AUDITING PRACTICE

CPA EXAMINATION REVIEWER

2023-2024 EDITION

Chapter 1
Cash and Cash
Equivalents

GERARDO S. ROQUE
PROBLEM 1-1

CASH AND CASH EQUIVALENTS

In connection with your annual audit of VICKAY Company’s financial

statements for the year ended December 31, 2023, you have extracted
the following information from your client’s accounting records.

Cash on hand (Note 1) P1,200,000

Petty cash fund (Note 2) 10,000
Balanghay Bank current account (Note 3) 980,000
Solid Bank current account No. 1 460,000
Solid Bank current account No. 2 (100,000)
Lagaslas Bank savings account (Note 4) 1,500,000
Time Deposit (90 Days)-BDO 2,000,000

Note 1- Cash on hand included the following:

a. PHLPOST money orders from various customers, P300,000.

b. A customer check for P50,000 was returned by the bank on
December 29, 2023 due to insufficient fund but was subsequently
redeposited and cleared by the bank on January 6, 2024.
c. The Cash Receipts Journal was held open until January 10, 2024
during which time P300,000 was collected and recorded on
December 31, 2023.
d. A customer check for P300,000 dated January 30, 2024, received on
December 27, 2023.

Note 2- The Petty Cash Fund consisted of the following items on

December 31, 2023.

a. Bills and coins P3,000

b. Unreplenished petty cash disbursements 1,000
c. Employees’ IOUs 500
d. Currency in an envelope marked
“employees’ contributions for charity” 1,500
e. Check drawn by Vickay Company,
payable to the petty cash custodian 4,000
P10,000

Note 3- Included among the checks drawn by Vickay Company against

the Balanghay Bank current account are the following:
 a. A check written and dated December 23, 2023 and delivered to
payee on January 29, 2024, P30,000.
b. A check written on December 28, 2023, dated January 3, 2024,
delivered to payee on December 29, 2023, P75,000.

Note 4- Vickay’s savings account deposit in Lagaslas Bank has been

earmarked for the acquisition of a state-of-the-art manufacturing
equipment within the next couple of months.

Based on the preceding information, compute for the adjusted balances of

the following:

1. Cash on hand
A. P1,170,000 C. P870,000
B. P823,000 D. P820,000
2. Petty cash fund
A. P8,500 C. P8,000
B. P7,000 D. P10,000
3. Balanghay Bank current account
A. P1,085,000 C. P1,055,000
B. P1,010,000 D. P980,000
4. Cash and cash equivalents
A. P4,272,000 C. P4,273,500
B. P4,372,000 D. P4,322,000

SOLUTION 1-1

1. Cash on hand per books P1,200,000

Customer NSF check (50,000)
January 2024 collections recorded in (300,000)
December 2023
Customer PDC check (30,000)
Cash on hand, as adjusted P820,000
Answer: D

2. Bills and coins P3,000

Replenishment check 4,000
Adjusted petty cash P7,000
Answer: B

3. Balanghay Bank Current Account

Undelivered/Unreleased disbursement check P980,000
Balance per books 30,000
Post dated check delivered 75,000
 Adjusted balance P1,085,000
Answer: A

4. Cash on hand (see no. 1)

Petty cash fund (see no. 2) P 820,000
Balanghay Bank current account (see no. 3) 7,000
Solid Bank current account no. 1 1,085,000
Solid Bank current account no. 2 460,000
Time deposit – BDO (100,000)
Total cash and cash equivalents 2,000,000
Answer: A P4,272,000

PROBLEM 1-2

CASH AND CASH EQUIVALENTS

Your audit of the December 31, 2023, financial statements of DIONISIO

CORP. reveals the following:

Current account at Prime Bank P(30,000)

Current account at Prudent Bank 135,000
Treasury bills (acquired 3 months before maturity) 300,000
Treasury bills (maturity date is Dec. 31, 2024) 1,500,000
Payroll account 390,000
Foreign bank account - restricted (translated
using the December 31, 2023, exchange rate) 2,000,000
Postage stamps 1,250
Employee's postdated check 4,500
IOU from the vice-president 8,000
Credit memo from a supplier for a purchase return 8,100
Traveler's check 21,000
Money order 12,900
Petty cash fund (P3,000 in currency and expense
receipts for P12,000) 15,000

What amount would be reported as cash and cash equivalents in the

statement of financial position on December 31, 2023?

A. P840,050 C. P849,400
B. P873,900 D. P861,900

SOLUTION 1-2
 Current account at Prudent Bank P 135,000
Treasury bills (acquired 3 months before 300,000
maturity)
Payroll account 390,000
Traveler's check 21,000
Money order 12,900
Petty cash fund 3,000
Total cash and cash equivalents P861,900
Answer: D

PROBLEM 1-3

CASH AND CASH EQUIVALENTS

The accountant of SANTIAGO COMPANY is in the process of preparing the

company's financial statements for the year ended December 31, 2023.
He is trying to determine the correct balance of cash and cash equivalents
to be reported as a current asset in the statement of financial position.
The following items are being considered:

 Balances in the company's accounts at the Metropolitan Bank:

 Current account P81,000
 Savings account P132,600
 Undeposited customer checks of P22,200 (including a customer
check dated January 2, 2024, for P3,000).
 Currency and coins on hand of P3,480.
 Savings account at the Northern Philippines Bank with a balance of
P2,400,000. This account is being used to accumulate cash for
future plant expansion (in 2024).
 Petty cash of P4,000 (currency of P1,200 and unreplenished
vouchers for P2,800).
 P120,000 in a current account at the Northern Philippines Bank. This
represents a 20% compensating balance for P600,000 loan with the
bank. Santiago Company is legally restricted to withdraw the funds
until the loan is due in 2026.
 Treasury bills:
Two-month maturity bills P 90,000
Seven-month bills 120,000
 Time deposit (placement term is 2 months) P100,000
 Commercial papers (maturities range P500,000
from 30-90 days at the time of purchase)
 Postal money orders received from customersP200,000
What total amount of cash and cash equivalents should be reported under
current assets?

A. P1,047,480 C. P1,127,480
B. P627,480 D. P1,027,480

SOLUTION 1-3

Savings and current accounts - Metropolitan

Bank (P132,600 + P81,000) P213,600
Undeposited customer checks (P22,200 - 19,200
P3,000)
Currency and coins on hand 3,480
Petty cash 1,200
Two-month treasury bills 90,000
Time deposit 100,000
Commercial papers 500,000
Postal money orders 200,000
Total cash and cash equivalents P1,127,480
Answer: C

Notes:

1. The P3,000 postdated customer check will not be accepted by the

bank when presented either for encashment or deposit. This should be
reverted to accounts receivable.
2. The P2,400,000 cash balance at Northern Philippines Bank is being
maintained for future plant expansion. Thus, it is unavailable for use in
current operations or payment of current liabilities. The amount should
be shown as part of investments in the noncurrent assets section of
the statement of financial position.
3. The P120,000 in a current account at the Northern Philippines Bank
which represents a compensating balance is legally restricted and is
being held against a long-term borrowing. Hence, this should be
classified as investment or other asset in the noncurrent assets
section of the statement of financial position.
4. The 7-month treasury bills are not cash equivalents and should be
shown as part of short-term investments in the current assets section
of the statement of financial position.

PAS 7 defines "cash equivalents" as short-term, highly liquid

investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
These normally include short-term investments with maturities of
three months or less from the date of acquisition.
PROBLEM 1-4

CASH AND CASH EQUIVALENTS

The following information has been extracted from the accounting records
of the URSULA COMPANY at December 31, 2023:

Cash on hand (see note below) P230,000

Impukan Bank savings account 9,500
364-day Treasury bills purchased March 1, 2023 400,000
Petty cash fund (see note below) 20,000
Tipid Bank current account (see note below) 160,000
Time deposit placements:
Date Term
Dec. 15, 2023 30 days 30,000
Oct. 31, 2023 90 days 40,000
Nov. 30, 2023 180 days 25,000
Employee travel advances 7,000
Cash in bond sinking fund 500,000
Customer's note receivable 45,000
Postage stamps 2,400
Commercial papers issued to retire short-term 800,000
obligations to mature in 2024

The following are included in cash on hand:

 A customer check for P43,000 returned by the bank on December

28, 2023 due to insufficient fund. It was redeposited and cleared the
bank on January 2, 2024.
 A customer check for P75,000 dated January 3, 2024, received
December 27, 2023.
 PHLPost money orders received from customers, P30,000.

The petty cash fund consists of the following:

Currency and coins P13,500

IOUs from officers and employees 3,000
Unreplenished petty cash disbursements 1,500
Currency in envelope marked donations for
calamity victims 1,500
P20,000
The following information pertains to Tipid Bank current account:

 A check for P13,000 was dated and recorded on December 29,

2023, but was delivered to payee on January 5, 2024.
 A check for P5,000 dated January 10, 2024, payable to a supplier
was recorded and released to payee on December 19, 2023.

What total amount should be recorded as cash and cash equivalents on

December 31, 2023?

A. P1,191,000 C. P378,000
B. P1,181,500 D. P391,000

SOLUTION 1-4

Cash on hand:
Per books P230,00
0
NSF customer check (40,000)
Postdated customer check (70,000) P120,00
0
Impukan Bank savings account 9,500
Petty cash fund (currency and coins) 13,500
Tipid Bank current account:
Per books P160,00
0
Undelivered disbursement check 13,000
Postdated disbursement check delivered 5,000 178,000
Time deposits:
30 days 30,000
90 days 40,000
Total cash and cash equivalents P391,00
0
Answer: D

PROBLEM 1-5

CASH AND CASH EQUIVALENTS

The controller of the LYRIC CO. is trying to determine the amount of cash
and cash equivalents to be reported on its December 31, 2023, statement
of financial position. The following information is provided:

1. Balances in the company's accounts at the Monte Bank:

 Checking account-P540,000
  Savings account--P884,000
2. Undeposited customer checks of P208,000.
3. Currency and coins on hand of P23,200.
4. Savings account at the Naic Bank with a balance of P350,000. This
account is being used to accumulate cash for future plant expansion
(in 2025).
5. P800,000 balance in a checking account at the Naic Bank.
6. Treasury bills: 30-day maturity bills totaling P600,000, and 180-day
bills totaling P800,000.

On December 31, 2023, what amount should be reported as cash and

cash equivalents?

A. P3,055,200 C. P2,955,200
B. P2,455,200 D. P2,355,200

SOLUTION 1-5

Balance in Monte Bank checking account P 540,000

Balance in Monte Bank savings account 884,000
Undeposited customer checks 208,000
Currency and coins on hand 23,200
Checking account in Naic bank 800,000
Treasury bills with 30-day maturity 600,000
Total cash and cash equivalents P3,055,200
Answer: A

PROBLEM 1-6

CASH AND CASH EQUIVALENTS

The following facts apply to OTO COMPANY during 2023:

1. Savings account of P900,000 and a checking account balance of

P1,200,000 are held at Manila Bank.
2. Money market placement with maturity of 3 months, P7,500,000.
3. Currency and coins on hand amounted to P11,550.
4. Travel advances of P270,000 for the first quarter of next year
(employee reimbursement will be through salary deduction).
5. Oto Company has purchased P3,150,000 of commercial paper of
Mendez Corp. which is due in 60 days.
6. A separate cash fund amounting to P2,250,000 is restricted for the
retirement of long-term debt.
7. Petty cash fund of P1,500.
 8. An IOU from an employee of Oto Company in the amount of P2,000.
9. Two certificates of deposit, each totaling P500,000. These CDs have
a maturity of 120 days.
10. Oto Company has received a check from a customer in the amount
of P187,500 dated January 15, 2024.
11. On January 1, 2023, Oto Company purchased marketable equity
securities to be held as "trading" for P3,000,000. On December 31,
2023, its market value is P4,300,000.

What amount should be reported as cash and cash equivalents on

December 31, 2023?

A. P13,763,050 C. P12,751,500
B. P12,575,550 D. P12,763,050

SOLUTION 1-6

Savings account - Manila Bank P 900,000

Checking account - Manila Bank 1,200,000
Money market placement 7,500,000
Petty cash 1,500
Commercial paper 3,150,000
Currency and coins on hand 11,550
Total cash and cash equivalents P12,763,05
0
Answer: D

PROBLEM 1-7

COMPUTATION OF CORRECT CASH BALANCE

The Cash account of the BEA CORPORATION as of December 31, 2023,

was composed of the following:

On deposit in current account with the Bank of PI P900,000

Cash collection not yet deposited to the bank 350,000
A customer's check returned by the bank for
insufficient fund 150,000
A check drawn by the Vice-President of the company
dated January 15, 2024 70,000
A check drawn by a supplier dated December 28,
2023, for goods returned by the company 60,000
A check dated May 31, 2023, drawn by the company
against the Bank of Manila 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 Bank of Manila 410,000
 Petty cash fund of which P10,000 is in currency;
P7,200 in form of employees' IOUS; and P2,800 is
supported by approved petty cash vouchers for
expenses all dated prior to closing of the books on
December 31, 2023 20,000
Total P1,960,000
Less: Overdraft with the Bank of Manila secured by a
chattel mortgage on the inventories 300,000
Cash balance per ledger P1,660,000
What is the amount of cash to be reported on the December 31, 2023,
statement of financial position of Bea Company?

