Cash shortage (11,400) ______
Adjusted cash balance 35,900 36,900
Cash shortage from July 1 to July 15
Collection per records 18,800

Deposit in transit – June 30 5,000
Cash that should be deposited 23,800
Deposited collection 11,000
Undeposited collection 12,800
Cash on hand – July 15 4,800
Cash shortage – July 1 to July 15 8,000
ANSWER:
1. D 2. B 3. A 4. D 5. A
Problem 25
In connection with the general examination of the accounts of Nelson Trading Company at
December 31, 2006, you obtained the information and data as shown below relative to your
verification of Cash.
The record kept by the accountant showed the following:
(a) Balances at the end of the month:
December 1, 2006 December 31, 2006

Per Bank Statement P 54,000
P101,100
Per Books 50,400
70,215
Undeposited collections 3,300
7,200
Outstanding checks 6,900 *
12,000 *
* Composed of the following #6515 510

#6552 P 1,800
6517 2,250
6553 5,700
6518 2,400
6554 2,550
6519 1,740
6555 1,950
(b) Totals for the month of December, 2006:

Cash Book:
Receipts P 425,550
Disbursement 405,735
Bank Statement
Receipts P 444,225
Disbursement 397,125
After application of the necessary auditing procedures, the following were noted:
a. Footing of disbursement should be P 404,235, instead of P 405,735.

b. Bank service charge of P15 for December has not been booked.
c. Cancelled checks (returned together with the December bank statement) include the
following which were charged in the statement:
1. Check #6530 dated December 15, 2006 for P2,400 - this was issued as
replacement of check # 6518 which was returned by the payee because of
certain erasures. No entry has been made to record the cancellation of check
#6518.
2. Check #6517 for P225 - this was erroneously recorded on the books as P2,250.
3. Check of Neil Trading for P900 - this was charged by bank in error.
d. Proceeds from sale of stocks amounting to P23,250 (cost is P18,000) transmitted
directly by the broker to the bank and credited on December 31, 2006. No entry has
been made on the books to record this sale of stock investment.
e. The company failed to record disbursement for payment of accounts payable at
December 31, 2006 for P1,500.
Questions
1. The adjusted cash receipts per ledger of NELSON
TRADING COMPANY at December 31, 2006 is:
a. P 448,800 b. P 448,125 c. P
444,225 d. P 425,550
2. The adjusted cash disbursement per bank of NELSON
TRADING COMPANY at December 31, 2006 is:
a. P 401,325 b. P 402,000 c. P
405,735 d. P 406,125
3. The adjusted cash ledger balance of NELSON TRADING COMPANY at December 31, 2006 is:
a. P 91,350 b. P 95,400 c. P 97,200
d. P 97,500
4. The adjusted cash in bank balance of NELSON TRADING

COMPANY at December 31, 2006 is:
a. P 91,350 b. P 95,400 c. P 97,200
d. P 97,500
5. The cash shortage of NELSON TRADING COMPANY at

a. P 765 b. P 675 c. P 575
d. P 390
Solution
Dec. 1 Receipts Disburse. Dec. 31
Balance per book 50,400 425,550 405,735 70,215
Overfooting of disburse. ( 1,500) 1,500
Service charge 15 ( 15)
# 6518 ( 2,400) 2,400
Overstatement of
disbursement ( 2,025) 2,025
Proceeds from sale of
stock 23,250 23,250
Unrecorded disbursement _________ _________ 1,500 ( 1,500)
Balance 50,400 448,800 401,325 97,875
Cash shortage _________ ( 675) _________ ( 675)
Dec. 1 Receipts Disburse. Dec. 31

Balance per bank 54,000 444,225 397,125 101,100
Deposit in transit
Dec. 1 3,300 ( 3,300)
Dec. 31 7,200 7,200
Outstanding checks
Dec. 1 ( 6,900) ( 6,900)
Dec. 31 12,000 ( 12,000)
Error _________ _________ ( 900) 900
Adjusting entry:
Due to custodian 675

Cash 675
Service charge 15
Cash 15
Cash 2,025

Cash 1,500
Cash 1,500
Cash 2,400
Cash 23,250
Stock investment 18,000
Gain on sale 5,250
Answer:
1. B 2. A 3. C 4. C 5. B
Problem 1
The senior auditor instructed you to prepare a four column proof of cash receipts and disbursements for
the month of August 2008.
The bank reconciliation prepared by Albarando Company at July 31 is reproduced below (All book
disbursements were recorded in August)
Bank Balance 52,000 Book Balance

40,000
Add: Proceeds
of note receivable
Add: Deposit in transit, July 31 900 by bank in July
8,000
Deposit made in bank on
July 31 not
recorded on
books until
August 1,000
Total 52,900 Total
49,000
Less: Outstanding checks Less: Service Charge
100
No. 436 200
No. 450 1,800
No. 451 1,400
No. 454 600 4,000
______
Adjusted balance 48,900 Adjusted balance
48,900
Upon inquiry about the client’s August 31 bank reconciliation, you were informed hat it has been lost and
that no client is too busy at this time to prepare another. Your senior auditor told you to get the August
bank statement and paid checks and to prepare the August 31 reconciliation so that you may complete
the August proof of cash.
The August bank statement is reproduced below:
Davao Bank
Account name: Albarando Company
Date Debits Credits
July 31
August 1 1,800 900
August 8 1,400
August 9 600 10,000
August 15 1,000
August 20 700 14,000
August 27 1,440
August 31 440 SV
August 31 300 DM
August 31 1,820
SV – Service Charges; DM – Debit Memos; EC – Error
Corrected; CM – Credit Memo
The paid checks accompanying this bank statement (all clearing in August) were: (checks listed in order
of payment by bank)
No. 450 1,800 No. 455 1,000

No. 458 1,440
451 1,400 456 700
459 1,820
454 600
The checks register revealed that the last check issued on August was no. 460 for P1,000 and that check
no. 457 was for P2,400.
Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on September 1.
The debit memo on August 12 and August 31 were customer DAIF checks returned by the bank. The
check on August 12 was immediately redeposited without entry. The check returned on August 31 was
redeposited by the client in the bank on September 1 without entry.
Questions: Based on the application of the necessary audit procedures and appropriation of the above
daa, you are to provide the answer to the following:
1. How much is the unadjusted book receipts for August?

a. P 25,140 b. 42,400 c. P 35,540
d. P 43,360
2. How much is the unadjusted book disbursements for August?
a. P 8,460 b. P 9,740 c. P 8,760
d. P 8,360
3. How much is the adjusted book receipts for August?

a. P 33,640 b. P 33,450 c. P 34,400
d. P 33,400
4. How much is the adjusted book disbursement for August?

a. P 9,100 b. P 8,900 c. P 9,200
d. P 9,340
5. How much is the adjusted cash balance as of August 31, 2004?

a. P 73,940 b. P 73,060 c. P 73,400
d. P 73,200
AUDIT OF CASH AND CASH EQUIVALENTS
PROBLEM NO. 1
In connection with your audit of Caloocan Corporation for the year ended December 31, 2006, you
gathered the following:
1. Current account at Metrobank P2,000,000
2. Current account at BPI (100,000)
3. Payroll account 500,000
4. Foreign bank account – restricted (in equivalent pesos) 1,000,000
5. Postage stamps 1,000
6. Employee’s post dated check 4,000
7. IOU from controller’s sister 10,000
8. Credit memo from a vendor for a purchase return 20,000
9. Traveler’s check 50,000
10. Not-sufficient-funds check 15,000
11. Money order 30,000
12. Petty cash fund (P4,000 in currency and expense
receipts for P6,000) 10,000
13. Treasury bills, due 3/31/07 (purchased 12/31/06) 200,000
14. Treasury bills, due 1/31/07 (purchased 1/1/06) 300,000
Question:
Based on the above information and the result of your audit, compute for the cash and cash equivalent
that would be reported on the December 31, 2006 balance sheet.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000
Suggested Solution:
Current account at Metrobank P2,000,000

Money order 30,000
Petty cash fund (P4,000 in currency) 4,000
Total
P2,784,000
Answer: A
PROBLEM NO. 2
In the course of your audit of the Las Piñas Corporation, its controller is attempting to determine the
amount of cash to be reported on its December 31, 2006 balance sheet. The following information is
provided:
1. Commercial savings account of P1,200,000 and a commercial checking account balance of

P1,800,000 are held at PS Bank.
2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to
reimburse through salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term
debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its
cash receipts. At the present time, the company has no deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit
have maturity of 120 days.
8. Las Piñas has received a check dated January 2, 2007 in the amount of P150,000.
9. Las Piñas has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure
future credit availability.
10. Currency and coin on hand amounted to P15,000.
Question:
Based on the above and the result of your audit, how much will be reported as cash and cash
equivalent at December 31, 2006?
a. P3,025,000 c. P2,575,000
b. P2,825,000 d. P5,025,000
Suggested Solution:
Savings account at PS Bank P1,200,000

