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Cash Shortage Computation: Solution

The cash shortage as of December 31, 2015 was P30,000. This was determined by calculating the adjusted cash balance per bank of P92,000 and cash balance per books of P122,000. To calculate the cash balance per books, the auditor totaled all cash receipts of P662,000 which included owners' investment, loan proceeds, and collections from customers. All cash disbursements totaling P540,000 were then subtracted to get the cash balance per books of P122,000.

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2K views

Cash Shortage Computation: Solution

The cash shortage as of December 31, 2015 was P30,000. This was determined by calculating the adjusted cash balance per bank of P92,000 and cash balance per books of P122,000. To calculate the cash balance per books, the auditor totaled all cash receipts of P662,000 which included owners' investment, loan proceeds, and collections from customers. All cash disbursements totaling P540,000 were then subtracted to get the cash balance per books of P122,000.

Uploaded by

CJ alandy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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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
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, 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
collections from credit sales on December 30, 2015, deposited on January 2, 2016.

Additional information are as follows:

a. Accounts 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.P80,000 o this loan was paid by check in December, 2015.
e. Operating expenses paid during the period totaled P180,000; while merchandise purchase
amounted to P250,000.
f. The gross profit rate is 120% of cost.

REQUIRED:

Determine the cash shortage as of December 31, 2015.

SOLUTION:
91,50
Unadjusted balance per bank, 12/31 0
(4,500
Outstanding checks , 12/31 )

Undeposited collections, 12/31 5,000


92,00
Adjusted balance per bank, 12/31 (Cash accounted) 0
Cash balance per books, 12/31/Cash accountability (see computation 122,00
below) 0
(30,00
Cash over (short) 0)

Computation of cash balance per books, 12/31

Cash receipts:
150,00
Owners' investment 0
98,00
Proceeds from loan 0
414,00
Collections from customers (see computation below) 0
662,00
Total 0

Cash disbursements:

Purchases (P250,000 - P15,000) 235,000

Store fixtures (P50,000 - P5,000) 45,000

Loan payment 80,000


540,00
Expenses paid 180,000 0
122,00
Cash balance per books, 12/31 0

Computation of collections from sales


250,00
Purchases/TGAS 0
30,00
Less merchandise inventory, 12/31 0
220,00
Cost of sales 0
264,00
Add gross profit (P220,000 x 120%) 0
484,00
Sales 0
70,00
Less accounts receivable, 12/31 0
414,00
Collections from sales 0

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