SOLUTION 1-7

Current account - Bank of PI P900,000

Undeposited collection 350,000
Supplier's check for goods returned by the 60,000
company
Petty cash fund 10,000
Bank of Manila (P410,000 - P300,000) 110,000
Correct cash balance P1,430,000

PROBLEM 1-8

CASH AND CASH EQUIVALENTS

In connection with your audit of the financial statements of ONOR

COMPANY for the year ended December 31, 2023, you gathered the
following information.

1. The company maintains its current account with TLC Bank. The bank
statement on December 31, 2023, showed a balance of P638,340.

Your audit of the company's account with TLC Bank disclosed the
following:

 A check for P22,500 received from a customer whose account is

current had been deposited and then returned by the bank on
December 28, 2023. No entry was made for the return of this
check. The customer replaced the check on January 15, 2024.
 A check for P5,720 was cleared by the bank as P7,520. The bank
made the correction on January 2, 2024.
 A check for P3,500 representing payment of an employee
advance was received and deposited on December 27, 2023,
but was not recorded until January 3, 2024.
  Postdated checks totaling P67,300 were included in the deposits
in transit. These represent collections of current accounts
receivable from customers. The checks were actually deposited
on January 5, 2024.
 Various debit memos for drafts purchased for payment of
importation of equipment totaling P230,000 were not yet
recorded. These purchases were previously set up as accounts
payable. Said equipment arrived in December 2023.
 Interest earned on the bank balance for the 4th quarter of 2023,
amounting to P1,950 was not recorded.
 Bank service charges totaling P1,260 were not recorded.
 Deposit in transit and outstanding checks at December 31,
2023, totaled P136,250 and P276,380, respectively.
2. Various expenses from the company's imprest petty cash fund dated
December 2023, totaled P16,250, while those dated January 2024,
amounted to P5,903. Another disbursement from the fund dated
December 2023 was a cash advance to an employee amounting to
P3,500. A replenishment of the petty cash fund was made on
January 8, 2024.
3. The company's trial balance on December 31, 2023, includes the
following accounts:

Cash in bank - TLC Bank P 748,320

Cash in bank - ER Bank (restricted account for
plant expansion, expected to be disbursed in
2024) 700,000
Petty cash fund 30,000
Time deposit, placed December 20, 2023, and
due March 20, 2024 1,000,000
Money market placement - Prudential Bank 4,000,000

1. What is the adjusted petty cash fund balance on December 31,

2023?
A. P4,347 C. P30,000
B. P10,250 D. P24,097
2. What is the adjusted Cash in bank-TLC Bank balance on
December 31, 2023?
A. P500,010 C. P432,710
B. P748,320 D. P429,110
3. The entry to adjust the Cash in bank - TLC Bank account should
include a debit to
A. Accounts receivable for P89,800.
B. Accounts receivable for P86,300.
C. Accounts payable for P228,200.
 D. Interest expense for P1,950.
4. The December 31, 2023, statement of financial position should
show "Cash and cash equivalents" at
A. P6,142,960 C.P4,442,960
B. P5,439,360 D. P5,442,960

SOLUTION 1-8

1. Petty cash fund per trial balance P30,000

Various expenses dated December 2023 (16,250)
Employee cash advance (3,500)
Adjusted petty cash fund balance P10,250
Answer: B

2. Book Bank
Unadjusted balances P748,320 P638,340
NSF check (22,500)
Bank error (P7,520 - P5,720) 1,800
Unrecorded cash receipt 3,500
Postdated checks (67,300)
Deposits in transit (P136,250 -
P67,300) 68,950
Bank debit memos (230,000)
Interest earned 1,950
Bank service charges (1,260)
Outstanding checks 00000000 (276,380)
Adjusted balances P432,710 P432,710
Answer: C

3. Accounts receivable (P22,500 + 89,800

P67,300)
Accounts payable 230,000
Bank service charges 1,260
Cash in bank - TLC Bank 315,610
Advances to employees 3,500
Interest income 1,950
Answer: A

4. Cash in bank - TLC Bank P 432,710

Petty cash fund 10,250
Time deposit 1,000,000
Money market placement 4,000,000
Cash and cash equivalents P5,442,96
0
Answer: D

PROBLEM 1-9
 CASH IN BANK AND PETTY CASH FUND

BARTOLOME COMPANY was incorporated 3 years ago as a trading

company engaged in the sale and distribution of hardware and electrical
supplies.

The company maintains its bank account with Secured Bank. Your review
of the bank reconciliation statement disclosed the following information:

1. On December 22, 2023, the bank erroneously credited the account

of Bartolome Company for P195,000 representing deposit for the
account of another company.
2. Postdated checks totaling P37,900 were included in the deposits in
transit. These represent collections of accounts receivable from
customers. The checks were actually deposited on January 5, 2024.
3. On December 28, 2023, the company issued checks to creditors
totaling P115,000. These checks were released on January 5, 2024.
4. A check dated December 12, 2023, in payment of accounts payable
was recorded as P12,000. Upon examination of the checks returned
by the bank, the actual amount was P21,000.
5. A check for P4,750 in payment of a minor repair of office equipment
was not recorded on the company books.
6. Transfer of fund of P59,300 to Secured Bank current account of DBS
Securities was not recorded. This pertains to purchase of 5,000
shares of William Lines to be held as trading securities.

Based on quoted price as of December 31, 2023, the market value

per share is P8.20.

7. Interest earned amounting to P5,720 was not recorded.

8. Deposits in transit and outstanding checks at December 31, 2023,
amounted to P89,200 and P132,000, respectively.
9. The cash in bank balance per book on December 31, 2023, is
P681,200.
10. Your review of the accounts receivable schedule disclosed that
various collections totaling P17,350 were not recorded in the books
but already reflected in the subsidiary ledgers.

The Petty cash fund of P35,000 maintained on an imprest basis was

counted on January 2, 2024. Unreplenished expenses include petty cash
vouchers for various expenses totaling P19,300 and employees' advances
for P5,800 all dated December 2023.

1. The cash balance per bank statement on December 31, 2023, is

A. P946,120 C. P984,020
 B. P988,770 D. P993,020
2. The adjusted Cash in bank balance at December 31, 2023, is
A. P708,320 C. P726,320
B. P746,220 D. P702,600
3. The adjusted Petty cash fund balance at December 31, 2023, is
A. P15,700 C. P35,000
B. P29,200 D. P9,900

SOLUTION 1-9

1. Cash balance per bank statement P984,020

Answer: C
2. Adjusted Cash in bank balance P708,320
Answer: A
Book Bank
Unadjusted balances P681,200 P984,020
Erroneous bank credit (195,000)
Postdated checks (37,900)
Unreleased checks 115,000
Understatement of book disbursement
(P21,000-P12,000) (9,000)
Unrecorded disbursement check (4,750)
Unrecorded transfer of fund (59,300)
Interest earned 5,720
Outstanding checks (132,000)
Deposit in transit (P89,200 - P37,900) 51,300
Unrecorded collections 17,350
Adjusted balances P708.320 P708,320

3. Petty cash fund per ledger P35,000

Unreplenished disbursements:
Various expenses (19,300)
Employees' advances (5,800)
Adjusted petty cash fund P 9,900
Answer: D

PROBLEM 1-10

PETTY CASH FUND

You are assigned to the petty cash count for the Jervick Trading at
December 31, 2023. The contents of the fund are listed below. The
custodian of the fund is Annie Bartolome, (Office Secretary). The balance
of the petty cash fund per the company's general ledger is P30,000. Such
fund is being maintained on an imprest basis.

Bills

Five hundred-peso bills; 13

One hundred-peso bills; 20
Fifty-peso bills; 44
Twenty-peso bills; 30

Coins

One-peso coins; 12 rolls of 20 and 10 loose

An IOU signed by the company treasurer for P3,750.

Postage stamps of various denominations - P750.

(The voucher is also for P750.)

A receipted bill from NCR Bulletin newspaper for advertising - P420.

A receipted bill from NB Store for copy paper - P660.

A receipted bill from Refill Gas Stations for gas and oil for the company's
delivery truck - P6,540.

A check signed by Melvin Cruz, an employee, dated December 28, 2023-

P1,050.

A check signed by Celine Dilon, sales manager, dated January 20, 2024 -
P990.

A notation on a sheet of paper as follows: Proceeds of employees'

contributions for office party - P3,630.

A receipted bill from Bona Restaurant for refreshment served at

employees' party, December 24, 2023- P2,010.

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

SOLUTION 1-10

Bills:
P500 x 13 P6,500
P100 x 20 2,000
P50 x 44 2,200
P20 x 30 600
Coins:
P1 x 250 250 P 11,550
IOU 3,750
Postage stamps 750
NCR Bulletin for advertising 420
NB Store for copy paper 660
Refill gas station for gas and oil 6,540
Accommodated checks:
Melvin Cruz; employee P1,050
Celine Dilon, sales manager 990 2,040
Total count P25,710
Accountabilities:
Petty cash fund P30,000
Unexpended employees'
contributions (P3,630 P2,010) 1,620 31,620
Cash shortage P 5,910

PROBLEM 1-11

PETTY CASH FUND

The auditor for SAMANTHA, INC. examined the petty cash fund
immediately after the close of business, July 31, 2023, the end of the
company's natural business year. The petty cash custodian presented the
following during the count:

Currency P1,650
 Petty cash vouchers:
Postage 420
Office supplies expense 900
Transportation expense 340
Computer repairs 800
Advances to office staff 1,500
A check drawn by Samantha, Inc., payable to the
petty cash custodian 7,200
Postage stamps 300
An employee's check, returned by bank, marked NSF 1,000
An envelope containing currency of P1,890 for a gift
for a retiring employee 1,890
P16,000

The general ledger shows an imprest petty cash fund balance of P16,000.

1. How much is the petty cash shortage or overage?

A. P2,190 overage C. P1,890 shortage
B. P2,190 shortage D. P1,890 overage
2. What is the adjusted balance of the petty cash fund at July 31,
2023?
A. P10,740 C. P7,200
B. P3,540 D. P8,850

SOLUTION 1-11

1. Currency P1,650
Petty cash vouchers (P420 + P900+ P340 +
P800 + P1,500) 3,960
Replenishment check 7,200
Employee's NSF check 1,000
Petty cash accounted for 13,810
Petty cash fund per ledger (custodian's
accountability) 16,000
Petty cash shortage 2,190
Answer: B

2. Currency P1,650
Replenishment check 7,200
Adjusted petty cash balance P8,850
Answer: D

PROBLEM 1-12

PETTY CASH FUND

On January 1, TANYA CO. establishes a petty cash account and designates
Orly Reyes as petty cash custodian. The original amount included in the
petty cash fund is P10,000. The following disbursements are made from
the fund:

Office supplies P3,460

Postage 2,240
Entertainment 840
The balance in the petty cash box is P3,200.

1. The person responsible, at all times, for the amount of the petty
cash fund is the
A. Chairman of the Board of Directors
B. President of the company
C. Petty cash custodian
D. General cashier
2. The following are appropriate procedures for controlling the petty
cash fund, except
A. To monitor variations in different types of expenditures, the
petty cash custodian files petty cash vouchers by category of
expenditure after replenishing the fund.
B. To replenish the fund, the general cashier issues a company
check to the petty cash custodian, rather than cash.
C. To determine that the fund is being accounted for
satisfactorily, surprise counts of the fund are made from time
to time by the internal auditor or other responsible official.
D. Each individual to whom petty cash is paid is required to
present signed receipts to the petty cash custodian.
3. The entry to replenish the fund is

A. Office supplies expense 3,460

Postage expense 2,240
Entertainment expense 840
Cash 6,540
B. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Petty cash 6,800
C. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Cash 6,800
D. Office supplies expense 3,460 6,540
Postage expense 2,240
 Entertainment expense 840
Petty cash

4. The objective of establishing a petty cash fund is to

A. Cash checks for employees
B. Account for all cash receipts and disbursements
C. Account for cash sales
D. Facilitate payment of small, miscellaneous items
5. What is the effect of not replenishing the petty cash at year-end and
not making the appropriate adjusting entry?
A. A detailed audit is essential
B. The petty cash custodian should turn over the petty cash to
general cashier
C. Cash will be overstated and expenses understated
D. Expenses will be overstated and cash will be understated

SOLUTION 1-12
1. One individual, the petty cash custodian, should be responsible for the
petty cash fund.
Answer: C
2. The petty cashier should not have custody of paid petty cash vouchers to
prevent their reuse.
Answer: A
3. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Cash
Computation of cash shortage:
Currency and coins 6,800
Petty cash vouchers (P3,460 + P2,240 + P840) P3,200
Petty cash accounted 6,540
Petty cash fund per ledger
9,740
Shortage
10,00
Answer: C
0
P 260
4. Facilitate payment of small, miscellaneous items.
Answer: D
5. Cash will be overstated, and expenses understated.
Answer: C

PROBLEM 1-13

COUNT OF PETTY CASH FUND AND UNDEPOSITED COLLECTIONS

In connection with your audit of the financial statements of BENJAMIN
CORP. for the year ended December 31, 2023, you conducted a surprise
count of the company’s petty cash fund and undeposited collections at
8:20 a.m. on January 3, 2024. Your count disclosed the following:

Bills and coins

Bills Coins
P100.00 5 pieces 5.00 18 pieces
50.00 40 pieces 1.00 214 pieces
20.000 48 pieces

Postage stamps (unused) – P365

Checks
Date Payee Maker Amount
Dec. 30 Cash Custodian P 1,200
Dec. 30 Benjamin Corp. SLV, Inc. 14,00
0
Dec. 31 Benjamin Corp. Mario Lansang, sales manager 1,680
Dec. 31 Benjamin Corp. MSU Corp. 17,80
0
Dec. 31 Benjamin Corp. Ateneo, Inc. 8,300
Dec. 31 Taiwan Corp. Benjamin Corp. 27,00
0

Unreimbursed vouchers
Date Payee Description Amount
Dec. 23 Mario Lansang, Advance for trip to Tagaytay
P20,000
sales manager City
28 Central Post
Postage stamps 1,620
Office
29 Messengers Transportation 150
29 Byte, Inc. Computer Repair 800

Other items found inside the cash box:

 1. Unclaimed pay envelope of Juan MacDonut. Indicated on the pay slip
is his net salary of P7,500. Your inquiry revealed that Juan’s salary is
mingled with the petty cash fund.
2. The sales manager’s liquidation report for his Tagaytay City trip.
Cash advance received on Dec. P20,000
23
Less: Hotel accommodation, P16,000
meals, etc. 1,200
Bus fare for two 1,000
Cash given to Pablo, 18,20
salesman 0
Balance P1,800

Accounted for as follows:

Cash returned by Pablo to the sales 120
manager
Personal check of the sales manager 1,680
Total 1,800

Additional information:
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,
2022.
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 P25,000. The last
replenishment of the fund was made on December 22, 2023.