Checking account at PS Bank 1,800,000
Currency and coin 15,000
Total P3,025,000
Answer: A
PROBLEM NO. 3
The cash account of the Makati Corporation as of December 31, 2006 consists of the following:
On deposit in current account with Real Bank P 900,000
Cash collection not yet deposited to the bank 350,000
A customer’s check returned by the bank for insufficient 150,000
fund
A check drawn by the Vice-President of the Corporation
dated January 15, 2007 70,000
A check drawn by a supplier dated December 28, 2006 for
goods returned by the Corporation 60,000
A check dated May 31,2006 drawn by the Corporation
against the Piggy Bank in payment of customs duties.
Since the importation did not materialize, the check was
returned by the customs broker. This check was an
outstanding check in the reconciliation of the Piggy
Bank account 410,000
Petty Cash fund of which P5,000 is in currency; P3,600 in
form of employees’ I.O.U. s; and P1,400 is supported by
approved petty cash vouchers for expenses all dated
prior to closing of the books on December 31, 2006 10,000
Total 1,950,000
Less: Overdraft with Piggy Bank secured by a Chattel
mortgage on the inventories 300,000
Balance per ledger
P1,650,000
Question:
At what amount will the account “Cash” appear on the December 31, 2006 balance sheet?
a. P1,315,000 c. P1,495,000
b. P1,425,000 d. P1,725,000
Suggested Solution:
Current account with Real Bank P 900,000
Undeposited collection 350,000
Supplier's check for goods returned by the Corporation 60,000
Unexpended petty cash 5,000
Current account with Piggy Bank (P410,000 - P300,000) 110,000
Total
P1,425,000
Answer: B
PROBLEM NO. 4
You noted the following composition of Malabon Company’s “cash account” as of December 31, 2006 in
connection with your audit:
Demand deposit account P2,000,000
Time deposit – 30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2007) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Customer’s check dated January 1, 2007 50,000
Customer’s check outstanding for 18 months 40,000
Total
P7,760,000
Additional information follows:

a) Check of P200,000 in payment of accounts payable was recorded on December 31, 2006 but mailed
to suppliers on January 5, 2007.
b) Check of P100,000 dated January 15, 2007 in payment of accounts payable was recorded and
mailed on December 31, 2006.
c) The company uses the calendar year. The cash receipts journal was held open until January 15,
2007, during which time P400,000 was collected and recorded on December 31, 2006.
Question:
The cash and cash equivalents to be shown on the December 31, 2006 balance sheet is
a. P3,310,000 c. P2,910,000
b. P1,910,000 d. P4,410,000
Suggested Solution:
Demand deposit account as adjusted:

Demand deposit account per books P2,000,000
Undelivered check 200,000
Postdated check issued 100,000
Window dressing of collection (400,000) P1,900,000
Time deposit - 30 days 1,000,000
Cash and cash equivalents
P2,910,000
Answer: C
PROBLEM NO. 5
You were able to gather the following from the December 31, 2006 trial balance of Mandaluyong
Cash on hand P 500,000
BPI current account 1,000,000
PNB savings account 1,200,000

a. Customer’s check for P40,000 returned by bank on December 26, 2006 due to insufficient fund
but subsequently redeposited and cleared by the bank on January 8, 2007.
b. Customer’s check for P20,000 dated January 2, 2007, received on December 29, 2006.
c. Postal money orders received from customers, P30,000.
Currency in an envelope marked “collections for charity” with
names attached 1,200
Unreplenished petty cash vouchers 1,300
Check drawn by Mandaluyong Corporation, payable to the
petty cashier 4,000
P10,100
Included among the checks drawn by Mandaluyong Corporation against the BPI current account and
recorded in December 2006 are the following:
a. Check written and dated December 29, 2006 and delivered to payee on January 2, 2007,
P80,000.
b. Check written on December 27, 2006, dated January 2, 2007, delivered to payee on December
29, 2006, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of
the deposit balance. These checks were still outstanding at December 31, 2006.
The savings account deposit in PNB has been set aside by the board of directors for acquisition of new
equipment. This account is expected to be disbursed in the next 3 months from the balance sheet
date.
Questions:
Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on hand
a. P410,000 c. P470,000
b. P530,000 d. P440,000
2. Petty cash fund
a. P6,000 c. P2,000
b. P7,200 d. P4,900
3. BPI current account
a. P1,000,000 c. P1,080,000
b. P1,120,000 d. P1,040,000
4. Cash and cash equivalents
a. P2,917,200 c. P3,052,000
b. P3,074,900 d. P3,066,000
Suggested Solution:
Question No. 1
Unadjusted cash on hand P500,000

NSF check (40,000)
Post dated check received (20,000)
Adjusted cash on hand P440,000
Question No. 2
Petty cash fund per total P10,100

Employees' vales (IOU) (1,600)
Currency in envelope marked "collections for charity" (1,200)
Unreplenished petty cash vouchers (1,300)
Petty cash fund, as adjusted P 6,000
Alternative computation:

Replenishment check 4,000
Petty cash fund, as adjusted P 6,000
Question No. 3
Unadjusted BPI current account P1,000,000

Unreleased check 80,000
Post dated check delivered 40,000
Adjusted BPI current account P1,120,000
Question No. 4
Cash on hand (see no. 1) P 440,000

Petty cash fund (see no. 2) 6,000
BPI current account (see no. 3) 1,120,000
Security Bank current account (net of
overdraft of P80,000) 1,000,000
Cash and cash equivalents, as adjusted P3,066,000
Answers: 1) D; 2) A; 3) B; 4) D
PROBLEM NO. 6
The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31, 2006. The
bank statement as of December 31 showed a balance of P547,800. Additional information that might
be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was dishonored on
December 29 (maturity date). The bank charged Manila's account for P142,650, including a protest
fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of
P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for P12,960.
(g) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been collected
on December 27, and the bank charged a P360 collection fee.
Questions:
Based on the above and the result of your audit, determine the following:
1. Adjusted cash in bank balance
a. P583,200 c. P589,200
b. P577,200 d. P512,400
2. Net adjustment to cash as of December 31, 2006
a. P104,370 c. P 98,370
b. P110,370 d. P175,170
Suggested Solution:
Question No. 1
Balance per bank statement, 12/31/06 P547,800

Add: Deposits in transit P134,250
Bank error-deposit not recorded 6,000 140,250
Total 688,050
Less: Outstanding checks 98,850
Adjusted bank balance, 12/31/06 P589,200
Balance per books, 12/31/06 P687,570

Add: Book error - Check No. 748 P15,000
Customer note collected by bank 46,290 61,290
Total 748,860
Less: Dishonored note 142,650
Book error-improperly recorded 1,950
deposit
NSF check 12,960
Adjusted book balance, 12/31/06 P589,200
Question No. 2
Unadjusted balance per books, 12/31/06 P687,570

Adjusted book balance, 12/31/06 589,200
Net adjustment to cash – credit P 98,370
Answers: 1) C; 2) C
PROBLEM NO. 7
Shown below is the bank reconciliation for Marikina Company for November 2006:
Balance per bank, Nov. 30, 2006 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2006 P136,000
The bank statement for December 2006 contains the following data:
Total deposits P110,000
Total charges, including an NSF check of P8,000 and a
service charge of P400 96,000
All outstanding checks on November 30, 2006, including the bank credit, were cleared in the bank 1n
December 2006.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31, 2006.
Questions:
1. How much is the cash balance per bank on December 31, 2006?
a. P154,000 c. P164,000
b. P150,000 d. P172,400
2. How much is the December receipts per books?
a. P124,000 c. P110,000
b. P 96,000 d. P148,000
3. How much is the December disbursements per books?

a. P96,000 c. P89,600
b. P79,600 d. P98,000
4. How much is the cash balance per books on December 31, 2006?
a. P150,000 c. P180,400
b. P170,400 d. P162,000
5. The adjusted cash in bank balance as of December 31, 2006 is
a. P141,600 c. P172,000
b. P162,000 d. P196,000
Suggested Solution:
Question No. 1
Balance per bank, Nov. 30, 2006 P150,000

Add: Total deposits per bank statement 110,000
Total 260,000
Less: Total charges per bank statement 96,000
Balance per bank, Dec. 31, 2006 P164,000
Question No. 2
Total deposits per bank statement P110,000

Less deposits in transit, Nov. 30 24,000
Dec. receipts cleared through the bank 86,000
Add deposits in transit, Dec. 31 38,000
December receipts per books P124,000
Question No. 3
Total charges per bank statement P96,000

Less: Outstanding checks, Nov. 30 P28,000
Correction of erroneous bank credit 10,000
December NSF check 8,000
December bank service charge 400 46,400
Dec. disb. cleared through the bank 49,600
Add outstanding checks, Dec. 31 30,000
December disbursements per books P79,600
Question No. 4
Balance per books, Nov. 30, 2006 P136,000

Add December receipts per books 124,000
Total 260,000
Less December disbursements per books 79,600
Balance per books, Dec. 31, 2006 P180,400
Question No. 5
Balance per bank statement, 12/31/06 P164,000

Deposits in transit 38,000
Adjusted bank balance, 12/31/06 P172,000
Balance per books, 12/31/06 P180,400

NSF check ( 8,000)
Bank service charges ( 400)
Adjusted book balance, 12/31/06 P172,000
Answers: 1) C; 2) A; 3) B; 4) C; 5) C
PROBLEM NO. 8
The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by 8,250
bank on July 16 marked NSF, and redeposited
immediately; no entry made on books for
return or redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Disbursements in July per bank statement P218,373

Cash receipts in July per Muntinlupa's books 236,452
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above data, you are
to provide the answers to the following:
1. How much is the adjusted cash balance as of June 30?
a. P87,565 c. P107,082
b. (P3,695) d. P15,822
2. How much is the adjusted bank receipts for July?
a. P253,787 c. P245,537
b. P214,802 d. P232,881
3. How much is the adjusted book disbursements for July?
a. P220,767 c. P181,782
b. P212,517 d. P206,673
4. How much is the adjusted cash balance as of July 31?
a. P137,817 c. P22,513
b. P112,335 d. P120,585
5. How much is the cash shortage as of July 31?
a. P8,250 c. P196,144
b. P71,815 d. P0
Suggested Solution:
Muntinlupa Company
Reconciliation of Receipts, Disbursements, and Bank Balance
For the month ended July 31
Beginning Ending
June 30 Receipts Disb. July 31
Balance per bank
statement P107,082 P249,108a P218,373 P137,817
Deposits in transit:
June 30 8,201 (8,201)
July 31 12,880 12,880
Outstanding checks:
June 30 (27,718) (27,718)
July 31 30,112 (30,112)
NSF check
redeposited (8,250) (8,250)
Adjusted bank
balance P 87,565 P245,537 P212,517 P120,585
Balance per books P 15,822 P236,452 P212,529b P 39,745