1. What is the amount of shortage due from the sales manager?

A. P240 C. P120
B. P1,800 D. P0

2. What is the amount of undeposited collections on December 31, 2023?

A. P44,300 C. P57,300
B. P84,300 D. P41,000

3. The adjusting entries on December 31, 2023, should include a net

debit to Travel expenses of
A. P17,320 C. P18,200
 B. P18,320 D. P18,080
4. The cash count should include total checks of
A. P69,980 C. P41,780
B. P42,980 D. P41,300

5. What is the total cash shortage?

A. P22,166 C. P22,406
B. P8,166 D. P20,486

1. Cash advance P 20,00

Less: Actual cash 0
disbursed Hotel,
meals, etc. P
16,000
Bus fare
1,200 18,08
Pablo (P1,000 – P120)
880 0
Cash that should be
returned Cash actually 1,92
returned 0
1,68
Shortage due from the sales manager
0
Answer: A
P
240

2. P
Collections per OR nos. 4352 – 4355 43,300
14,0
Unreceipted collections
00
Total undeposited collections
Answer: C P
57,300

3. Travel expenses (P16,000 + P1,200 + P880) P

Answer: D 18,080
4. Total checks P
Answer: B 42,980
5. Total cash shortage P
Answer: A 22,166
SOLUTION 1-13

Benjamin Corp.
CASH COUNT SHEET
January 3, 2024 – 8:20 a.m.
Bills and coins:
 Denomination Quantity Amount Total
P100.00 5 P500
50.00 40 2,000
20.00 48 960
5.00 18 90
1.00 214 214 P3,764

Date Maker Amount

Dec. 30 Custodia P1,200
Dec. 30 n 14,000
Dec. 31 SLV, Inc. 1,680
Dec. 31 Mario Lansang 17,800
Dec. 31 MSU 8,300
Corp.
Ateneo,
Inc. 42,980
Checks:

Date Account Amount

Dec. 23 Advances P20,000
Dec. 28 Postage 1,620
Dec. 29 Transportation 150
Dec. 29 Repairs 800 22,570
Unreimbursed vouchers:

Total cash accounted for

Less: Accountabilities P69,314
Petty cash 25,000
Collections (per official receipts) 43,300
Unclaimed salary 7,500
Excess travel advance 1,680
Unreceipted collection from SLV, 14,000
Inc. 91,480
CASH SHORTAGE (P22,166)
Benjamin Corp.
ADJUSTING JOURNAL ENTRIES December 31, 2023
1.Cash 14,000
Accounts receivable 14,000
2.Advances to officers and employees 20,000
Postage expense 1,620
Transportation expense 150
Repairs expense 800
Petty cash fund 22,570
3.Unused postage 365
Postage expense 365
4.Cash 27,000
Accounts payable 27,000
5.Cash 7,500
Salaries payable 7,500
6.Receivable from custodian 22,166
Cash 22,166
7.Travel expenses (P16,000 + P1,200 +
P880)
Petty cash fund 18,080
Advances to officers and 1,680
employees 19,760

PROBLEM 1-14

PETTY CASH FUND; BANK RECONCILIATION

Anying Velasco is reviewing the cash accounting for ABX, Inc. Anying’s
review will focus on the petty cash fund account and the bank
reconciliation for the month ended May 31, 2023. She has collected the
following information from ABX’s bookkeeper for this task.

Petty Cash Fund

1. The petty cash fund was established on May 2, 2023, in the amount
of P10,000.
2. Expenditures from the fund by the custodian as of May 31, 2023,
were evidenced by approved petty cash vouchers for the following:

Various office supplies P3,920

IOU from employees 1,200
Shipping charges 2,298
Miscellaneous expense 1,526

On May 31, 2023, the petty cash fund was replenished and increased to
P12,000; currency and coins in the fund at that time totaled P756.
Bank Reconciliation
Shore Bank
Bank Statement

Disbursement Receipts Balance

s
Balance, May 1, 2023 P350,760
Deposits P1,120,00
Note payment direct from 0
customer
(interest of P1,200) P1,246,000 37,200
Checks cleared during May 1,080
Bank service charges 260,880
Balance, May 31, 2023

ABX, Inc.’s Cash Account

Balance, May 1, 2023 P354,000
Deposits during May 2023 1,240,000
Checks written during May 1,273,400
2023

Deposits in transit are determined to be P120,000, and checks

outstanding at May 31 total P34,000. Cash on hand (besides petty cash)
at May 31, 2023, is P9,840.

1. What is the amount of petty cash shortage?

A. P2,300 C. P300
B. P11,244 D. P0

2. The journal entry to record the replenishment of, and increase in the
petty cash fund includes a credit to
A. Cash of P10,944
B. Cash of P11,244
C. Petty cash fund of P10,944
D. Petty cash fund of P11,244

3. What amount of cash should be reported in the May 31, 2023,

statement of financial position?
A. P368,720 C. P368,420
B. P356,720 D. P358,880

SOLUTION 1-14
 1. Coins and currency P756
Fund disbursements (P3,920 + P1,200 + P2,298 +
P1,526) 8,944
Petty cash accounted 9,700
Custodian’s accountability 10,000
Petty cash shortage P300
Answer: C

2. Petty cash fund 2,000

Office supplies 3,920
Accounts receivable-employees 1,200
Shipping expense 2,298
Miscellaneous expense 1,526
Cash short/over 300
Cash 11,244
Answer: B

3. Book Bank
Unadjusted balances P320,60 P260,880
0
Deposit in transit 120,000
Cash on hand 9,840
Outstanding checks (34,000)
Note collected by bank 37,200
Bank service charges (1,080)
Adjusted balances P356,72
0 P356,720
Adjusted cash balance (P356,720 +
P12,000) P368,720
Answer: A

PROBLEM 1-15

BANK RECONCILIATION; COMPUTATION OF BANK BALANCE

Presented below are a series of unrelated situations. Answer the question

at the end of each situation.
1. The accountant of NARCISA CO. provided the following data in reconciling
the April 30 cash in bank balance:
Balance per bank, April 30 P130,350
Balance per books, April 30 85,000
Bank service charge 2,000
Deposits in transit 49,000
Outstanding checks 17,650
Note collected by bank including P11,200
interest (Narcisa Co. not yet informed) 136,000
Check drawn by XYZ Co. erroneously charged 54,600
 by bank to Narcisa’s account
A transposition error was made in recording a sale and deposit in the
sales journal and cash receipts journal in April.
Correct amount P13,65
8
Recorded as P16,35
8

2. The following information is included in EMIL CORPORATION’s bank

statement for the month of March:
A customer’s check has been marked P
“NSF” by the bank and returned
13,000
Bank service charge for March 1,200

In comparing the bank statement to the company’s cash records, you

found:
Outstanding checks on March 31 P184,0
00
Deposits made but are not yet shown 14,000
in the April bank statement

The deposits in transit and outstanding checks have been correctly

taken up in the company’s books. You also found a customer’s
check for P17,400 that had not yet been deposited and had not
been recorded in Emil’s books. Your client’s books show a cash
balance of P36,420.

What is Emil Corporation’s correct cash balance at March 31?

3. The following information pertains to a checking account of a

company at June 30, 2023.
Balance per bank statement P200,0
00
Interest earned for the second quarter 500
Outstanding checks 15,000
Customers’ checks returned for insufficient 5,000
funds
Deposit in transit 25,000

What is the cash balance per books at June 30, 2023?

4. A company is reconciling its bank statement with internal records.

The cash balance per the company’s books is P45,000. There are
P5,000 of bank charges not yet recorded, P7,500 of outstanding
 checks, P12,500 of deposits in transit, and P15,000 of bank credits
and collections not yet taken up in the company’s books.

What is the cash balance per bank?

5. A company shows a cash balance of P175,000 on its bank

statement dated June 30. As of June 30, there are P55,000 of
outstanding checks and P37,500 of deposits in transit.

What is the adjusted cash balance on June 30?

6. The Cash account shows a balance of P225,000 before

reconciliation. The bank statement does not include a deposit of
P11,500 made on the last day of the month. The bank statement
shows a collection by the bank of P4,700 and a customer’s check for
P1,600 was returned because it was NSF. A customer’s check for
P2,250 was recorded on the books as P2,700, and a check written
for P395 was recorded as P485.

What should be the correct cash balance?

7. On July 5, 2022, EMILIA CORP. received its bank statement for the
month ending June 30. The statement showed a P209,500 balance
while the cash account balance on June 30 was P35,000. In
reconciling the balances, the auditor discovered that:
1. The June 30 collections of P176,000 were
recorded on the books but were not
deposited until July.
2. The bank service charges for the month of June totaled P3,000.
3. A paid check for P24,300 was entered incorrectly in the cash
payments journal as P34,200.
What is the total outstanding checks at June 30, 2023?

SOLUTION 1-15
 Book Bank
1. Unadjusted balances P85,000 P130,000
Bank service charge (2,000
)
Deposits in transit 49,000
Outstanding checks (17,000)
Collection of note 136,000
Erroneous bank debit 54,000
Transposition error (P16,358 – (2,700)
P13,658)
Adjusted balances P216,300 P216,300

2. Balance per books P 36,420

Unrecorded and undeposited customer’s check 17,400
Bank service charge (1,200)
NSF check (13,000)
Adjusted Cash balance P39,620

3. Balance per bank statement P200,000

Outstanding checks (15,000)
Deposit in transit 25,000
Interest earned (500)
NSF checks 5,000
Balance per books at June 30, 2023 214,500

4. Balance per books P45,000

Bank charges (5,000)
Outstanding check 7,500
Deposits in transit (12,500)
Bank credits and collections 15,000
Balance per bank P50,000

5. Balance per bank statement P175,000

Outstanding checks (55,000)
Deposits in transit 37,500
Adjusted cash balance P157,500

6. Balance per books P225,000

Bank collection 4,700
Customer’s NSF check (1,600)
Overstatement of cash receipt (P2,700 – P2,250) (450)
Overstatement of cash disbursement (P485 – 90
P395)
Adjusted cash balance P227,740

7. Balance per books, June 30, 2023 P35,000

Bank service charges (3,000)
Overstatement of disbursement (P34,200 – 9,900
P24,300)
Adjusted cash balance P41,900

Balance per bank, June 30, 2023 P209,500

Add: Undeposited collections 176,000
Total 385,500
Less: Adjusted cash balance 41,900
Outstanding checks, June 30, 2023 P343,600
PROBLEM 1-16
BANK RECONCILIATION

The bank statement for the current account of IAN Co. showed a
December 31, 2023, balance of P585,284. Information that might be
useful in preparing a bank reconciliation is as follows:

a) Outstanding checks were P52,810.

b) The December 31, 2023, cash receipts of P23,000 were not
deposited in the bank until January 2, 2024.
c) One check written in payment of rent P8,940 was correctly
recorded by Ian Co. as a P9,840 disbursement.
d) In accordance with prior authorization, the bank withdrew P18,000
directly from the current account as payment on a mortgage note
payable. The interest portion of that payment was P14,000. Ian Co.
has made no entry to record the automatic payment.
e) Bank service charges of P740 were listed on the bank statement.
f) A deposit of P35,000 was recorded by the bank on December 12,
but it did not belong to Ian Co.
g) The bank statement included a charge of P3,400 for a not-
sufficient-fund-check. The company will seek payment from the
customer.
h) Ian Co. maintains an P8,000 petty cash fund that was appropriately
reimbursed at the end of December.
i) According to instructions from Ian Co. on December 30, the bank
withdrew P40,000 from the account and purchased treasury bills for
Ian Co. The company recorded the transaction in its books on
December 31 when it received notice from the bank. Half of the
treasury bills mature in three months and other half in six months.