Bank service charge:
June (72) (72)
July 60 (60)
Collection of notes
receivable:
June 71,815 (71,815)
July 80,900 80,900
Adjusted book
balance P 87,565 P245,537 P212,517 P120,585
a (P137,817 + P218,373 – P107,082)
b (P15,822 + 236,452 – P39,745)
Answers: 1) A; 2) C; 3) B; 4) D; 5) D
PROBLEM NO. 9
In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30, 2006:
Bank balance – November 30, 2006 P90,800
Bank service charges 100
Bank collection of customer’s note (8,000)
Outstanding checks:
Number Amount
7159 P3,000
7767 5,000
7915 2,000 (10,000)
Book balance – November 30, 2006 P77,900
Additional data are given as follows:
a. Company recordings for December:
Total collections from customers P165,000
Total checks drawn 98,000
b. Bank statement totals for December :
Charges P123,800
Credits 169,000
c. Check no. 7159 dated November 25, 2006, was entered as P3,000 in payment of a voucher for
P30,000. Upon examination of the checks returned by the bank, the actual amount of the check
was P30,000.
d. Check no. 8113 dated December 20, 2006 was issued to replace a mutilated check (no.7767),
which was returned by the payee. Both checks were recorded in the amount drawn, P5,000, but no
entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
f. Undeposited collections on December 31, 2006 - P8,000.
g. The service charge for December was P150 which was charged by the bank to another client.
h. The bank collected a note receivable of P7,000 on December 28, 2006, but the collection was not
received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2006, were:
Check No. Amount Check No. Amount
7767 P5,000 8910 P2,300
8856 1,300 8925 4,100
QUESTIONS:
Based on the above and the result of your audit, determine the following:
1. Unadjusted cash balance per books as of December 31, 2006
a. P152,800 c. P144,900
b. P152,750 d. P165,700
2. Adjusted cash balance as of November 30, 2006
a. P85,800 c. P63,800
b. P58,800 d. P90,800
3. Adjusted book receipts for December 2006
a. P170,500 c. P172,000
b. P182,000 d. P173,000
4. Adjusted bank disbursement for December 2006
a. P120,150 c. P125,150
b. P 76,150 d. P 98,150
5. Adjusted cash balance as of December 31, 2006
a. P132,650 c. P137,800
b. P137,650 d. P134,650
Suggested Solution:
Question No. 1
Unadjusted book balance, 11/30/06 P77,900

Add unadjusted book receipts:
Collection from customers P165,000
Note collected by bank in Nov.
presumed recorded in Dec. 8,000 173,000
Total 250,900
Less unadjusted book disbursements:
Checks drawn 98,000
BSC for Nov. presumed recorded in Dec. 100 98,100
Unadjusted book balance, 12/31/06 P152,800
Question Nos. 2 to 5
Pasig Company
Proof of Cash
For the month ended December 31, 2006
Beginning Ending
Nov. 30 Receipts Disb. Dec. 31
Balance per bank
statement P90,800 P169,000 P123,800 P136,000a
November 30 5,000 (5,000)
December 31 8,000 8,000
Outstanding checks:
November 30 (32,000) (32,000)
December 31 7,700 (7,700)
Bank errors – Dec.
Check of Sipag Co. (1,500) 1,500
BSC charged to
another client 150 (150)
Adjusted bank
balance P63,800 P172,000 P 98,150 P137,650
Balance per books P77,900 P173,000 P98,100 P152,800

Customer's note
collected by bank:
November 8,000 (8,000)

December
150 (150)
Book errors:
Check no. 7159
(P30,000-P3,000) (27,000) (27,000)
Check no. 7767
(mutilated check) 5,000 5,000
Adjusted book
balance P63,800 P172,000 P 98,150 P137,650
a (P90,800 + P169,000 – P123,800)
Answers: 1) A; 2) C; 3) C; 4) D; 5) B
PROBLEM NO. 10
You obtained the following information on the current account of Parañaque Company during your
examination of its financial statements for the year ended December 31, 2006.
The bank statement on November 30, 2006 showed a balance of P306,000. Among the bank credits in
November was customer’s note for P100,000 collected for the account of the company which the
company recognized in December among its receipts. Included in the bank debits were cost of
checkbooks amounting to P1,200 and a P40,000 check which was charged by the bank in error against
Parañaque Co. account. Also in November you ascertained that there were deposits in transit
amounting to P80,000 and outstanding checks totaling P170,000.
The bank statement for the month of December showed total credits of P416,000 and total charges of
P204,000. The company’s books for December showed total debits of P735,600, total credits of
P407,200 and a balance of P485,600. Bank debit memos for December were: No. 121 for service
charges, P1,600 and No. 122 on a customer’s returned check marked “Refer to Drawer” for P24,000.
On December 31, 2006 the company placed with the bank a customer’s promissory note with a face
value of P120,000 for collection. The company treated this note as part of its receipts although the
bank was able to collect on the note only in January, 2007.
A check for P3,960 was recorded in the company cash payments books in December as P39,600.
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above data, you are
to provide the answers to the following:
1. How much is the undeposited collections as of December 31, 2006?
a. P339,600 c. P219,600
b. P179,600 d. P139,600
2. How much is the outstanding checks as of December 31, 2006?
a. P191,960 c. P361,960
b. P397,600 d. P363,160
a. P216,000 c. P176,000
b. P256,000 d. P157,200
4. How much is the adjusted bank receipts for December?
a. P635,600 c. P475,600
b. P515,600 d. P435,600
5. How much is the adjusted book disbursements for December?
a. P395,960 c. P225,960
b. P431,600 d. P397,160
a. P625,640 c. P220,000
b. P195,640 d. P375,640
Suggested Solution:
Question No. 1
Deposits in transit, 11/30/06 P80,000

Add collections in December:
December book receipts P735,600
Less receipts not representing
collections in December:
bank in Nov. recorded in Dec. P100,000
Uncollected customer's note
treated as receipts 120,000 220,000 515,600
Total 595,600
Less deposits credited by the bank in

December:
December bank receipts P416,000
Less receipts not representing
deposits:
Erroneous bank debit, Nov.;
corrected Dec. 40,000 376,000
Deposits in transit, 12/31/06 P219,600
Question No. 2
Outstanding checks, 11/30/06 P170,000

Add checks issued in December:
December book disbursements P407,200
Less disbursements not
representing checks issued in
December:
Bank service charge, Nov.;
recorded Dec. P1,200
Error in recording a check
(should be P3,960, recorded
as P39,600) 35,640 36,840 370,360
Total 540,360
Less checks paid by the bank in
December:
December bank disbursements P204,000
Less disbursements not
representing checks:
Bank service charge, Dec. P1,600
NSF check, Dec. 24,000 25,600 178,400
Outstanding checks, 12/31/06 P361,960
Question Nos. 3 to 6
Parañaque Company
Proof of Cash
Beginning Ending
Balance per bank
statement P306,000 P416,000 P204,000 P518,000a
November 30 80,000 (80,000)
December 31 219,600 219,600
Outstanding checks:
November 30 (170,000) (170,000)
December 31 361,960 (361,960)
Erroneous bank
debit-November 40,000 (40,000)
Adjusted bank
balance P256,000 P515,600 P395,960 P375,640
Balance per books P157,200b P735,600 P407,200 P485,600

Customer's note
collected by bank -
November 100,000 (100,000)
November (1,200) (1,200)
December 1,600 (1,600)
NSF check -
December 24,000 (24,000)
Book errors -
December
Uncollected
customer's note
treated as
receipts (120,000) (120,000)
Error in recording
a check (should
be P3,960,
recorded as
P39,600) (35,640) 35,640
Adjusted book
balance P256,000 P515,600 P395,960 P375,640
a (P306,000 + P416,000 – P204,000)
b (P485,600 + 407,200 – P735,600)
Answers: 1) C; 2) C; 3) B; 4) B; 5) A; 6) D
PROBLEM NO. 11
You were able to obtain the following information in connection with your audit of the Cash account of
the Pasay Company as of December 31, 2006:
k. Balances per bank P480,000 P420,000
l. Balances per books 504,000 539,000
m. Undeposited collections 244,000 300,000
n. Outstanding checks 150,000 120,000
o. The bank statement for the month of December showed total credits of P240,000 while the debits
per books totaled P735,000.
p. NSF checks are recorded as a reduction of cash receipts. NSF checks which are later redeposited
are then recorded as regular receipts. Data regarding NSF checks are as follows:
1. Returned by the bank in Nov. and recorded by the company in Dec., P10,000.
2. Returned by the bank in Dec. and recorded by the company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the company in Jan., P29,000.
q. Check of Pasaway Company amounting to P90,000 was charged to the company’s account by the
bank in error on December 31.
r. A bank memo stated that the company’s account was credited for the net proceeds of Anito’s note
for P106,000.
s. The company has hypothecated its accounts receivable with the bank under an agreement whereby
the bank lends the company 80% of the hypothecated accounts receivable. The company performs
accounting and collection of the accounts. Adjustments of the loan are made from daily sales
reports and deposits.
t. The bank credits the company account and increases the amount of the loan for 80% of the
reported sales. The loan agreement states specifically that the sales report must be accepted by the
bank before the company is credited. Sales reports are forwarded by the company to the bank on
the first day following the date of sale. The bank allocates each deposit 80% to the payment of the
loan, and 20% to the company account. Thus, only 80% of each day’s sales and 20% of each
collection deposits are entered on the bank statement. The company accountant records the
hypothecation of new accounts receivable (80% of sales) as a debit to Cash and a credit to the bank
loan as of the date of sales. One hundred percent of the collection on accounts receivable is
recorded as a cash receipt; 80% of the collection is recorded in the cash disbursements books as a
payment on the loan. In connection with the hypothecation, the following facts were determined:
 Included in the undeposited collections is cash from the hypothecation of accounts receivable.
Sales were P180,000 on November 30, and P200,000 at December 31. The balance was made
up from collections which were entered on the books in the manner indicated above.
 Collections on accounts receivable deposited in December, other than deposits in transit,
totaled P725,000.
u. Interest on the bank loan for the month of December charged by the bank but not recorded in the
books, amounted to P38,000.
QUESTIONS:
a. P574,000 c. P430,000
b. P394,000 d. P350,000
a. P860,000 c. P876,000
b. P280,000 d. P296,000
a. P180,000 c. P180,000
b. P905,000 d. P760,000
a. P690,000 c. P440,000
b. P530,000 d. P490,000
a. P32,000 c. P8,000
b. P90,000 d. P0
Suggested Solution:
Pasay Company
Proof of Cash
Beginning Ending
Balance per bank
statement P480,000 P240,000 P300,000a P420,000
November 30 100,000c (100,000)
December 31 140,000d 140,000
Outstanding checks:
November 30 (150,000) (150,000)
December 31 120,000 (120,000)
Erroneous bank
debit-December (90,000) 90,000
Deposits with loan
Beginning Ending
payment
(P725,000 x 80%) 580,000 580,000
Adjusted bank
balance P430,000 P860,000 P760,000 P530,000
Balance per books P504,000 P735,000 P700,000b P539,000

NSF checks:
Returned in Nov.,
recorded in Dec. (10,000) 10,000
Returned and
recorded in Dec. 25,000 25,000
Returned in Dec.,
recorded in Jan. 29,000 (29,000)
Customer's note
collected by bank -
December 106,000 106,000
Anticipated loan
proceeds from AR
hypothecation:
Nov. 30 sales
(P180,000 x 80%) (144,000) 144,000
Dec. 31 sales
(160,000)
(P200,000 x 80%) (160,000)
Anticipated loan
payment from
undeposited
collections:
Nov. 30
(P100,000 x 80%) 80,000 80,000
Dec. 31
(P140,000 x 80%) (112,000) 112,000
Interest charge for
bank loan in Dec. 38,000 (38,000)
Adjusted book
balance P430,000 P860,000 P760,000 P530,000
a (P480,000 + P240,000 – P420,000)
b (P504,000 + 735,000 – P539,000)
c [P244,000 – (P180,000 x 80%)]
d [P300,000 – (P200,000 x 80%)]
Answers: 1) C; 2) A; 3) D; 4) B; 5) D
PROBLEM NO. 12
In connection with your audit, Quezon Metals Company presented to you the following information:
Quezon Metals Company
Comparative Balance Sheets
December 31, 2006 and 2005
2006 2005
Assets
Current Assets:
Cash P 476,000 P 392,000
Available for sale securities 236,000 -
Accounts Receivable 1,248,000 1,016,000
Inventory 1,112,000 956,000
Prepaid expenses 140,000 84,000
Total Current Assets 3,212,000 2,448,000
Property, plant, and equipment 2,144,000 1,636,000
Accumulated depreciation (304,000) (212,000)
1,840,000 1,424,000
Total Assets P5,052,000 P3,872,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable P 848,000 P 792,000
Accrued expenses 392,000 304,000
Dividends Payable 160,000 -
Total Current Liabilities 1,400,000 1,096,000
Notes Payable - due 2008 500,000 -
Total Liabilities 1,900,000 1,096,000
Stockholders' Equity:
Common Stock 2,400,000 2,200,000
Retained earnings 752,000 576,000
Total Stockholders' Equity 3,152,000 2,776,000
Total Liabilities and Stockholders' Equity P5,052,000 P3,872,000
Quezon Metals Company

Condensed Comparative Income Statements
For the Years Ended December 31, 2006 and 2005
2006 2005
Net sales P14,244,000 P13,016,000
Cost of Goods Sold 11,156,000 10,272,000
Gross Profit 3,088,000 2,744,000
Expenses 2,084,000 1,944,000
Net Income P 1,004,000 P 800,000
Additional information for Quezon:

(a) All accounts receivable and accounts payable relate to trade merchandise.
(b) The proceeds from the notes payable were used to finance plant expansion.
(c) Capital stock was sold to provide additional working capital.
QUESTIONS:
Based on the above and the result of your audit, compute the following for 2006:
1. Cash collected from accounts receivable, assuming all sales are on account.
a. P14,012,000 c. P14,476,000
b. P 796,000 d. P16,508,000
2. Cash payments made on accounts payable to suppliers, assuming that all purchases of inventory
are on account.
a. P11,368,000 c. P10,944,000
b. P11,212,000 d. P11,256,000
3. Cash payments for dividends.
a. P 828,000 c. P 668,000
b. P1,020,000 d. P1,180,000
4. Cash receipts that were not provided by operations.
a. P192,000 c. P700,000
b. P500,000 d. P 0
5. Cash payments for assets that were not reflected in operations.
a. P1,412,000 c. P 508,000
b. P 744,000 d. P1,176,000
Suggested Solution:
Question No. 1
Accounts receivable, 1/1/06 P 1,016,000
Add sales for 2006 14,244,000
Total collectible accounts 15,260,000
Less accounts receivable, 12/31/06 1,248,000
Cash collected from accounts receivable P14,012,000
Question No. 2
Accounts payable, 1/1/06 P 792,000
Add purchases for 2006:
Cost of goods sold for 2006 P11,156,000
Add Inventory, 12/31/06 1,112,000
Total goods available for sale 12,268,000
Less Inventory, 1/1/06 956,000 11,312,000
Total accounts to be paid 12,104,000
Less accounts payable, 12/31/06 848,000
Cash payments made on AP P11,256,000
Question No. 3
Retained earnings, 1/1/06 P 576,000
Add net income for 2006 1,004,000
Total 1,580,000
Less retained earnings, 12/31/06 752,000
Total dividends declared 828,000
Less increase in dividends payable 160,000
Cash payments for dividends P 668,000
Question No. 4
Proceeds from notes payable P500,000

Proceeds from issuance of common stock
(P2,400,000 - P2,200,000) 200,000
Cash receipts not provided by operations
(cash provided from financing) P700,000
Question No. 5
Purchase of available for sale securities P236,000
Purchase of PPE (P2,144,000 - P1,636,000) 508,000
Cash payments for assets that were not reflected
in operations P744,000
Answers: 1) A; 2) D; 3) C; 4) C; 5) B
PROBLEM NO. 13
The Valenzuela Corporation was organized on January 15, 2006 and started operation soon thereafter.
The Company cashier who acted also as the bookkeeper had kept the accounting records very
haphazardly. The manager suspects him of defalcation and engaged you to audit his account to find
out the extent of the fraud, if there is any.
On November 15, when you started the examination of the accounts, you find the cash on hand to be
P25,700. From inquiry at the bank, it was ascertained that the balance of the Company’s bank deposit
in current account on the same date was P131,640. Verification revealed that the check issued for
P9,260 is not yet paid by the bank. The corporation sells at 40% above cost.
Your examination of the available records disclosed the following information:
Capital stock issued at par for cash P1,600,000
Real state purchased and paid in full 1,000,000
Mortgage liability secured by real state 400,000
Furniture and fixtures (gross) bought on which there
is still balance unpaid of P30,000 145,000
Outstanding notes due to bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount still due from customers 426,900
Inventory of merchandise on November 15 at cost 469,600
Expenses paid excluding purchases 303,780
QUESTIONS:
Based on the above and the result of your audit, compute for the following as of November 15, 2006:
1. Collections from sales
a. P1,188,140 c. P1,615,040
b. P1,153,600 d. P2,041,940
2. Payments for purchases
a. P1,854,620 c. P1,207,204
b. P1,391,780 d. P 922,180
3. Total cash disbursements
a. P2,340,960 c. P2,810,560
b. P3,273,400 d. P2,625,984
4. Unadjusted cash balance
a. P 74,740 c. P1,007,180
b. P722,156 d. P 537,580
5. Cash shortage
a. P574,076 c. P859,100
b. P389,500 d. P 0
Suggested Solution:
Question No. 1
Sales P1,615,040
Less accounts receivable, 11/15 426,900
Collections from sales P1,188,140
Question No. 2
Cost of sales (P1,615,040/1.4) P1,153,600
Add Merchandise inventory, 11/15 469,600
Purchases 1,623,200
Less Accounts payable, 11/15 231,420
Payments for purchases P1,391,780
Question No. 3
Purchase of real estate P1,000,000
Payment for furniture and fixtures
(P145,000 - P30,000) 115,000
Expenses paid 303,780
Payments for purchases (see no. 2) 1,391,780
Total cash disbursements P2,810,560
Question No. 4
Proceeds from issuance of common stock P1,600,000
Proceeds from mortgage note payable 400,000
Proceeds from notes payable - bank 160,000
Collections from sales (see no. 1) 1,188,140
Total cash receipts 3,348,140
Less cash disbursements (see no. 3) 2,810,560
Unadjusted cash balance P 537,580
Question No. 5
Cash accountability P537,580
Less cash accounted (Adjusted cash
balance):
Unadjusted bank balance P131,640
Outstanding checks (9,260) 148,080
Cash shortage P389,500
Answers: 1) A; 2) B; 3) C; 4) D; 5) B
PROBLEM NO. 14
You were engaged to audit the accounts of Taguig Corporation for the year ended December 31, 2006.
In your examination, you determined that the Cash account represents both cash on hand and cash in
bank. You further noted that the company’s internal control over cash is very poor.
You started the audit on January 15, 2007. Based on your cash count on this date, cash on hand
amounted to P19,200. Examination of the cash book and other evidence of transactions disclosed the
following:
a. January collections per duplicate receipts, P75,200.
b. Total duplicate deposit slips, all dated January, P44,000. This amount includes a deposit
representing collections on December 31.
c. Cash book balance at December 31, 2006 amounted to P186,000, representing both cash on hand
and cash in bank.
d. Bank statement for December showed a balance of P170,400.
e. Outstanding checks at December 31:
November checks December checks
No. 280 P1,800 No. 331 P2,400
290 6,600 339 1,600
345 20,000
353 3,600
364 10,000
f. Undeposited collections at December 31, 2006 amounted to P20,000.
g. An amount of P4,400 representing proceeds of a clean draft on a customer was credited by bank,
but is not yet taken up in the company’s books.
h. Bank service charges for December, P400.
The company cashier presented to you the following reconciliation statement for December, 2006,
which he has prepared:
Balance per books, December 31, 2006 P180,600
Add outstanding checks:
No. P2,400
331
1,600
339
2,000
345
3,600
353
1,000 10,600
364
Total 191,200
Bank service charge (400)
Undeposited collections (20,400)
Balance per bank, December 31, 2006 P170,400
QUESTIONS:
a. P152,800 c. P180,200
b. P144,400 d. P 0
a. P45,600 c. P37,200
b. P 4,400 d. P41,200
3. How much is the cash shortage for the period January 1 to 15, 2007?
a. P30,800 c. P31,200
b. P32,400 d. P32,000
4. Which of the following is not a method used by the cashier to cover-up the shortage as of December
31, 2006?
a. Understating outstanding checks by P27,000.
b. Not recording the bank collection of P4,400.
c. Understating the book balance by P5,400.
d. Overstatement of undeposited collections by P400.
Suggested Solution:
Questions No. 1 and 2