1. What is the cash in bank balance per books on December 31.

A. P549,714 C. P534,914
B. P543,514 D. P541,714
2. What is the adjusted cash in bank balance on December 31, 2023?
A. P520,474 C. P518,674
B. P527,274 D. P520,154
3. What amount of cash and cash equivalents should be shown under
current assets on December 31, 2023?
A. P928,474 C. P720,474
B. P728,474 D. P735,274

SOLUTION 1-16
 1. Balance per bank statement P
585,284
Outstanding checks (52,810)
Undeposited collections 23,000
Error in recording rent check (P9,840 – P8,940) (900)
Automatic mortgage payment 18,000
Bank service charges 740
Bank error – deposit incorrectly credited to Ian (35,000)
Co.
NSF Check 3,400
Balance per books P
541,714
Answer: D

2. Book Bank
Unadjusted balances P
P541,714 585,284
Outstanding checks (52,810)
Undeposited collections 23,000
Error in recording rent check 900
Automatic mortgage payment (18,000)
Bank service charges (740)
Bank error – deposit incorrectly
credited to Ian Co. account (35,000)
NSF Check (3,400)
Adjusted balance P 520,474 P520,474
Answer: A

3. Current account balance P

520,474
Petty cash 8,000
Treasury bills (P400,000 x ½) 200,000
Total cash and cash equivalents P
728,474
Answer: B
PROBLEM 1-17

BANK RECONCILIATION: UNADJUSTED TO ADJUSTED

The following data were taken from GARAY’s check register for the month
of April. Garay’s bank reconciliation for March showed one outstanding
check, check No. 178 for P2,150 (written on March 20), and one deposit
in transit for P4,350 (made on March 31).

DATE ITEM CHECKS DEPOSITS BALANC

2023 E
 APRIL Beginning Balance 6,150
1 Deposit 26,167 32,317
1 Check No. 179 250 32,567
1 Check No. 180 10,673 21,898
4 Deposit 11,774 33,672
27 Check No. 181 13,217 20,490
29

The following is from Garay’s bank statement for April;

DATE ITEM CHECKS DEPOSIT BALANC

2023 S E
APRIL Beginning Balance 3,950
1 Check No. 179 250 3,700
3 Deposit 4,350 8,050
3 Check No. 180 10,673 (2,623)
5 Automatic loan 8,150 5,527
5 Deposit 26,417 31,944
5 NSF check 1,000 30,944
20 Service charge 600 30,344
20 Interest 82 30,426
30

Assume that any errors or discrepancies you find are Garay’s not the
bank’s.

What is the adjusted cash balance as of April 30?

A. P26,833 C. P30,426
B. P26,838 D. P26,872

SOLUTION 1-17

Book Bank
Unadjusted balances P20,490 P30,426
Outstanding checks:
Check no. 178 P 2,150
Check no. 181 13,217 (15,367)
Deposit in transit 11,774
Error in recording deposit (P26,417 – 250
P26,167)
Automatic loan 8,150
Interest 82
NSF check (1,000)
Bank service charge (600)
Arithmetic error for:
Check no. 179 (P32,567 – P32,067) (500)
Check no. 180 (P21,898 – P21,894) (4)
Check no. 181 (P20,490 – P20,455) ______
(35)
Adjusted balances P26,833 P26,833
Answer: A

PROBLEM 1-18

BANK RECONCILIATION: UNADJUSTED TO ADJUSTED BALANCES

FORMAT

The following information pertains to FLINT CORP:

Flint Corp.
BANK RECONCILIATION
November 30, 2023
Balance per bank statement P435,000
Less: Outstanding checks
No. 4321 P6,000
4329 15,000
4340 1,700
4341 4,675 27,375
P407,625
Add: Deposit in transit 16,200
Balance per books P423,825

CHECK REGISTER
December 2023

DATE PAYEE NO. VOUCHER DISCOUN CASH

S T
PAYABLE
Dec 1 San Beda, Inc. 4342 P 10,000 P 500 P 9,500
3 Miriam Corp. 4343 4,200 - 4,200
7 UE Enterprises 4344 3,755 - 3,755
12 PSBA Corp. 4345 12,000 120 11,880
15 Payroll 4346 96,000 - 96,000
16 BU, Inc. 4347 6,300 - 6,300
18 New Era Co. 4348 14,200 142 14,058
21 UST, Inc. 4349 7,000 - 7,000
22 Petty cash 4350 10,000 - 10,000
28 fund 4351 98,000 98,000
Payroll P261,455 - P260,693
P762
 BANK STATEMENT
BANKABLE BANK
PERIOD: NOVEMBER 30,2023 – DECEMBER 31, 2023
No.: 001-43-44
DATE Description Check Debit Credit Balance
Numb
er
Balance last statement P435,0
00
Dec. Cash deposit P16,20 451,20
1 Check issued 4329 P15,00 0 0
1 Check issued 4342 0 436,20
4 Check issued 4341 9,500 0
4 Check deposit 4,675 426,70
5 Check issued 4343 49,000 0
6 Check deposit 4,200 422,02
8 Check issued 4344 14,000 5
10 Encashment 4346 3,755 471,02
15 Encashment 4350 96,000 5
22 Encashment 4351 10,000 466,82
28 Debitmemo-service 98,000 5
29 charge 480,82
Credit memo - 1,000 5
29 interest 1,550 477,07
0
381,07
0
371,07
0
273,07
0

272,07
0
273,62
0

Deposits in transit at December 31 totaled P49,000.

1. What is the total book receipts for December?

A. P113,550 C. P63,000
B. P80,750 D. P112,000
2. What is the cash balance per books on December 31, 2023?
A. P275,132 C. P291,332
B. P226,132 D. 274,370

3. What is the total outstanding checks on December 31, 2023?

A. P68,313 C. P46,938
 B. P39,238 D. P40,938
4. What is the adjusted cash balance on November 30, 2023?
A. P446,375 C. P423,825
B. P417,825 D. P435,000
5. What is the adjusted cash balance on December 31, 2023?
A. P281,682 C. P226,682
B. P275,682 D. P274,920

SOLUTION 1-18

1. Dec. 5 deposit P 49,000

Dec. 8 deposit 14,000
Dec. 31 deposit in transit 49,000
Total collections/book receipts P112,000
ANSWER: D

2. Cash balance, November 30 P423,825

Add: December receipts (see no.1) 112,000
Total 535,825
Less: Disbursements per check 260,693
register
Cash balance. December 31 P 275,132
ANSWER: A

3. Outstanding checks, December 31:

Check no. 4321 P 6,000
4340 1,700
4345 11,880
4347 6,300
4348 14,058
4349 7,000
Total P 46,938
Answer: C

4. Adjusted cash balance, Nov. 30, P423,825

2023

The balance per books as determined and as shown

on the November 30 reconciliation is also the
adjusted cash balance on that date. Notice that there
are no book reconciling items in November.
Answer: C
5. Book Bank
Unadjusted balances P275,132 P273,620
Deposits in transit 49,000
Outstanding checks (46,938)
Service charge (1,000)
Interest ______
1,550 _
Adjusted balances P275,682 P275,682
Answer: B
PROBLEM 1-19

BANK RECONCILIATION: UNADJUSTED TO ADJUSTED BALANCES

FORMAT

EDGARDO CO. was organized on January 2, 2023. The following items are
from the company’s trial balance on December 31, 2023.
Ordinary share capital P1,500,0
00
Share premium 150,000
Merchandise inventory 69,000
Land 1,000,00
0
Building 1,400,00
0
Furniture and Fixtures 367,000
Accounts receivable 165,400
Accounts payable 389,650
Notes payable-bank 500,000
Sales 6,235,20
0
Operating expenses (including 1,005,15
depreciation of P400,000) 0

Additional information is as follows:

1. Deposits in transit , December 31 P384,660

2. Service charge for December 2,000
3. Outstanding checks, December 31 475,000
4. Bank balance, December 31 892,000
5. Edgardo Co.’s mark up sales is 30%

1. What is the total collections from sales?

A. P6,114,967 C. P6,235,200
B. P4,119,240 D. P6,069,800
2. What is the total payments for merchandise purchases?
A. P3,905,990 C. P4,043,990
B. P4,649,140 D. P5,914,550
3. What is the total cash disbursements per books?
A. P7,819,800 C. P8,219,800
B. P8,169,800 D. P8,069,800
4. What is the total cash disbursements per books?
A. P7,816,140 C. P8,021,290
B. P7,416,140 D. P7,278,140
5. What is the cash balance per books on December 31?
A. P653,660 C. P1,203,660
 B. P803,660 D. P707,060
6. What is the adjusted cash balance on December 31?
A. P801,660 C. P1,201,660
B. P651,660 D. P803,660

SOLUTION 1-19
1. Sales P6,235,20
0
Less: Accounts receivable 165,400
Collections from customers P6,069,80
0
Answer: D

2. Cost of Sales (P 6,235,200 x 70%) P4,364,64

0
Add: Merchandise inventory, December 31 69,000
Goods available for sale/Purchase (there is
no beginning inventory) 4,433,640
Less: Accounts payable, December 31 389,650
Payments for purchases P4,043,99
0
Answer: C

3. Issue price or ordinary shares P1,650,00

(P1,500,000 + P150,000) 0
Notes payable – bank 500,000
Collections 6,069,800
Total cash receipts per books P8,219,80
0
Answer: C

4. Land P1,000,00
0
Building 1,400,000
Furniture and fixtures 367,000
Operating expenses paid (P1,005,150 -
400,000) 605,150
Payments for purchases 4,043,990
Total cash Disbursements per books P7,416,14
0
Answer: B

5. Cash receipts per books (see no. 3) P8,219,80

0
Cash disbursements per books (see no. 4) (7,416,14
0)
Cash balance per books, December 31 P803,660
Answer: B

6. Book Bank
Unadjusted balances P803,660 P892,000
Deposit in transit 384,660
Service charge (2,000)
Outstanding checks ________ (475,000)
Adjusted balances P801,660 P801,660
Answer: A
PROBLEM 1-20

COMPUTATION OF CASH RECEIPTS AND DISBURSEMENTS

In connection with your audit of the cash account of ANNIE CORP., you
gathered the following information.

a. Balance per bank, December 1, 2023 P145,000

b. Total bank receipts (credits) in December 346,000
c. Balance per bank, December 31, 2023 114,500
d. Outstanding checks, Nov. 30, 2023 (including
P12,000 paid by bank in December) 67,000
e. Outstanding checks, December 31, 2023 (including
checks issued in November) 94,162
f. Deposit in transit, November 30, 2023 39,458
g. A customer’s check received on December 4, 2023,
was returned by bank on December 7 marked
“NSF”. It was redeposited on December 8, 2023.
The only entry made was to take up the collection
on December 4, 2023. 11,143

1.What is the total book receipt in December?

A. P295,399 C. P334,857
B. P306,542 D. P346,000
2.What is the total bank disbursement in December?
A. P315,550 C. P231,500
B. P376,500 D. P201,000
3.What is the book disbursements in December?
A. P447,519 C. P403,662
B. P331,519 D. P392,519

SOLUTION 1-20

1. Bank receipts (credits) in December P 346,000

Less: Deposit in transit, November 30 39,458
NSF check redeposited in 11,143 50,601
December
Book receipts (debits) in December P
295,399
ANSWER: A

2. Bank balance, December 1, 2010 P145,000

Add: Bank receipts in December 346,000
Total 491,000
 Less: Bank balance, December 31, 2010 114,500
Bank disbursements in December P 376,500
Answer: B
3. Bank disbursements in December P 376,500
Add: Book disbursements in December
but
not in December bank
disbursements:
Checks issued in December,
outstanding at December 31:
Outstanding checks, Dec. 31 P94,162
Less: Checks issued in Nov., still
outstanding at Dec. 31
(P67,000–P12,000) 55,000 39,162
Total 415,662
Less: Bank disbursements in December
but not in book disbursements in
December:
November outstanding checks
paid by bank in December P12,000
NSF check 11,143 23,143
Book disbursements (credits) in
December P 392,519
Alternative computation:
Bank disbursements in December P 376,500
Add: Outstanding checks, December 31 94,162
Total 470,662
Less: Outstanding checks, Nov. 30 P67,000
NSF Check 11,143 78,143
Book disbursements in December P 392,519
Answer: D
PROBLEM 1-21

PETTY CASH FUND; BANK RECONCILIATION

Your audit of the cash account of JUNIE CORP. disclosed the following
information:
1. Cash in bank balance per books, Dec. 31, P
2023 35,000
2. Bank statement balance, Dec. 31, 2023 60,00
0
3. Note collected by bank in December
(principal plus
Interest for P800, less collection fee of P200) 27,60
0
4. Debit memo for a checkbook ?
5. Deposits in transit, Dec. 31, 2023 15,20
0
6. Transposition error made by bank in
 recording Deposit of December 28;
Correct amount P 45,000
Recorded as 54,000 9,000
7. Erroneous bank debit 26,700
8. Included in the Cash in bank account is petty cash fund
of P10,000. Your count on Dec. 31, 2023, revealed the
following fund items:
Currency and coins P 3,000
Supplies 2,400
Transportation 100

9. Erroneous bank credit 11,000

10. Outstanding checks (including a certified
check
of P10,000) 39,400

1. What is the principal amount of the note collected by bank in

December?
A. P27,600 C. P28,200
B. P26,800 D. P27,000
2. What is the adjusted cash in bank balance at December 31, 2023?
A. P52,500 C. P53,000
B. P52,700 D. P51,900
3. The cost of checkbook is
A. P600 C. P0
B. P300 D. P100
4.What is the amount of petty cash shortage at December 31, 2023
A. P400 C. P100
B. P500 D. P0
5.What is the adjusted petty cash balance?
A. P9,500 C. P3,000
B. P3,500 D. P10,000

SOLUTION 1-21
1. Principal (SQUEEZE) P27,000
Interest 800
Collection fee (200)
Proceeds credited by bank P27,600
Answer: D Book Bank
2.
Unadjusted balances P35,000 P60,000
Note collected by bank 27,600
Debit memo for a checkbook (SQUEEZE) (100)
Deposit in transit 15,200
Transposition error in recording deposit
(P54,000 – P45,000) (9,000)
Erroneous bank debit 26,700
Petty cash fund (10,000)
Erroneous bank credit (11,000)
Outstanding checks, net of certified (29,400
check (P39,400-P10,000) _________ )
Adjusted balances P52,50 P52,500
0
Answer: A

3. Cost of checkbook (see no.2)

Answer: D P100

4. Petty cash fund per ledger P10,000

Petty cash accounted 9,500
Petty cash shortage P500
Answer: B

5. Adjusted petty cash balance – currency P3,000

& coins
Answer: C

PROBLEM 1-22

BANK RECONCILIATION
The cash receipts and the cash payments of JERVS COMPANY for April
2023 follow:

CASH RECEIPTS (CR) CASH PAYMENT(CP)

Date Cash Debit Check Cash Credit

No.

April 2 P208,700 4113 P44,550

8 20,350 4114 7,350
10 27,950 4115 96,500
16 109,350 4116 33,200
22 92,700 4117 73,600
29 53,000 4118 50,000
30 16,850 4119 31,600
TOTAL P528,900 4120 83,750
4121 5,000
4122 120,650
Total P546,200

The cash account of Jervs Company shows the following information at

April 30, 2023

CASH
Date Item Ref. Debit Credit Balance
April 1 Balance 95,550
528,90
30 CR 6 624,450
0
30 CP 11 546,200 78,250

Jervs Company received the following bank statement on April 30, 2023
Bank Statement for April 2023:

Bank Statement for April 2023

Beginning balance P 95,550
Deposits and other
Credits:
April 1 P 16,300 EFT
4 208,700
9 20,350
12 27,950
17 109,350
22 68,400 BC
23 92,700 543,750
 Checks and other Debits:
April 7 P 44,550
13 69,500
14 45,150 US
15 7,350
18 33,200
21 10,950 EFT
26 73,600
30 50,000
30 1,000 SC (335,300)
Ending balance P 304,000

Explanation:
EFT --- electronic funds transfer
US --- unauthorized signature
BC --- bank collection
SC --- service charge

Additional data for the bank reconciliation include the following:

a. The EFT deposit was a receipt of the monthly rent. The EFT debit was
a monthly insurance payment.
b. The unauthorized signature check was received from Harold Mony.
c. The P 68,400 bank collection of a note receivable on April 22 included
P 9,250 interest revenue.
d. The correct amount of check number 4115, a payment on account, is
P 69,500. (Jervs Company’s accountant mistakenly recorded the check
for P 96, 500).

1. What is the amount of deposits in transit on April 30?

A. P 53,000 C. P 45,150
B. P 69,850 D. P 115,000
2. What is the amount of outstanding checks on April 30?
A. P 241,000 C. P 286,150
B. P 337,500 D. P 310,500
3. What is the amount of bank receipts in April?
A. P 543,750 C. P 459,050
B. P 527,450 D. P 528,900
4. What is the amount of bank disbursements in April?
A. P 290,150 C. P 289,150
B. P 335,300 D. P 316,150
5. What is the correct cash balance as of April 30?
A. P 132,850 C. P 122,150
B. P 87,700 D. P 223,150
SOLUTION 1-22

1. Deposits in transit, April 30:

April 29 collection per CR P53,000
April 30 collection per CR Total 16,850
Total P69,850
Answer: B

2. Outstanding checks, April 30:

Check no. 4119 P31,600
Check no. 4120 83,750
Check no. 4121 5,000
Check no. 4122 120,000
Total P241,000
Answer: A

3. Bank receipts in April

(Total Deposits and other credits) P 543,750
Answer: A

4. Bank disbursements in April P

(Total checks and other debits) 335,300
Answer: B

5. Book Bank
Unadjusted balances P304,00
P78,250 0
Deposits in transit 69,850
Outstanding checks (241,000)
Error in check no. 4115
(96,500-P69,500) 27,000
EFT-rent 16,300
Bank collection 68,400
Unauthorized signature check (45,150)
EFT-insurance (10,950)
Service Charge (1,000) _________
Adjusted balances, April 30 P132,850 P132,850
Answer: A
Problem 1-23

Bank Reconciliation: Unadjusted to Adjusted Balances Format

FERMIN COMPANY's check register shows the following entries for the
month of December:

Date Checks Deposits Balance

2023
Dec. 1 Beginning Balance P 89,300
5 Deposit P 65,000 154,300
7 Check #14344 P 32,500 120,800
11 Check #14345 14,000 106,800
26 Deposit 49,000 155,800
29 Check #14346 8,600 147,200

Fermin's bank reconciliation for November revealed one outstanding

check (No. 14343) for P 12,000 (written on November 28), and one
deposit in transit for P 5,550 (made on November 29).

The following is from Fermin's bank statement for December 2023:

Date Checks Deposits Balance

2023
Dec. 1 Beginning Balance P 95,750
1 Deposit P 5,550 101,300
4 Check #14344 P 32,500 68,800
5 Deposit 56,000 124,300
14 Check #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

Assume that all errors were committed by Fermin Company, not the bank.

Based on the preceding information, determine the following:

1. Adjusted cash balance on November 30
A. P 89,300 C. P 102,200
B. P 95,750 D. P 101,300
2. Outstanding checks on December 31
A. P 46,500 C. P 8,600
B. P 45,500 D. P20,600
3. Deposit in transit on December 31
A. P 52,600 C. P 5,550
B. P 49,000 D. P 43,450
 4. Total Bank receipts in December
A. P 114,000 C. P 565,150
B. P 119,550 D. P 61,550
5. Adjusted cash balance on December 31
A. P 663,800 C. P 748,200
B. P 634,200 D. P 597,200

SOLUTION 1-23

1. Balance per bank, Nov. 30 P95,750

Outstanding check (no. 14343) (12,000)
Deposit transit 5,500
Adjusted bank balance, Nov. 30 P89,300
Answer: A

Since there are no book reconciling items in November, the adjusted

bank balance agrees with the cash in bank balance per ledger on
November 30

2. Outstanding checks on December 31:

Check no. 14343 P12,000
Check no. 14346 8,600
Total P20,600
Answer: D

3. Deposit in transit on December 31:

Dec. 26 collection P49,000
Answer: B

4. Total Bank receipts in December P565,150

Answer: C
The total bank receipt is the total amount credited by the bank during
the period.
5. Book Bank
Unadjusted balances P147,200 P605,800
Deposit in transit 49,000
Outstanding checks (see no. 2) (20,600)
Error in recording deposit
(P 65,000 - P 56,000) (9,000)
Error in arithmetic for Check No.
14344 1,000
Loan proceeds 500,000
NSF check (7,600)
Interest 3,600
 Service charge (1,000) _________
Adjusted balances P634,200 P634,200
Answer: B

PROBLEM 1-24

BANK RECONCILIATION: UNADJUSTED TO ADJUSTED BALANCES

FORMAT

In connection with an audit, you are given the following bank

reconciliation.

BANK RECONCILIATION
December 31, 2023
Balance per ledger, December 31, 2023 P34,35
0
Add: Collections Received on the last day of 5,325
December
and charged to “Cash in Bank” on books
but not deposited
Debit memo for customer’s check returned 4,000
unpaid
(check is on hand but no entry has been
made on the books)
Debit memo for bank service charge for 1,000
December P46,67
5
Deduct: Outstanding checks (see detailed list
below) P18,625
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 a
P12,625 but drawn and paid by bank as
P16,225 3,600 32,225
Computed balance P14,45
0
Unlocated difference 36,600
Balance per bank (checked to confirmation) P51,05
0
 LIST OF OUTSTANDING CHECKS December 31, 2023

Check No. Amount

14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
P18,625

1. What is the correct amount of outstanding checks on December

31?
A. P18,625 C. P17,625
B. P22,625 D. P21,625
2. The journal entry to correct the outstanding checks should include
a
A. Debit to Cash in bank of P4,000 C. Debit to accounts
payable of P4,000
B. Credit to Cash in bank of P4,000 D. No journal entry is
necessary
3. The correct amount of “unlocated difference” is
A. P32,600 C. P36,600
B. P35,600 D. P0
4. The Cash in bank to be shown on the company’s December 31,
2012 statement of financial position is
A. P34,750 C. P33,750
B. P37,350 D. P37,750
5. The journal entry to adjust the Cash in bank account of December
31 should be
A. Debit Cash in bank of P8,000 C. Net credit to Cash in
bank of P600
B. Credit to Cash in bank of P8,600 D. Net debit to Cash in bank
of P600

SOLUTION 1-24
PROBLEM 1-25

COMPUTATION OF BOOK DISBURSEMETS

In connection with your audit of the MARCELO COMPANY at December 31,

2023, the following bank reconciliation was submitted to you by an
employee of your client:

Balance per bank P30,534

Deposits in transit 37,856
P68,390
 Outstanding checks 42,756
Balance per books P25,634

As part of your verification, you obtained the bank statement and

canceled checks from the bank on January 15, 2024. According to the
records of the company, checks issued from January 1 to January 15,
2024; amounted to P22,482. Checks returned by the bank on January 15,
2024, totaled P58,438. Of the checks outstanding on December 31, 2023,
P9,600 were not returned by the bank with the January 15, 2024, bank
statement; and of those issued, according to the records of the company,
in January 2024, P7,200 were not returned by the bank.

Based on the above data, calculate the disbursements per company

records.
1. The difference between the disbursements per books as computed
and as reported is
A. P61,912 C. P10,000
B. P2,800 D. P29,874
2. Suggest three possible explanations for the difference between the
disbursements per company as computed and as reported.

SOLUTION 1-25

PROBLEM 1-26

BANK RECONCILIATION: UNADJUSTED TO ADJUSTED BALANCES

FORMAT
In auditing the HECTOR COMPANY, you obtained the bank statement,
canceled checks, and other memoranda which relate to the company’s
bank account for December 2023. In reconciling the bank balance with
that shown on the company's books, you observed the facts set forth
below;

P47,17
(1)Balance per bank statement, Dec. 31, 2023
4
(2)Balance per books, Dec. 31, 2023 19,289
(3)Outstanding checks, Dec. 31, 2023 63,000
(4)Receipts of Dec. 31, 2023, deposited Jan. 2, 2024 6,260
(5)Service charge for November, per bank memo of Dec. 15,
1,000
2023
(6)Proceeds of bank loan, Dec, 15, 2023, discounted for 3
months at 18% per annum, omitted from company books 47,750
(7)Deposit of Dec. 22,2023, omitted from Bank
statement 9,170
(8) Check of Milano company, returned on Dec.
21, 2023, for absence of counter-signature and
redeposited with complete signature on Jan. 3,
2024, no entry on the books having been
made for the return or redeposit 77,320
(9)Error on bank statement in entering deposit
of Dec. 18, 2023:
Correct amount P1,600
Entered in statement 160 1,440
(10)Check No. 021261 of Yek Company,
charged by bank in error to company's
account 13,600
(11) Proceeds of note of Harthur Co., collected
by
bank, Dec. 10, 2023, not entered in cash
book (principal amount of P25,000 plus
interest of P 1,125 less collection fee)
(12)Erroneous debit memo of Dec. 28, 2023 to 25,625
charge company’s account with settlement
of bank loan which was paid by check no.
112170 on same date 5,000
(13)Error on bank statement in entering
deposit of Dec. 4, 2023:
Entered as P14,200.62
Correct amount 12,400.62 1,800
 (14)Deposit of Bunso Co. of Dec. 2, credited in
error to this company 3,500

1. What is the principal amount of the loan obtained from bank in

December?
A. P50,000 C. P48,125
B. P47,750 D. P49,625
2. What amount of prepaid interest should on Hectors December 31,
2018, statement
A. P2,250 C. P375
B. P0 D. P1,875
3. The amount of collection fee
A. P625 C. P500
B. P1,625 D. P0
4. What is the adjusted Cash in bank balance as of December 31, 2018?
A. P14,344 C. PI 7,944
B. P11,464 D. P9,344
5. The Cash in bank per ledger as of December 31, 2018, should be
increased (decreased) by
A. P4,945 C. P(4,945)
B. P5,945 D. P(5,945)

SOLUTION 1-26
PROBLEM 1-27

BANK RECONCILIATION

You are auditing general cash for the DION COMPANY for the fiscal year
ended July 31, 2023. The client has not prepared the July 31 bank
reconciliation. After a brief discussion with the owner you agree to prepare
the reconciliation, with assistance from one of Dion Company's clerks. You
obtain the following information:

General Ledger Bank

Statement
Beginning balance P 46,110 P 57,530
Deposits 250,560
Cash receipts journal 254,560
Checks cleared (236,150)
Cash disbursements journal (218,110)
July bank service charge (870)
Note paid directly (61,000)
NSF check _________ (3,110)
Ending balance P82,560 P6,960

June 30 Bank
Reconciliation
Information in General Ledger and Bank
Statement
Balance per bank
P57,530
Deposits in transit
6,000
Outstanding checks
17,420
Balance per books
46,110

Additional information obtained is:

1. Checks clearing that were outstanding on June 30 totaled P 16,920.

 2. Checks clearing that were recorded in the July disbursements
journal totaled P204,670.
3. A check for P 10,600 cleared the bank, but had not been recorded in
the cash disbursements journal. It was for an acquisition of
inventory. Dion uses the periodic inventory method.
4. A check for P3,960 was charged to Dion Company but had been
written on a different company's bank account.
5. Deposits included P6,000 from June and P 244,560 for July.
6. The bank charged Dion Company's account for a not-sufficient fund
check totaling P3,110. The credit manager concluded that the
customer intentionally closed its account and the owner left the city.
The check was turned over to a collection agency.
7. A note for P58,0000, plus interest, was paid directly to the bank
under an agreement signed four months ago. The note payable was
recorded at P58,000 on Dion Company's books.