Bank Books
Unadjusted balances P170,400 P186,000
Add (deduct) adjustments:
Outstanding checks: (46,000)
Unrecorded bank collection 4,400
Bank service charge (400)
Balances 144,400 190,000
Shortage (45,600)
Adjusted balances P144,400 P144,400
Question No. 3
Collections per records P75,200
Add undeposited collections, Dec. 31 20,000
Total cash that should be deposited in January 95,200
Less January deposits 44,000
Undeposited collections, Jan. 15 51,200
Less undeposited collections per cash count 19,200
Shortage, Jan. 1 to 15, 2007 P32,000
Question No. 4
Cover-up for the December 31, 2006 shortage:
Non-recording of bank collection P 4,400
Understatement of book balance
(P186,000 - P180,600) 5,400
Understatement of outstanding checks
(P46,000 - P10,600) 35,400
Overstatement of undeposited collections
(P20,400 - P20,000) 400
Total shortage, December 31, 2006 P45,600
Answers: 1) B; 2) A; 3) D; 4) A
PROBLEM NO. 15
1. An auditor would consider a cashier’s job description to contain compatible duties if the cashier
receives remittance from the mailroom and also prepares the
a. Daily deposit slip. c. Remittance advices.
b. Prelist of individual checks. d. Monthly bank reconciliation.
2. Which of the following internal control procedures will most likely prevent the concealment of a
cash shortage resulting from improper write-off of a trade account receivable?
a. Write-offs must be supported by an aging schedule showing that only receivables overdue for
several months have been written off.
b. Write-offs must be approved by the cashier who is in a position to know if the receivables have,
in fact, been collected.
c. Write-offs must be approved by a responsible officer after review of credit department
recommendations and supporting evidence.
d. Write-offs must be authorized by company field sales employees who are in a position to
determine the financial standing of the customers.
3. An entity’s internal control structure requires every check request that there be an approved
voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To
determine whether checks are being issued for unauthorized expenditures, an auditor most likely
would select items for testing from the population of all
a. Cancelled checks. c. Purchase orders.
b. Approved vouchers. d. Receiving reports.
4. Which of the following auditing procedures would the auditor not apply to a cutoff bank statement?
a. Trace year end outstanding checks and deposits in transit to the cutoff bank statement.
b. Reconcile the bank account as of the end of the cutoff period.
c. Compare dates, payees and endorsements on returned checks with the cash disbursements
record.
d. Determine that the year end deposit in transit was credited by the bank on the first working
day of the following accounting period.
5. A client maintains two bank accounts. One of the accounts, Bank A, has an overdraft of P100,000.
The other account, Bank B, has a positive balance of P50,000. To conceal the overdraft from the
auditor, the client may decide to
a. Draw a check for at least P100,000 on Bank A for deposit in Bank B. Record the receipt but
not the disbursement and list the receipt as a deposit in transit. Record the disbursement at
the beginning of the following year.
b. Draw a check for at least P100,000 on Bank B for deposit in Bank A. Record the receipt but
not the disbursement and list the receipt as a deposit in transit. Record the disbursement at
c. Draw a check for P100,000 on Bank B for deposit in Bank A. Record the disbursement but not
the receipt. List the disbursement as an outstanding check, but do not list the receipt as a
deposit in transit. Record the receipt at the beginning of the following period.
d. Draw a check for at least P100,000 on Bank A for deposit in Bank B. Record the disbursement
but not the receipt and list the disbursement as an outstanding check. Record the receipt at
6. While performing an audit of cash, an auditor begins to suspect check kiting. Which of the
following is the best evidence that the auditor could obtain concerning whether kiting is taking
place?
a. Documentary evidence obtained by vouching credits on the latest bank statement to supporting
documents.
b. Documentary evidence obtained by vouching entries in the cash account to supporting
documents.
c. Oral evidence obtained by discussion with controller personnel.
d. Evidence obtained by preparing a schedule of interbank transfers.
7. Two months before year-end, the bookkeeper erroneously recorded the receipt of a long-term bank
loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure
for detecting this type of error?
a. Analyze bank confirmation information.
b. Analyze the notes payable journal.
c. Prepare year-end bank reconciliation.
d. Prepare a year-end bank transfer schedule.
8. Postdated checks received by mail in settlement of customer’s accounts should be

a. Returned to customer.
b. Stamped with restrictive endorsement.
c. Deposited immediately by the cashier.
d. Deposited the day after together with cash receipts.
9. The cashier of Milady Jewelries covered a shortage in the cash working fund with cash obtained at
December 31 from a bank by cashing but not recording a check drawn on the company out of town
bank. How would you as an auditor discover the manipulation?
a. By confirming all December 31 bank balances.
b. By counting the cash working fund at the close of business on December 31.
c. By investigating items returned with the bank cut-off statements of the succeeding month.
d. By preparing independent bank reconciliations as of December 31
10. An essential phase of the audit of the cash balance at the end of the year is the auditor's review of
cutoff bank statement. This specific procedure is not useful in determining if
a. Kiting has occurred.
b. Lapping has occurred.
c. The cash receipts journal was held open.
d. Disbursements per the bank statement can be reconciled with total checks written.
Answers: 1) A; 2) C; 3) A; 4) B, 5) B; 6) D; 7) A; 8) B; 9) C; 10) B
-end-
PROBLEM NO. 1
The following data were taken from your current working papers in connection with your
audit of the Rizal Company’s financial statements for the year ended December 31, 2006.
Cash account consists of the following items:

Petty cash fund P 25,000
Security Bank checking account (37,500)
Allied Bank current account 344,250
Total per GL P331,750
a. The count of the cashier’s accountability on January 2, 2007, revealed total bills and
coins of P9,000. Unreplenished vouchers for various expenses totaled P16,000, of
which P3,000 pertains to January 2007.
b. On December 29, 2006, a check for P87,500 was drawn against Security Bank
current account resulting in bank overdraft of P37,500. The check was picked up by
the supplier on January 3, 2007.
c. Bank reconciliation statement prepared by the cashier for the Allied Bank account
follows:
Bank balance P310,500
Add: Deposit in transit P61,250
Total 373,000
Less: Outstanding checks
Check No. Amount
214 P 2,500 @
219 20,750
225 6,000
228 8,500 28,750
Book balance P344,250
@ Check certified by the bank in December 2006.
All reconciling items were traced to the bank statement. Further investigation indicated
that the deposits in transit include a customer’s post-dated check amounting to P40,000.
The check represents a collection from account customer for sales made in the middle of
October 2006.
QUESTIONS:
1. How much is the adjusted balance of petty cash fund as of December 31, 2006?
a. P12,000 b. P13,000 c. P9,000 d.
P16,000
2. How much is the adjusted Allied Bank current account as of December 31, 2006?
a. P336,500 b. P305,500 c. P296,500 d.
P330,250
a. P46,500 b. P6,500 c. P9,000 d. P0
4. How much is the adjusted cash as of December 31, 2006?
a. P355,500 b. P398,500 c. P367,500 d.
P358,500
5. An auditor would consider a cashier’s job description to contain compatible duties if
the cashier receives remittance from the mailroom and also prepares the
a. Daily deposit slip. c. Remittance advices.
b. Prelist of individual checks. d. Monthly bank reconciliation.
PROBLEM NO. 2 (RPCPA 10.84)