Based on facts given, answer the following:

1. The checks outstanding on June C. 30 P13,940 amount to

A. P9,980 C. P13,940
B. P10,830 D. P3,340
2. The deposits in transit on June 30 amount to
A. P6,890 C. P6,000
B. P10,000 D. P9,110
3. The adjusted cash balance on July 31 is
A. P6,980 C. 3,870
B. P10,940 D. P3,020
4. Which of the following audit procedures would be used to verify the
payment of note in July?
A. Check the arithmetical accuracy of the July 31 reconciliation.
B. Check for absence of note on July 31 bank confirmation.
C. Trace payment to duplicate deposit slip.
D. Obtain cutoff bank statement.
5. The auditor would perform the following procedures to verify the
unrecorded check of P10,600, except
A. Obtain cutoff bank statement.
B. Examine checks retürned with July bank statement.
C. Trace check number to absence in July cash disbursements
journal and recording in August.
D. Examine supporting documentation.
SOLUTION 1-27
PROBLEM 1-28

PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES FORMAT

The cash account of VELASCO COMPANY shows the following

activities:
Date Debit Credit Balance
Nov.3 Balance P115,00
0 0
Dec.2 November bank charges P 50 114,950
4 November bank credit for
notes receivable collected P10,000 124,950
15 NSF check 1,300 123,650
20 Loan proceeds 48,500 172,150
21 December bank charges 60 172,090
31 Cash receipts book 707,300 879,390
31 Cash disbursements book 408,000 471,390

CASH BOOKS

RECEIPTS PAYMENTS

Date OR No. Amount Check No. Amount

Dec. 1 110-120 P 11,000 801 P 2,000
2 121-136 21,300 802 3,000
3 137-150 20,000 803 1,000
4 151-165 56,000 804 3,000
5 166-190 39,000 805 12,000
8 191-210 66,000 806 19,000
9 211-232 88,000 807 26,000
10 233-250 77,000 808 30,000
11 251-275 21,000 809 61,000
12 276-300 30,000 810 7,000
15 301-309 55,000 811 8,000
16 310-350 8,000 812 16,000
17 351-390 19,000 813 20,000
18 391-420 9,000 814 22,000
19 421-480 17,000 816 36,000
22 481-500 21,000 817 11,000
23 501-525 32,000 818 50,000
23 - - 819 7,000
23 - - 820 4,000
26 526-555 74,000 821 3,000
28 556-611 5,000 822 12,000
 28 - - 823 13,000
29 612-630 38,000 824 29,000
29 - - 825 2,000
29 - ______- 826 11,000
Totals P 707,300 P408,000
BANK STATEMENT
Date Check No. Charges
Credits
Dec. 1 792 P2,500 P 8,500
2 802 3,000
11,000
3 - -
21,300
4 804 3,000
20,000
5 EC 81,000
81,000
8 805 12,000
95,000
9 CM 16 -
12,000
10 799 7,050
154,000
11 DM 57 1,300
77,000
12 808 30,000
21,000
15 803 1,000
-
16 809 61,000
85,000
17 DM 61 60
8,000
18 813 20,000
19,000
19 CM 20 -
48,500
22 815 6,000
-
23 816 36,000
47,000
23 811 8,000
-
 23 801 2,000
-
26 814 22,000
32,000
28 818 50,000
74,000
28 DM 112 120
-
29 821 3,000
5,000
29 CM 36 -
12,000
29 820 4,000
-
Totals P 353,030 P
831,300

Additional information:
a. DMS 61 and 112 are for service charges.
b.EC is error corrected.
c. DM 57 is for an NSF check.
d.CM 20 is for loan proceeds, net of P 150 interest charges for 90 days.
e. CM 16 is for the correction of an erroneous November bank charge.
f. CM 36 is for customers' notes collected by bank in December.
g.Bank balance on December 31 is P592,270.

1. The total outstanding checks at November 30 should be

A. P9,550 C. P13,050
B. P7,050 D. P15,550
2. The total outstanding checks at December 31 should be
A. P147,000 C. P153,000
B. P162,550 D. P159,000
3. The deposit in transit at November 30 should be
A. P8,500 C. P48,500
B. P19,500 D. P 0
4. The deposit in transit at December 31 should be
A. P44,000 C. P46,500
B. P0 D. P38,000
5. The adjusted book balance at November 30 should be
A. P125,000 C. P115,000
B. P124,950 D. P136,950
6. The adjusted bank receipts for the month of December should
A. P763,800 C. P765,800
 B. P773,800 D. P767,800
7. The adjusted book disbursements for the month of December
should be
A. P403,480 C. P415,480
B. P415,540. D. P409,480
8. The adjusted bank balance at December 31 should be
A. P592,270 C. P558,270
B. P477,270 D. P483,270
SOLUTION 1-28

PROBLEM 1-29

PROOF OF CASH: BANK TO BOOK BALANCES FORMAT

Shown below is the May 31, 2023, bank reconciliation prepared by your
client's staff.

RECONCILIATION
May 31, 2018
Bank balance P652,000
Add: Deposit in transit 10,000
Total P662,000
Less: Outstanding checks
No. 640 P10,000
652 8,000
653 2,000 20,000
Adjusted bank balance P 642,000

Book balance P 570,800

Add: Proceeds of note
receivable
collected in May P70,000
Deposit on May 31 not
recorded
on books until June 2,000 72,000
Total P642,800
Less: Bank service charge 800
Adjusted book balance P642,000

The June 2023 bank statement is shown

below:
Pasig Bank
Period covered: May 31, 2023- June 30,
2023
Account No.: 0021261
Date Checks Deposits
June 1 8,000 10,000
June 8 2,000
June 11 14,000 20,000
June 13 1,000 DM 1,000
June 16 4,000
June 21 12,000 56,000
June 27 18,000
June 29 1,000 EC 1,000 EC
June 30 200 SV
June 30 3,000 DM
SV-Service
Charges DM-Debit Memo
EC - Error CM Credit Memo
Corrected

The paid checks accompanying this bank statement (all clearing in June)
are the following:
No. 652 P8,000 No. 654 P14,000 No. 657 P12,000
No. 653 P2,000 No. 655 P 4,000 No. 658 P18,000
The check register reveals that the last check issued in June is No. 659 for
P5,000 and that check no. 656 is for P2,600.
Cash received for the period June 22 through June 30 of P70,000 was
deposited in the bank on July 1.

The debit memos on June 13 and June 30 represent customers' NSF

checks returned by the bank. The June 13 NSF check was immediately
redeposited without entry. The June 30 NSF check was redeposited on July
1 without entry.

1. What is the total bank receipts in June?

A. P87,000 C. P77,000
B. P88,000 D. P78,000
2. What is the total bank disbursements in June?
A. P59,200 C. P58,200
B. P58,000 D. P63,200
3. What is the balance per bank statement on June 30, 2018?
A. P676,800 C. P732,400
B. P627,200 D. P729,200
4. What is the total book receipts in June?
A. P88,000 C. P146,000
B. P220,000 D. P218,000
5. What is the total book disbursements in June?
A. P53,000 C. P56,400
B. P57,400 D. P63,200
6. What is the book balance on June 30, 2018?
A. P732,200 C. P732,400
B. P729,200 D. P676,800

SOLUTION 1-29
PROBLEM 1-30

PROOF OF CASH: BANK TO BOOK BALANCES FORMAT

The following information was obtained in an audit of the cash account of

CHELSEE.COMPANY as of December 31, 2023. Assume that the CPA has
satisfied himself as to the propriety of the cash book, the bank
statements, and the returned checks, except as noted:

1. The bookkeeper's bank reconciliation at November 30, 2023.

P
Balance per bank statement 194,000
11,000
Add: Deposit in transit P205,00
Total 0
Less: Outstanding checks
No. 1434 P1,400
1562 7,500
1571 5,800
1584 8,000
1591 300 23,000
2. P182,00 A
Balance per books 0
summary of the bank statement for December 2023.
Balance brought forward P194,000
Deposits 1,487,000
Total P1,681,000
Charges (1,325,000)
Balance, December 31, 2023 P356,000
3. Included in cancelled checks returned with the December bank
statement were the checks listed below.
4. The Chelsee Company discounted its own 60-day note for P90,000
with the bank on December 1, 2023. The discount rate was 6
percent. The accountant recorded the proceeds as a cash receipt at
the face value of the note.
5. The accountant records customers' dishonored checks as a
reduction of cash receipts. When the dishonored checks are
redeposited they are recorded as a regular cash receipt. Two NSF
checks for P 1,800 and P2,200 were returned by the bank during
December. Both checks were redeposited and were recorded by the
accountant.
6. Cancellations of Chelsee Company checks are recorded by a
reduction of cash disbursements.
 7. December bank charges were P200. In addition, a P 100 service
charge was made in December for the collection of a note receivable
in November. These charges were not recorded on the books.
8. Check no. 1434 listed in the November outstanding checks was
drawn in 2021. Since the payee cannot be located, the president of
Chelsee Company agreed to the CPA's suggestion that the check be
written back into the accounts by a journal entry.
9. Outstanding checks at December 31, 2023, totaled P49,400,
including checks 1434 and 1584.
10. The cutoff bank statement disclosed that the bank had recorded a
deposit of P24,000 on January 2, 2024. The accountant had recorded
this deposit on the books on December 31, 2023, and then mailed
the deposit to the bank.

Cancelled Checks Returned with the December Bank Statement

Number Date of Check Amount of check Comments

1562 11/28/23 P 750 This check was in payment of

an invoice for P7,500 and
was recorded in the cash
book as P7,500.
1571 11/28/23 5,800 This check was in payment of
an
invoice for P5,800 and
was recorded in the cash
book as P5,800.
1583 12/04/23 1,500 Examination of this check
revealed that it was
unsigned. A discussion
with the client disclosed
that it had been mailed
inadvertently before it
was signed. The check
was endorsed and
deposited by the payee
and processed by the
bank even though it was
a legal nullity. The check
was recorded in the
cash disbursements
journal.
1588 12/12/23 8,000 This check replaced 1584, which
was returned by the
payee because it was
mutilated. Check 1584
was not cancelled on the
books.
---------- 12/19/23 2,000 This was a counter
check drawn
at the bank by the
president of the company
as a cash advance for
travel expense. The
president overlooked
informing the bookkeeper
about the check.

--------- 12/20/23 3,000 The drawer of this check was the

Chelsea Company.
1595 12/20/23 3,500 This check had been labeled NSF
and returned to the
payee because the
bank had erroneously
believed that the
check was drawn by
Chelseen.
Subsequently, the
payee was advised to
redeposit the check.
1599 01/05/24 100,000 This check was given to the payee
on December 30, 2023, as
a postdated check with the
understanding that it
would not be deposited
until January 5. The check
was not recorded on the
books in December.

1. What is the correct amount of outstanding checks on December

31?
A. P41,400 C. P48,000
B. P33,250 D.P40,000
2. What is the amount of cash receipts per book in December?
A. P1,496,900 C. P1,495,100
B. P1,504,900 D. P1,487,000
 3. What is the amount of cash disbursements per book in December?
A. P1,254,850 C. P1,256,850
B. P1,252,850 D. P1,248,850
4. What is the cash in bank balance per book as of December 31?
A. P426,050 C. P430,050
B. P428,250 D.P343,050
5. What is the adjusted cash balance as of December 31?
A. P343,000 C. P347,000
B. P340,200 D. P344,200

SOLUTION 1-30

PROBLEM 1-31

PROOF OF CASH BOOK TO BANK BALANCES FORMAT

The following information was obtained in connection with the audit of

PINKY COMPANY's cash account as of December 31, 2023.

Outstanding checks, Nov. 30, 2023

Outstanding checks, Dec. 31, 2023
Deposit in transit, Nov. 30, 2023 12,500
Cash balance per general ledger Dec. 31, 2023
Actual company collections from its customers
during December
 Company checks paid by bank in December
Bank service charges recorded on company
books in December 2,500
Bank service charges per December bank statement 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on
company books in December
1,500

The cash receipts book of December is underfooted by P2,500.

The bank erroneously charged the company’s account for a P3,750 check
of another depositor. This bank error was corrected in January 2024.

1. How much is the deposit in transit on December 31, 2023?

A. P5,000 C. P22,500
B. P20,000 D. P17,500
2. The total unrecorded bank service charges as of December 31,
2023, is
A. P750 C. P1,750
B. P2,250 D. P4,250
3. What is the total book receipts in December?
A.P150,000 C. P155,000
B. P152,000 D. P147,500
4. What is the total amount of company checks issued in December?
A. P130,000 C. P133,750
B. P123,000 D. P126,250
5. What is the total book disbursements in December?
A. P123,750 C. P126,250
B. P128,500 D. P128,750
6. What is the book balance on November 30, 2023?
A. P16,250 C. P37,500
B. P21,250 D. P35,000
7. What is the bank balance on November 30, 2023?
A. P23,000 C. P43,500
B. P18,500 D. P16,250
8. What is the total bank receipts in December?
A. P120,000 C. P145,000
B. P140,000 D. P150,000
9. What is the total bank disbursements in December?
A. P154,500 C. P129,500
B. P132,500 D. P137,000
10. What is the bank balance on December 31, 2023?
A. P21,500 C. P310,000
B. P26,500 D. P33,250
SOLUTION 1-31

PROBLEM 1-32

PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES FORMAT

In your audit of HARRY INC.'s cash account as of December 31, 2023, you
ascertain the following information:

The bookkeeper's bank reconciliation on November 30, 2023, is as follows:

Balance per bank statement, November P 24, 298

30
Add: Deposits in transit 3,643
Total P 27,946
Less: Outstanding checks
No. 3408 P440
No. 3413 300
No. 3414 6,820
No. 3416 3,924
No. 3417 800 12,284
Balance P15,662
Add: Bank Service Charge For November 36*
 Balance per general ledger, November P15,698
30
*Entered in Check Register in December

The Cash Receipts Journal shows total receipts for December of P371, 766.
The Check Register reflects total checks issued in December of P377, 632.
A collection of P5, 912 was recorded on company books on December 31
but was not deposited until January 2, 2024.