You obtained the following information on the current account of Bonifacio Company
during your examination of its financial statements for the year ended December 31, 2006.
bank credits in November was customer’s note for P37,500 collected for the account of the
charged by the bank in error against Bonifacio Co. account. Also in November you
ascertained that there were deposits in transit amounting to P30,000 and outstanding
checks totaling P63,750.
charges of P76,500. The company’s books for December showed total receipts of
December were: No. 245 for service charges, P600 and No. 246 on a customer’s returned
check marked “DAIF” for P9,000.
On December 31, 2006 the company placed with the bank a customer’s promissory note
A check for P1,485 was recorded in the company cash payments books in December as
P14,850.
QUESTIONS:
a. P127,350 b. P67,350 c. P82,350 d.
P52,350
a. P71,985 b. P135,735 c. P149,100 d.
P136,185
a. P238,350 b. P178,350 c. P163,350 d.
P193,350
a. P84,735 b. P148,485 c. P161,850 d.
P148,935
a. P234,615 b. P82,500 c. P140,865 d.
P73,365
PROBLEM NO. 3 (RPCPA 5.80)

On January 10, 2007, you started the audit of the financial records of the Del Pilar
Company for the year ended December 31, 2006. From your investigation, you
discovered the following:
1. The bookkeeper also acts as the cashier. On December 31, 2006, the bookkeeper’s
year-end cash reconciliation contains the following items.
Cash per ledger, 12-31-06 P736,800
Cash per bank, 12-31-06 778,200
Outstanding checks 62,640
Joe Co. check charge by bank in error
12-20-06; corrected by bank on 1-5-07 1,800
Cash in transit, credited by bank on 1-2-07 8,640
2. The cash account balances per ledger as of 12-31-06 were: Cash - P736,800; petty
cash - P1,800
3. The count of the cash on hand at the close of business on January 10, 2007, including
the petty cash, was as follows:
Currency and coin P4,620
Expense vouchers 240
Employees’ IOU’s dated 1-5-07 660
Customers’ checks in payment of account 3,480
P9,000
4. From January 2, 2007 to January 10, 2007, the date of your cash count, total cash
receipts appearing in the cash records were P103,200. According to the bank
statement for the period from January 2, 2007 to January 10, 2007, total deposits were
P91,200.
5. On July 5, 2006, cash of P4,800 was received from an account customer; the
Allowance for Doubtful Accounts was charged and Accounts Receivable credited.
6. On December 5, 2006, cash of P3,600 was received from an account customer;

Inventory was charged and Accounts Receivable credited.
7. Cash of P8,760 received during 2006 was not recorded.
8. Checks received from customers from January 2, 2007 to January 10, 2007, totaling
P5,040, were not recorded but were deposited in bank.
9. On July 1, 2006, the bank refunded interest of P240 because a note of the Del Pilar
Company was paid before maturity. No entry had been made for the refund.
10. In the cashier’s petty cash, there were receipts for collections from customers on
January 9, 2007, totaling P10,200; these were unrecorded and undeposited.
11. In the outstanding checks, there is one for P600 made payable to a trade creditor;
investigation shows that this check had been returned by the creditor on June 14, 2006
and a new check for P1,200 was issued in its place; the original check for P600 was
made in error as to amount.
QUESTIONS:
1. The correct bank balance as of December 31, 2006 is
a. P726,600 b. P754,800 c. P726,000 d.
P724,800
2. The cash shortage as of December 31, 2006 is
a. P28,800 b. P28,200 c. P27,600 d. P
0
3. The cash shortage for the period January 1 to 10, 2007 is
a. P20,040 b. P30,480 c. P15,240 d. P
0
4. Which of the following internal control procedures will most likely prevent the
concealment of a cash shortage resulting from improper write-off of a trade account
receivable?
e. Write-offs must be approved by a responsible officer after review of credit
department recommendations and supporting evidence.
f. Write-offs must be supported by an aging schedule showing that only receivables
overdue for several months have been written off.
g. Write-offs must be approved by the cashier who is in a position to know if the
receivables have, in fact, been collected.
h. Write-offs must be authorized by company field sales employees who are in a
position to determine the financial standing of the customers.
5. As an in-charge auditor, you are reviewing a write-up of internal control in cash
receipt and disbursement procedures. Which of the following deficiencies alone
should cause you the least concern?
a. Checks are signed by only one person.
b. Signed checks are distributed by the controller to approved payees.
c. The treasurer fails to establish bona fide names and addresses of check payees.
d. Cash disbursements are made directly out of cash receipts.
AUDIT OF CASH AND CASH EQUIVALENTS
PROBLEM NO. 1
You were able to gather the following from the December 31, 2005 trial balance of Peso
Cash on hand 372,000
BPI current account 950,000
PNB savings account 500,000

d. Customer’s check for P60,000 returned by bank on December 26, 2005 due to
insufficient fund but subsequently redeposited and cleared by the bank on January
8, 2006.
e. Customer’s check for P30,000 dated January 2, 2006, received on December 29,
2005.
f. Postal money orders received from customers, P36,000.
Currency in an envelope marked “collections for charity” with
names attached 1,200
Unreplenished petty cash vouchers 800
Check drawn by Peso Corporation, payable to the petty cashier 4,600
P10,300
Included among the checks drawn by Peso Corporation against the BPI current account
and recorded in December 2005 are the following:
c. Check written and dated December 29, 2005 and delivered to payee on January 2,
2006, P50,000.
d. Check written on December 27, 2005, dated January 2, 2006, delivered to payee on
December 29, 2005, P86,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31,
2005.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
QUESTIONS:
Based on the above and the result of your audit, compute for the adjusted balances of
following:
1. Cash on hand
a. P282,000 b. P408,000 c. P246,000 d. P342,000
2. Petty cash fund

a. P6,700 b. P2,100 c. P9,100 d. P10,000
3. BPI current account

a. P1,086,000 b. P1,000,000 c. P914,000 d. P950,000
4. Cash and cash equivalents
a. P2,914,700 b. P2,614,700 c. P2,954,700 d. P3,414,700
PROBLEM NO. 2
The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of
December 31, 2005. The bank statement as of December 31, 2005 showed a balance of
P106,000. Upon comparing the bank statement with cash records, the following facts
were developed:
a. The company’s account was charged on December 26 for a customer’s uncollectible
check amounting to P30,000.
b. A two-month, 17% P60,000 customer’s note dated November 25, discounted on

December 12, was dishonored on December 25, and the bank charged the company
P62,000, which included a protest fee of P2,000.
c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and
the bank but was later corrected by the bank.
d. Check no. 142 for P12,425 was entered in the cash disbursements journal at
P12,245 and check no. 156 for P3,290 was entered as P32,900.
e. Bank service charges of P1,830 for December were not yet recorded on the books.
f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had
been collected on December 28; and the bank charged P500. (No entry was made on
the books when the note was sent to the bank for collection).
g. Receipts on December 31 for P24,000 were deposited on January 2.
h. The following checks were outstanding on December 31:

No. 123 P3,000 No. 154 P4,000
143 * 2,000 157 6,000
144 7,000 159 7,000
147 3,000 169 5,000
* Certified by the bank in December
i. A deposit of P20,000 was recorded by the bank on December 5, but it should have
been recorded for Dolor Company rather than Dollar Company.
j. Petty cash of P10,000 was included in the Cash in Bank balance.

k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company
expects to recover this amount from the insurance company. The cash receipts were
recorded in the books, but no entry was made for the loss.
l. The December 21 deposit included a check for P20,000 that had been returned on
December 15 marked NSF. Dollar Company had made no entry upon return of the
check. The redeposit of the check on December 21 was recorded in the cash
receipts journal of Dollar Company as a collection on account.
REQUIRED:
Prepare a bank reconciliation and necessary adjusting entries as of December 31, 2005.
PROBLEM NO. 3
You were able to obtain the following information during your audit of Euro Company:
Reconciling items:
Undeposited collections P200,000 P120,000
Outstanding checks 80,000 60,000
Customer’s notes collected by bank 100,000 120,000
Erroneous bank debits 10,000 20,000
Erroneous bank credits 40,000 30,000
NSF checks not redeposited 5,000 7,000
Customer's check deposited December 10,
returned by bank on December 16
marked NSF, and redeposited
immediately; no entry made on books for 10,000
return or redeposit
Unadjusted balances:
Books ? 90,000
Bank 230,000 ?
December Transactions:
Bank Books
Receipts P420,000 P270,000
Disbursements 500,000 407,000
REQUIRED:
1. Prepare a 4-column bank reconciliation for the month of December, using the form
that reconciles both the book and bank balances to a correct cash amount.
PROBLEM NO. 4
In your audit of the cash account of Yen Company, you are required to prepare a four-
column reconciliation of receipts, disbursements, and balances using the adjusted balance
method and to submit adjusting journal entries as of September 30, 2005.
August 31 September 30
a) Balances per bank P14,010 P19,630
b) Balances per books 13,290 18,195
c) Deposits in transit 2,740 3,110
d) Outstanding checks 4,260 3,870
e) Bank collections not in books 1,200 1,600
f) Bank charges not in books 950 640
g. Of the checks outstanding on September 30, one check for P700 was certified at
the request of the payee.
h. Receipts for September, per bank statement – P281,070.
i. September disbursements, per cash journal – P274,635.
j. NSF check from customer was charged by the bank on September 28, and has
not been recorded – P800.
k. NSF check returned in August and recorded in September, P1,050.
l. NSF check returned and recorded in September, P900.
m. Check of Yin Company charged by the bank in error, P2,010.
n. Receipt on September 6 paid out in cash for travel expenses, P750.
o. Error in recording customer’s check on September 20, P165 instead of P465.
p. Error in disbursements journal for September, P3,250 instead of P325.
You noted in your audit that that the NSF checks returned by the bank are recorded as a
reduction on the cash receipts journal instead of recording it at cash disbursements
journal; redeposits are recorded as regular cash receipts.
PROBLEM NO. 5
You obtained the following information on the current account of Baht Company during
your examination of its financial statements for the year ended December 31, 2005.
bank credits in November was customer’s note for P25,000 collected for the account of the
charged by the bank in error against Baht Co. account. Also in November you ascertained
that there were deposits in transit amounting to P20,000 and outstanding checks totaling
P42,500.
charges of P51,000. The company’s books for December showed total receipts of
December were: No. 143 for service charges, P400 and No. 145 on a customer’s returned
check marked “DAIF” for P6,000.
On December 31, 2005 the company placed with the bank a customer’s promissory note
A check for P990 was recorded in the company cash payments books in December as
P9,900.
QUESTIONS:
a. P84,900 b. P54,900 c. P44,900 d. P34,900
a. P47,990 b. P90,490 c. P99,400 d. P90,790
a. P54,000 b. P64,000 c. P44,000 d. P39,300
a. P158,900 b. P128,900 c. P118,900 d. P108,900
a. P56,490 b. P98,990 c. P107,900 d. P99,290
a. P156,410 b. P93,910 c. P55,000 d. P48,910
PROBLEM NO. 6
Your audit senior instructed you to prepare a four column proof of cash receipts and
disbursements for the month of December, 2005.
The bank reconciliation prepared by Ringgit Company at November 30 is reproduced