The balance per bank statement at December 31, 2023, is P17,516. This
statement shows total receipts of P373, 502 and checks paid of P380,284.

Your examination reveals the following additional information:

1) Check no. 3413 dated November 24, 2023, was entered in the Check
Register as P300. Your examination of the paid checks returned with the
December bank statement reveals that the amount of this check is P30

2) Check no. 3417 was mutilated and returned by the payee. A

replacement check (no. 3453) was issued. Both checks were entered in
the Check Register but no entry was made to cancel check no. 3417.

3) The December bank statement includes an erroneous charge of P

480.

4) On January 3, 2024, the bank informed your client that a December

bank service charge of P42 was omitted from the statement.

5) Your examination of the bank credit memo accompanying the

December bank statement discloses that it represents proceeds from
the note receivable' collection in December for P4,000

6) The outstanding checks at December 31, 2018, are as follows:

No. 3408 P440 No.3418 P2,814

No. 3417 800 No. 3419 5,788

1. What is the total book disbursement for the month of December?

A. P377,668 C. P377,632
B. P377,710 D. P377,596
2. What is the book balance at December 31?
A. P9,832 C. P9,754
B. P9,868 D. P9, 796
3. The outstanding checks at December 31 totaled
A. P8,602 C. P9,042
B. P9,072 D. P9,842
4. What is the adjusted bank balance on November 30?
 A. P16,690 C. P16,804
B. P16,732 D. P16,774
5. The adjusted book receipts for the month of December should be
A. P375,724 C. P371,238
B. P371,766 D. P375,766
6. The adjusted book disbursements for the month of December
should be
A. P377,590 C. P377,674
B. P377,662 D. P377,632
7. What is the adjusted book balance on December 31?
A. P14,824 C. P14,908
B. P14,866 D. P14,782
8. A proof of cash used by an auditor
A. Provides that the client's year-end balance of cash is fairly
stated.
B. Confirms that the client has properly separated the custody
function from the recording function with respect to cash.
C. Validates that the client's bank did not make an error during
the period being examined.
D. Determines whether any unauthorized disbursements or
unrecorded deposits were made for the given time period.

SOLUTION 1-32
PROBLEM 1-33

Proof of Cash: Unadjusted to Adjusted Balances Format

The following data are assembled by the accountant of HAROLD

COMPANY:

Nov. 30, 2023 Dec. 31, 2023

Cash account balance P 41,175.00 P 100,712.50
Bank statement balance 267,705.00 344,542.50
Deposits in transit 20,502.50 32,200.00
Outstanding checks 69,295.00 75,280.00
Bank service charges 1,800.00 1,500.00
NFS check* 20,625.00
Company’s notes receivable
collected by bank 179,537.00 202,250.00

*Redeposited in the same month. No entries made to take up the return

and redeposit.

The bank statement and the company’s cash records show the following
totals:
Canceled checks and debit memos
per bank statement P545,932.50
Cash receipts per cash book 411,592.50
Checks written per cash book 529,792.50
Deposits and credit memos per bank statement 622,770.00
1. What is the total book receipts in December?
A. P613,842.50 C. P411,592.50
B. P591,130.00 D. P580,330.00
2. What is the total book disbursements in December?
A. P531,592.50 C. P533,092.50
B. 529,792.50 D. P531,292.50
3. What is the adjusted book balance on November 30?
A. P220,712.50 C. P218,912.50
B. P222,512.50 D. P217,412.50
4. The adjusted bank receipts in December should be
A. P634,168.50 C. P632,667.50
B. P622,770.00 D. P634,467.50
5. The adjusted book disbursements in December should be
A. P545,932.50 C. P548,917.50
B. P552,517.50 D P551,917.50
6. What is the adjusted book balance on December 31?
A. P301,462.50 C. P322,087.50
 B. P302,662.50 D. P280,537.50

SOLUTION 1-33

PROBLEM 1-34

PROOF OF CASH: BOOK TO BANK BALANCES FORMAT

The auditor of TSIKOY COMPANY gathered the following information:

1. The November 30 bank statement balance included bank service

charges of P2,000.

2. The November 30 cash balance in the general ledger was

P244,500.

3. Outstanding checks on November 30 were P63,000 while

undeposited receipts were P36,000.

4. The bank service charges as shown on the bank statement

totaled P3,000.
 5. The December 31 cash balance in the general ledger was
P319,750, which recognized P482,750 for December receipts
and P405,500 for checks written during December. In transit to
the bank were receipts of P28,750. Checks of P15,000 written
prior to December and checks of P60,500 written in December
had not yet cleared the bank.

1.What is the total book disbursements for December?

A. P403,500 C. P407,500
B. P404,500 D. P405,500
2.What is the November 30 bank balance?
A. P271,500 C. P268,500
B. P269,500 D. P266,500
3.What is the total bank receipts in December?
A. P490,000 C. P497,250
B. P482,750 D. P488,000
4.What is the total bank disbursements in December?
A. P419,000 C. P408,500
B. P405,500 D. P396,000
5.What is the bank balance on December 31?
A. P316,750 C. P322,750
B. 363,500 D. 366,500

SOLUTION 1-34
PROBLEM 1-35

Proof of Cash: Unadjusted to Adjusted Balances Format

RODELIO CO. has a current account in Pinoy Bank. Your audit of the
company’s cash account reveals the following:

1. Balances taken from the company’s general

ledger:
Cash balance, Nov. 30,2023 P637,8
60
Cash balance, Dec. 31, 2023 576,42
0
Receipts, Dec. 1-31,2023 306,22
0
2. Balances taken from the December bank
statement:
Bank balance, Nov. 30,2023 P685,1
80
Bank balance, Dec. 31, 2023 637,22
0
Disbursements (debits) 356,08
0
3. Outstanding checks, Nov. 30, 2023 (P26,140
was paid by bank in December) 64,140

4. Checks written and recorded in December;

not included in the checks returned with the
December bank statement 36,080
5.
Deposit in transit, Nov. 30, 2023
15,260
6.
Deposit in transit, Dec. 31, 2023
16,140
7. A bank credit memo was issued in December
to correct an erroneous charge made in
November 1,500
8. Note collected by bank in December
(company was not informed of the collection) 2,060
9. A check for P2,021 (payable to a supplier) was 980
recorded in the Check Register in December
 as P3,000
10 A check for P2,240 was charged by the bank
. 180
as P2,420 in December
11 Rodelio Co. issued a stop payment to the bank
. in December. This pertains to a check written
in December which was not received by the
payee. A new check was written and recorded
in the Check Register in December. The old
check was written off by a journal entry also
in December. 780

12 Bank service charge, Nov. 30, 2023 60

.

1. What is the total book disbursements in December?

A. P367,660 C. P369,720
B. P244,780 D. P368,540
2. What is the total bank receipts in December?
A. P260,160 C. P306,060
B. P308,120 D. P309,020
3. What is the total outstanding checks on December 31?
A. P100,220 C. P62,220
B. P38,000 D. P74,080
4. What is the adjusted bank balance on November 30?
A. P636,300 C. P637,800
B. P685,180 D. P634,800
5. What is the adjusted book receipts in December?
A. P307,500 C. P303,380
B. 306,220 D. P305.440
6. What is the adjusted bank disbursements in December?
A. P353,980 C. P345,960
B. 365,840 D. P366,020
7. What is the adjusted book balance on December 31?
A. P577,500 C. P576,420
B. P577,400 D. P579,460

SOLUTION 1-35
PROBLEM 1-36

PROOF OF CASH: UNADJUSTED TO ADJUSTED BALANCES FORMAT

Data for the ANNABELLE, INC. are shown below:

Nov. 30 Dec. 31
Cash account balance P 20,340 P 48,540
Bank statement balance 107,060 137,820
Deposits in Transit 8,200 12,880
Outstanding checks 27,700 30,100
Bank service charges for the month, not
shown on company books 720 600
NSF checks returned by bank, not shown on
company books 4,300 8,240
Bank collection from company customers, not
shown on company books 72,240 80,900

Additional information:
1. Deposits and credit memos per bank statement P249,100
2. Canceled checks and debit memos per bank 218,340
statement
3. Cash receipts per cash book 172,880
4. Checks written per cash book 211,900

1. What is the total book receipts in December?

A. P172,880 C. P253,780
B. P245,120 D. P181,540
2. What is the total book disbursements in December?
A. P211,900 C. P211,180
B. P216,200 D. P216,920
3. What is the adjusted cash balance on November 30?
A. P89,000 C. P71,160
B. P87,560 D. P96,160
4. What is the adjusted cash balance on December 31?
A. 120,600 C. P137,080
B. 94,840 D. P155,040
5. What is the adjusted book receipts in December?
A. P253,780 C. P244,420
B. P236,460 D. P270,180
6. What is the adjusted bank disbursements in December?
A. P215,940 C. P248,440
 B. P220,740 D. P204,260

SOLUTION 1-36

PROBLEM 1-37

Computation of Cash Shortage

On January 10, 2024, you started the audit of the financial records of the
KEMIRARA COMPANY for the year ended December 31, 2023. From your
investigation, you discovered the following:

1. The bookkeeper acts also as the cashier. Her December 31, 2023,
year-end cash reconciliation contained the following items:

Cash per ledger, Dec. 31, 2023 P184,200

Cash per bank, Dec. 31, 2023 194,550
Checks outstanding 15,660
Amnesia Co. check charged by the bank in error
Dec. 20, 2023; corrected by the bank on Jan. 5, 2024
450
Cash in transit, credited by the bank on Jan. 2, 2024
2,160

2.The cash account balances per ledger as of December 31, 2023, were:

Cash P184,200
Petty Cash 450
 3. The count of the cash on hand at the close of the business on January
10, 2024, including the petty cash, was as follows:

Currency and coins P1,155

Expense vouchers 60
Employees’ IOU’s dated Jan. 5, 2024 165
Customers’ checks in payment of account 870

4. From January 2, 2024 to January 10, 2024, the date of your cash
count, total cash receipts appearing in the cash records were
P25,800. According to the bank statement for the period from January
2, 2024 to January 10, 2024, total deposits were P22,800.

5. On July 5, 2023, cash of P1,200 was received on account from a

customer; the Allowance for Doubtful Accounts was charged and
Accounts Receivable was credited.

6. On December 5, 2023, cash of P900 was received on account from a

customer; Inventory was charged and Accounts receivable was
credited.

7.Cash of P2,190 received during 2023 was not recorded.

8. Checks received from customers from January 2, 2024 to January 10,

2024, totaling P1,260, were not recorded but were deposited in the
bank.

9. On July 1, 2023, the bank refunded interest of P60 because a note of

the Kemirara Company was paid before maturity. No entry was made
for the refund.

10. In the cahier’s petty cash, there were receipts for collection from the
customers on January 9, 2024, totaling P2,550; these were
unrecorded and undeposited.

11. In the outstanding checks, there is one for P150 made payable to a
trade creditor; investigation shows that this check had been returned
by the creditor on November 14, 2023, and a new check for P300
was issued in its place; the original check for P150 was made in error
as to amount.

Required:
1. Compute the correct bank balance as of December 31, 2023.
2. Compute the cash shortage as of December 31, 2023.
3. Compute the cash shortage for the period January 1, 2024 to
January 10, 2024.
 (PhilCPA
adapted)

SOLUTION 1-37

PROBLEM 1-38

COMPUTATION OF CASH
SHORTAGE

You have been asked by the

proprietor of the SOMALIA CO. to verify the accountability of the cashier-
bookkeeper, who was allowed to take a vacation leave a few days ago.

A. The bank reconciliation statements prepared by the cashier-

bookkeeper are presented below:

NOVEMBER 30, 2023

Balance per bank statement P21,500

Cash on hand 500
Total 22,000
Outstanding checks:
No. 2520 P2,000
2521 1,400
2522 1,900 (3,300)
Erroneous bank charge 2,000
Erroneous bank credit (500)
Book balance P20,200

DECEMBER 31, 2023

Balance per bank statement P135,000

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

B. The Cash in Bank account in the general ledger shows the following
debits and credits during December:
Cash in Bank
Dec Dec.
.
1 Balance P20,200 1 Checks issued P2,000
2 Received from 4,500 5 Checks issued 5,200
customers
7 Received from 5,000 14 Checks issued 31,000
customers
12 Received from 20,000 24 Checks issued 46,000
customers
17 Received from 30,000 28 Checks issued 7,600
customers
23 Received from 9,000
customers
27 Received from 70,000
customers
31 Received from 48,500 31 Balance 102,400
customers P198,20 Total P198,200
Total 0

C. The following summarized transactions were taken from the bank

statement for the month of December 2023:

Balance, December 1, 2023 P16,500

Total deposits P173,700
The total deposits per bank statement include:
a. Collection of notes receivable P5,000
b. Correction of November erroneous bank charge 2,000
c. December 10 deposit of Lava, Inc. credited in
error to Somalia 600
Total P7,600

Total Checks P65,200

The total checks per bank statement include:
 a. Correction of November erroneous bank credit P500
b. December check of Nile Co. charged in error to
Somalia 3,000
Total P3,500

D. Cash on hand per count in the morning of January 2, 2024,

amounted to P6,300.
E. Before leaving his company for one-week vacation, the proprietor
had left several signed blank checks that the cashier-bookkeeper
had cashed for his personal use.