below:
Unadjusted bank balance P96,800 Unadjusted book balance P58,640

Add: deposit in transit 18,000 Add: CM - Note collected 40,320
Total 114,800 Total 98,960
Less outstanding checks: Less: DM bank charges 160
No. 276 P2,400
282 7,200
284 4,800
285 1,600 16,000 .
Adjusted bank balance P98,800 Adjusted balance P98,800
The December bank statement, which has a beginning balance of P96,800, is reproduced
below:
May Bank
Account Name: Ringgit Company
Date Debits Credits
December 01 P18,000
December 02 P7,200 40,000
December 04 24,000
December 06 48,000
December 08 400,000 CM83
December 10 40,000 DM97
December 11 56,000
December 16 20,000
December 18 64,000
December 21 72,400
December 28 36,000 80,000
December 31 4,000 DM98 64,000 CM84
Totals P131,200 P842,400
DM97 – Customer’s DAIF check CM83 – Note collected by the bank
DM98 – Service Charges CM84 – Account collected by the bank
The company’s cash receipts and cash disbursements journals for the month of December
2005 are provided below:
Cash Receipts Journal Cash Disbursements Journal
Date OR No. Amount Date Check No. Amount
Dec. 01 415 P40,000 Dec. 01 286 P16,000
05 416 48,000 03 287 24,000
10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
30 420 80,000 23 291 36,000
31 421 88,800 26 292 40,000
28 293 44,000
. 31 294 48,000
Total P440,800 Total P304,000
The company’s Cash in Bank ledger appears below:

Cash in Bank
Balance P58,640 12/31/2005 CDJ P304,000
12/01/2005 GJ 40,320
12/10/2005 GJ (CM83) 400,000
12/31/2005 CRJ 440,800
QUESTIONS:
b. P208,000 b. P232,800 c. P216,800 d. P224,000
b. P985,200 b. P771,600 c. P913,200 d. P904,800
a. P347,840 b. P348,000 c. P332,000 d. P339,200
a. P664,000 b. P688,800 c. P680,000 d. P672,800
a. P24,240 b. P23,840 c. P15,840 d. P0
PROBLEM NO. 7
In connection with the audit of the financial statements of Rupee Company for the year
ended December 31, 2005, you performed a surprise count of the petty cash fund and
undeposited collections under the custody of Ms. Au at 8:15 a.m. on January 3, 2006.
Your count disclosed the following:
Bills and Coins

Bills Coins
P100 10 pieces P1.00 410 pieces
10 54 pieces
Unused postage stamps – P730

Checks
Date Payee Drawer Amount
Dec. 30 Cash Ms. Au P 2,400
Dec. 30 Rupee Company Emong De Leon 28,000
Dec. 31 Rupee Company Apol Boba, sales manager 3,360
Dec. 31 Rupee Company Datu Macmod 35,600
Dec. 31 Rupee Company Tom Guts 16,600
Dec. 31 German Corp. Rupee Company 54,000
(not endorsed)
Expense Vouchers
Date Payee Description Amount
Dec. 23 Apol Boba, Cash advance for trip to P14,000
sales manager Baguio City
Dec. 27 Central Post Office Postage stamps 3,240
Dec. 29 Messengers Transportation 300
Dec. 29 PC Express Computer repair 1,600

a) Two pay envelopes which had been opened and the contents aggregating P15,000
representing unclaimed salaries had been removed.
b) The sales manager’s liquidation report for his Baguio trip:
Cash advance received on Dec. 23 P14,000
Less: Hotel accommodation P9,000
Cash given to Pedro, salesman 600 10,400
Balance P 3,600
Cash returned by Pedro to the sales manager P 240
Personal check of sales manager 3,360
Total P 3,600
a) The custodian is not authorized to cash checks.
b) The last official receipt included in the deposit on December 30 is No. 351 and the
last official receipt issued for the current year is No. 355. The following official
receipts are all dated December 31, 2005.
O.R. No. Amount Form of payment
352 P27,200 Cash
353 35,600 Check
354 7,200 Cash
355 16,600 Check
c) The Petty Cash balance per general ledger is P20,000. The last replenishment of the
fund was made on December 22, 2005.
REQUIRED:
1. Computation of shortage or overage, if any
PROBLEM NO. 8
The bank statement for the account of Rial Company as of December 31, 2005 showed a
credit balance of P20,000, while the company’s ledger balance of the cash account as of
November 30, 2004 was a debit of P40,000. During December 2005, the ledger showed
two postings; a debit of P60,000 and a credit of P39,000 from the cash receipts and cash
disbursements journal, respectively.
Your examination revealed that the cash column of the receipts book was under footed by
P6,400. The receipts book recorded only the collections from customers and did not
include a bank credit in December for P8,000, representing loan proceeds of a P10,000
promissory note.
An examination of the customers’ subsidiary ledgers showed total credits to individual
accounts amounting to P70,400. The December check disbursements journal which was
over footed by P500, records only the checks issued by the company. In the month of
December, 2005, the bank charged the company for P5,000 representing a loan
guaranteed by the client but was dishonored by the maker, the company vice president.
The December bank service charges of P1,200 were erroneously charged by the bank to
the account of Saudi Company. The bank made the correction in January, 2006. The
outstanding checks as of December 31, 2005 amounted to P5,600.
On the following morning of January 2, 2006, a cash count conducted produced the
following:
Bills and coins P5,200
Three (3) duplicate copies of Rial official
receipts, all dated Jan. 2, 2006 1,800
Checks 2,900
REQUIRED:
a. Computation of the cash shortage as of December 31, 2005.
b. Computation of maximum probable shortage as of December 31, 2005.
PROBLEM NO. 9
You were engaged to audit the books of Dinar Company. From the records of the
company, you gathered the following information:
Dinar Company started operations on October 2, 2005 with the owners investing
P150,000 cash. Monthly bank reconciliation statements have not been prepared;
however, bank statements for October, November, and December were made available to
you. Your analysis of these bank statements showed total bank credits (deposits) of
P575,000 including the owners’ initial investment and a bank loan, details of which are in
additional data. The bank statement in December, 2005 showed an ending balance of
P30,200.
Examination of the paid checks disclosed that checks totaling P4,500 were issued by the
company in December, 2005, and were presented for payment only in January, 2006.
Cash count of the cashier’s accountability amounted to P6,300. You were told by the
cashier that P5,000 of these, in checks, were cash sales on December 29, 2005,
deposited on January 3, 2005. The balance, in currency and coins, represents petty cash.
Additional information are as follows:
a. Accounts receivable subsidiary ledgers had a total balance of P70,000 at December
31, 2005. P5,000 of this was ascertained to be uncollectible.
b. Suppliers’ unpaid invoices for merchandise totaled P15,000; while an account for
store fixtures bought for P50,000 had an unpaid balance of P5,000.
c. Merchandise inventory at December 31, 2005 amounted to P30,000 but P5,000 of
these were spoiled with no resale value.
d. The bank statement in October showed a bank credit for P98,000, dated October 2,
2005. Inquiry from the cashier disclosed that the amount represents proceeds of a
90-day, discounted bank note. P80,000 of this loan was paid by check in December,
2005.
e. Operating expenses paid during the period totaled P180,000; while merchandise
purchases amounted to P250,000.
f. The gross profit rate is 120% of cost.
REQUIRED:
Compute for the cashier’s shortage at December 31, 2005.
PROBLEM NO. 10
1. Who is responsible, at all times, for the amount of the petty cash fund?
a. General cashier c. President of the company
b. Petty cash custodian d. Chairman of the Board of Directors
2. What is the effect of not replenishing the petty cash fund at year-end and not making
the appropriate adjusting entry?
a. A detailed audit is necessary.
b. The petty cash custodian should turn over the petty cash to the general cashier.
c. Cash will be overstated and expenses understated.
d. Expenses will be overstated and cash will be understated.
3. Normally, the audit objective of valuation is of minimum concern during the audit of
cash. However, the auditor’s concern about the valuation objective would most likely
increase when
a. Both currency and negotiable securities are on hand
b. The client uses a demand deposit account.
c. The proof of cash cannot be reconciled.
d. The client has foreign currency accounts.
4. The primary purpose of sending a standard confirmation request to financial institutions
with which the client has done business during the year is to.
a. Detect kiting activities that may otherwise not be discovered.
b. Corroborate information regarding deposit and loan balances.
c. Provide the data necessary to prepare a proof of cash.
d. Request information about contingent liabilities and secured transactions.
5. The auditor should ordinarily mail confirmation requests to all banks with which the
client has conducted any business during the year, regardless of the year-end balance,
since
a. The confirmation form also seeks information about indebtedness to the bank.
b. This procedure will detect kiting activities which otherwise not be detected.
c. The mailing of confirmation forms to all such banks is required by GAAS.
d. This procedure relieves the auditor of any responsibility with respect to non-
detection of forged checks.
6. The standard bank confirmation form requests all of the following except
a. Maturity date of a direct liability.
b. The principal amount paid for a direct liability.
c. Description of collateral for a direct liability.
d. The interest rate of a direct liability.
7. As one of the year-end audit procedures, the auditor instructed the client’s personnel to
prepare a standard bank confirmation request for a bank account that had been closed
during the year. After the client’s treasurer had signed the request, it was mailed by the
assistant treasurer. What is the major flaw in this audit procedure?
a. The confirmation request was signed by the treasurer.
b. Sending the request was meaningless because the account was closed before
year-end.
c. The request was mailed by the assistant treasurer.
d. The CPA did not sign the confirmation request before it was mailed.
8. An auditor who is engaged to examine the financial statements of a business enterprise
will request cutoff bank statement primarily in order to
a. Verify the cash balance reported on the bank confirmation inquiry form.
b. Verify reconciling items on the client’s bank reconciliation.
c. Detect lapping.
d. Detect kiting.
9. On receiving the bank cutoff statement, the auditor should trace

a. Deposits in transit on the year-end bank reconciliation to deposits in the cash
receipts journal.
b. Checks dated prior to year-end to the outstanding checks listed on the year-end
bank reconciliation.
c. Deposits listed on the cutoff statement to deposits in the cash receipts journal.
d. Checks dated subsequent to year-end to the outstanding checks listed on the year-
end bank reconciliation.
10. An unrecorded check is issued during the last week of the year would most likely be
discovered by the auditor when
a. Check register for the last month is reviewed.
b. Cutoff bank statement is reconciled.
c. Bank confirmation is reviewed.
d. Search for unrecorded liabilities is performed.
11. To gather evidence regarding the balance per bank in a bank reconciliation, an auditor
would examine all of the following except
a. Cutoff bank statement c. Bank confirmation
b. Year-end bank statement d. General ledger
12. An auditor compares information on cancelled checks with information contained in the
cash disbursement journal. The objective of this test is to determine that
a. Recorded cash disbursement transactions are properly authorized.
b. Proper cash purchase discounts have been recorded.
c. Cash disbursements are for goods and services actually received.
d. No discrepancies exist between the data on the checks and the data in the journal.
13. An auditor should trace bank transfers for the last part of the audit period and for the
first part of the subsequent period to detect whether
a. The cash receipts journal was held open for a few days after the year-end.
b. The last checks recorded before the year-end were actually mailed by the year-end.
c. Cash balances were overstated because of kiting.
d. Any unusual payments to or receipts from related parties occurred.
14. Which of the following cash transfers would appear as a deposit in transit on the
Per Bank Per Books Per Bank Per Books
a. 12/31 12/30 12/31 12/30
b. 1/2 12/30 12/31 12/31
c. 1/3 12/31 1/2 1/2
d. 1/3 12/31 1/2 12/31
15. Which of the following transfers would not appear as an outstanding check on the

Per Bank Per Books Per Bank Per Books
a. 12/31 12/30 12/31 12/30
b. 1/2 12/30 12/31 12/31
c. 1/3 12/31 1/2 1/2
d. 1/3 12/31 1/2 12/31
The information below was taken from the bank transfer schedule prepared during the
audit of Khaye Ting Company’s financial statements for the year ended December 31,
2005. Assume all checks are dated and issued on December 30, 2005.
Check
No. From To
Per Books Per Bank Per Books Per Bank
101 Pbcom HSBC 12/30 1/4 12/30 1/3
102 UCPB Metrobank 1/3 1/2 12/30 12/31
103 HSBC PSBank 12/31 1/3 1/2 1/2
104 Metrobank PNB 1/2 1/2 1/2 12/31
16. Which of the following checks might indicate kiting?
a. Check Nos. 101 and 103 c. Check Nos. 101 and 104
b. Check Nos. 102 and 104 d. Check Nos. 102 and 103
17. Which of the following checks illustrate deposits/transfers in transit at December 31,
2005?
a. Check Nos. 101 and 102 c. Check Nos. 102 and 104
b. Check Nos. 101 and 103 d. Check Nos. 103 and 104
18. Which of the following cash transfer results in a misstatement of cash at December 31,
2005?
From To Amount Disbursements Receipts

Per Per Per Per
Books Bank Books Bank
a. Pbcom HSBC 30,000 12/31/05 1/4/06 12/31/05 12/31/05
b. UCPB Metrobank 20,000 1/4/06 1/5/06 12/31/05 1/4/06
c. HSBC PSBank 7,000 12/31/05 1/5/06 12/31/05 1/4/06
d. Metrobank PNB 6,000 1/4/06 1/11/06 1/4/06 1/4/06
19. Which of the following is one of the better auditing techniques that might be used by an
auditor to detect kiting?
a. Review the composition of authenticated deposit slips.
b. Review subsequent bank statements received directly from the banks.
c. Prepare a schedule of bank transfers.
d. Prepare year-end bank reconciliation.
20. Kiting is a technique that might be used to conceal cash shortage. The auditor can
best detect kiting by performing which of the following procedures?
a. Examining the details of deposits made to all bank accounts several days
subsequent to the balance sheet date.
b. Comparing cash receipts records with details on authenticated bank deposit slips
for dates subsequent to the balance sheet date.
c. Examining paid checks returned with bank statements subsequent to the balance
sheet date.
d. Comparing year-end balances per the standard bank confirmation forms with the
like balances on the client’s bank reconciliations.
21. A cash shortage may be concealed by transporting funds from one location to another
or by converting negotiable assets to cash. Because of this, which of the following is
vital?
a. Simultaneous confirmations c. Simultaneous verifications
b. Simultaneous bank reconciliations d. Simultaneous surprise cash count
22. When counting cash on hand, the auditor must exercise control over all cash and other
negotiable assets to prevent
a. Theft c. Substitution
b. Irregular endorsement d. Deposits-in-transit
- End of AP-5907 -

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AUDIT OF CASH - QUIZZERS

d) Total charges in the bank statement during December were P1,094,850.

g) NSF checks returned, recorded as reduction of cash receipts, were:

h) Collections by bank not recorded by Company were P60,750 in November and

Your examination of the available records disclosed the following information:

Charis Marie F. Urgel BSA – IV

PROBLEM NO. 1 – Composition of cash and cash equivalents

The following data pertain to PRTC Corporation at December 31, 2015:

Current account at Metrobank P 1,800,000

Cash on hand P 372,000

Cash on hand includes the following items:

Currency and coins P 2,100

1. Compute for the adjusted balances of following:

2. Adjusting entries as of December 31, 2015

B. Petty cash fund

C. BPI current account

D. Cash and cash equivalents

b. Advances to employees 1,600

c. BPI current account 50,000

d. Accounts Receivable 86,000

PROBLEM NO. 3 – Cash count and shortage computation

Bills and coins

Unused postage stamp – P730

Other items found inside the cash box:

Cash advance received on Dec. 23 P14,000

Accounted for as follows:

a. The custodian is not authorized to cash checks.

O.R. No. Amount Form of payment

1. Determine shortage or overage, if any

Dec. 23 Advances P 14,000

b. Advances to officers and employees 14,000

f. Receivable from custodian 40,332

g. Travel expenses 10,160

PROBLEM NO. 4 – Bank Reconciliation

The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of

a. The company’s account was charged on December 26 for a customer’s uncollectible

b. A two-month, 17% P60,000 customer’s note dated October 25, discounted on

g. Receipts on December 31 for P24,000 were deposited on January 2.

h. The following checks were outstanding on Dec. 31:

j. Petty cash of P10,000 was included in the Cash in Bank balance

1. Bank reconciliation using:

2. Adjusting entries as of December 31, 2015.

c) Notes Receivable – discounted 60,000

d) Cash in Bank 900

e) Accounts Payable 180

f) Cash in Bank 29,610

h) Cash in Bank 25,500

i) Petty Cash Fund 10,000

j) Claims from insurance company 60,000

k) Accounts Receivable 20,000

PROBLEM NO. 5 - Bank reconciliation and amount of shortage computation

Balance per bank statement P 350,000

2. Adjusting entries as of December 31, 2015

b. Unadjusted outstanding checks P 246,750

Postdated check delivered (37,210)

Book balance P 293,500 Bank balance P 350,000

a. Accounts Receivable 50,000

b. Cash in Bank 14,750

c. Cash in Bank 37,210

d. Cash in bank 15,000

e. Receivable from cashier 60,000

PROBLEM NO. 6 – Cash shortage computation