1. What is the cash shortage as of November 30, 2023?

A. P5,000 C. P33,000
B. P7,000 D. P13,200
2. The amount of unaccounted receipts in December is
A. P11,000 C. P9,000
B. P13,200 D. P15,100
3. The amount of unrecorded/unsupported disbursements in
December is
A. P15,100 C. P7,000
B. P10,900 D. P5,000
4. What is the total cash shortage as of December 31, 2023?
A. P26,000 C. P33,000
B. P15,100 D. P7,000
5. What is the adjusted cash balance on December 31, 2023?
A. P102,400 C. P87,400
B. 125,000 D. 111,400

SOLUTION 1-38
PROBLEM 1-39

COMPUTATION OF CASH SHORTAGE

The bookkeeper-cashier of the TANYING COMPANY absconded on the

evening of April 26,2024, apparently with a large portion of the
company’s cash. He had taken with him certain accounting records,
including the cash journals and the general ledger. You are called upon to
ascertain, if possible, the shortage with which the missing employee may
be charged.

You obtained the following information from the available subsidiary

journals, ledgers, and other data.

Balances at close of business, April 16,2024:

Accounts Receivable P442,500

Accounts payable 207,300
Cash in bank, less checks outstanding 98,830

Transactions, January 1-April 16, 2024:

Sales, per receivable clerk P5,876,170
Cash sales None
Sales allowances in customers’ accounts 18,330
Cash purchase of furniture, per dealers’ invoice 3,000
Total merchandise purchases 3,615,260
Expenses paid, supported by paid invoices and 1,865,830
payrolls
Cash dividend declared, P50,000 (of which, P10,000
remains unpaid.) 40,000

A check for P10,000 had been cashed by the bookkeeper shortly before
his departure. Although the signature on the check had been obviously
forged, it was paid by the bank and returned with other canceled checks.

A statement of financial position prepared from the books and other files
follows:

Tanying Company
Statement of Financial Position
December 31,2023

ASSETS
Cash P32,670
Accounts Receivable 226,230
Inventory (at cost) 440,350
Furniture P74,560
Less: Accumulated depreciation 31,800 42,760
Total assets P742,010
 LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts Payable P114,720

Share capital 500,000
Retained earnings 127,290
Total liabilities and shareholders’ equity P742,010

1. What is the total amount paid for merchandise purchases?

A. P3,615,260 C. P3,522,680
B. P3,293,240 D. P3,707,840
2. What is the total amount of collections from sales?
A. P5,641,520 C. P6,074,160
B. P5,659,850 D. P6,092,490
3. What is the total amount of cash disbursements from January 1-
April 16, 2024?
A. P5,524,090 C. P5,431,510
B. P5,202,070 D. P5,432,510
4. What is the cashier’s accountability (correct cash balance before
shortage) on April 16, 2024?
A. P242,680 C. P143,850
B. P98,830 D. P43,850
5. What is the amount of cash shortage chargeable against the
cashier?
A. P100,000 C. P143,850
B. 43,850 D. 242,680

SOLUTION 1-39
PROBLEM 1-40

COMPUTATION OF CASH SHORTAGE

The JUNNEL COMPANY had weak internal controls over its cash
transactions. Facts about its cash position at November 30, 2023, were as
follows:

The cash book showed a balance of P94,508, which included undeposited

receipts. A credit of P500 on the bank’s records did not appear on the
books of the company. The balance per bank statement was P77,750.
Outstanding checks were no. 8420 for P581, no. 8422 for P750, no. 8430
for P1,266, no. 8621 for P954, no. 8623 for P1,034, and no. 8632 for P726.

The cashier stole all undeposited receipts in excess of P18,972 and

prepared the following reconciliation:

Balance per books, Nov. 30, 2023 P94,508

Add: Outstanding checks
8621 P954
8623 1,034
8632 726 2,214
96,722
Less: Undeposited receipts 18,972
Balance per bank, Nov 30, 2023 77,750
Less: Unrecorded credit 50
0
True cash, Nov. 30, 2023 P77,250

1. What is the correct amount of cash that should be on hand for deposit
on November 30, 2023?
A. P23,069 C. P22,569
B. P18,972 D. P22,069
2. How much was stolen by the cashier?
A. P3,597 C. P4,097
B. P3,097 D. P 0
3. The cashier attempted to conceal his theft by
 I. Not listing all outstanding checks
II. Underfooting outstanding checks shown on the reconciliation.
III. Adding an item to the bank balance that should be deducted
from the book balance.
A. I and II only C. I and III only
B. II and III only D. I, II, and III
4. Taking only the information given, which of the following internal
control deficiencies allowed the cashier to steal cash and conceal his
theft?
A. The cashier is also responsible for preparing the
reconciliation.
B. No one other than the cashier responsible for tracing cash
receipts to the deposits in the bank.
C. Both A and B.
D. Neither A nor B.
5. What is the adjusted cash balance as of November 30, 2023?
A. P95,008 C. P94,008
B. P91,411 D. P87,814

SOLUTION 1-40

PROBLEM 1-41
COMPUTATION OF CASH
SHORTAGE

Presented below is the cash receipts book of APPLE, INC.:

 CASH RECEIPTS BOOK
June 1-30, 2023
Date Accounts Cash Sales Net Cash
Receivable Sales Discount
June Cash Sales P800 P800
1
10 BA P3,200 P64 3,136
15 BO 6,000 120 5,880
20 BE 4,800 96 4,664
20 Cash Sales 2,400 2,400
25 BU 10,800 216 10,504
26 BO 4,000 4,000
26 BE 12,000 240 11,680
30 BO 3,600 3,600
30 BA 800 ______ ______ 800
P45,200 P3,200 P936 P47,464

The following are the company’s accounts receivable subsidiary ledgers.

All the debits represent sales. The credit terms are 2%-10days, net 30
days.

BA BO
Jun 3 3,200 Jun 1 3,200 June 2 6,000 Jun 1 6,000
e e 0 e 5
4 4,800 3 800 9 4,000 2 4,000
0 6
15 3,600 3 3,600
0

BU BE
Jun 2 6,000 Jun 2 10,80 June 15 4,800 Jun 2 4,800
e e 5 0 e 0
1 4,800 16 12,00 2 12,00
0 0 6 0

1. What is the correct amount of cash receipts in June?

A. P47,800 C. P48,000
B. P47,600 D. P47,664
2. What is the cash shortage on June 30?
A. P336 C. P200
B. P0 D. P536

SOLUTION 1- 41
PROBLEM 1-42
COMPUTATION OF CASH SHORTAGE

You started the audit of the financial statements of ARCHIE, INC. on

January 15, 2024, for the year ended December 31, 2023. The general
ledger shows cash account balance of P247,200 as at December 31, 2023.

The following items are included in the December 31, 2023, reconciliation
prepared by the cashier:

Cash per records, December 31, 2023 P247,200

Cash per bank statement, December 31, 2023 264,095
Outstanding checks 25,325
Check of Tsikoy Co., charged by bank in
error on December 28, 2023; corrected by
bank on January 2, 2024 750
Deposit in Transit 3,500
From January 2, 2024, to January 15, 2024, the date of your cash count,
total cash receipts appearing in the cash records amounted to P53,500.
During the same period, the bank had credited total deposits of P47,965.

The following cash and cash items were on hand at the close of business
on January 15, 2024:
Currency P1,425
Customer’s checks 1,950
Expense vouchers 375
P3,750
Your further investigation revealed the following:
a. Cash received on account from customers:

DATE AMOUNT ENTRY MADE

1. W
07/05/23 P4,000 Allowance for bad 4,000
debts 4,000 h
Accounts a
receivable t
12/10/202 P3,000 Inventory 3,000
3 Accounts 3,000
receivable
12/15/202 P3,500 Not recorded
3
adjusting entries would you provide for items (a) through (c)?
2. What is the total cash shortage as of December 31, 2023?
A. P21,180 C. P14,680
B. P16,180 D. P4,180
3. What is the total cash shortage as of January 15, 2024?
A. P26,465 C. P27,965
B. P18,430 D. P24,930
SOLUTION 1-42
PROBLEM 1-43

COMPUTATION OF CASH SHORTAGE

The LEINOR COMPANY does not have adequate controls over its cash
transactions. During an audit, you found the following data concerning its
cash position at December 31, 2023.

1. On the company’s records the cash balance is P173,500.

2. A credit of P2,500 for a note collected by the bank does not
appear on the company’s records.
3. The bank statement balance is P135,000.
4. Outstanding checks are as follows:
Number Amount
1428 P5,200
1431 3,600
1445 4,080
1446 3,460
The cashier made the following reconciliation:

Balance per bank statement P135,000

Deduct: Outstanding checks:
No. 1431 P3,600
1445 4,080
1446 3,460 10,140
P124,860
Add: Undeposited collections (per count) P46,140
Collected note 2,500 48,640
Cash per books, December 31, 2023 P173,500

1. What is the total shortage?

A. P11,200 C. P5,000
B. P8,700 D. P6,000
2. How did the cashier attempt to conceal the shortage?

SOLUTION 1-43
PROBLEM 1-44
COMPUTATION OF CASH SHORTAGE

The following table summarizes the cash receipts and disbursements of

LOI COMPANY for the last six months of 2023:

Month Receipts Disburseme

nts
July P102,000 P60,000
August 70,000 110,000
September 120,000 68,000
October 172,000 92,000
November 260,000 122,000
December 280,000 180,000
P964,000 P668,000
Additional information:

1 Bank Balance, July 1, 2023 P200,0

. 00
2 Bank balance, December 31, 2023 524,00
. 0
3 Outstanding checks, December 31, 2023
. (No checks were outstanding on July 1) 42,000
4 Undeposited receipts, December 31, 2023
. (Included in the December receipts) 24,000
5 Bank deposits, July 1 through December 31 914,00
. 0

What is the total shortage?

A. P 0 C. P30,000
B. P76,000 D. P66,000

SOLUTION 1-44
PROBLEM 1-45

COMPUTATION OF CASH SHORTAGE

In connection with the audit of the financial statements of JEM COMPANY

for the year ended October 31, 2023, you conducted a surprise count of
undeposited receipts on October 31, 2023. It was witnessed by the
company’s cashier whose accountability on October 31 was determined to
be P80,000. Your count revealed the following:

Currency and coins P48,840

Unused postage stamps 440
Checks:
Date Payee Maker
1-22 Cash Cashier 4,000
10-19 Jem Company DWU, Inc. 9,400
10-28 Jem Company PSU Co. 7,840
10-31 CCP Co. Jem Company 3,600
Office supplies paid out of 6,400
receipts
Total per count P80,52
0

1. What is the cash shortage on October 31, 2023?

A. P7,080 C. P3,080
B. P3,480 D. P7,600
2. 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
B. Simultaneous bank reconciliations
C. Simultaneous verification
D. Simultaneous surprise cash count
SOLUTION 1-45

PROBLEM 1-46

COMPUTATION OF WORKING CAPITAL AND CURRENT RATION

JAM COMPANY’s unadjusted trial balance at December 31, 2023, included

the following accounts:

Debit Credit
Cash P69,20
0
Accounts receivable 102,65
0
Merchandise inventory 947,16
0
Accounts payable P789,71
5
Accrued expenses 13,214

Jam Co.’s year-end is December 31. At the end of 2023, it held its cash
book open so that its statement of financial position would show a more
favorable financial condition. Your audit revealed the following items:

1. The December cash book included January cash receipts of

P65,460, of which P36,010 represents cash sales and P29,450
represents collections from customers, net of 5% cash discounts.

2. The December check register included payments of accounts to

suppliers of P37,240 on which discounts of P1,240 were taken.
 3. The merchandise inventory account balance was determined by
physical count on December 31, 2023

1. What are Jam’s working capital and current ratio at December 31,
2023, based on balances per company books?
Working Capital Current Ratio
A. P316,081 1.42
B. P316,081 1.39
C. P329,295 1.42
D. P329,295 1.39

2. What are Jam’s correct working capital and current ratio at

December 31, 2023?
Working Capital Current Ratio
A. P244,381 1.29
B. P278,831 0.33
C. P330,835 1.40
D. P280,381 1.33

SOLUTION 1-46
PROBLEM 1-47

COMPUTATION OF CASH SHORTAGE

FE COMPANY, organized on March 1, 2023, has a very poor internal control

system. The company’s cashier is also its accountant. After 9 months of
operations, the company’s manager suspects that the cashier-accountant
has been misappropriating company collections. You have been engaged
to audit the company’s accounts to determine the extent of fraud, if any.

You started the audit on November 15. On that date, the cash on hand per
your surprise count was P5,140. Also on that date, the bank confirmed
that the balance of the company’s current account was P26,328. Your
examination of the records reveals that a check for P1,852 was
outstanding on November 15. The company’s markup is 40% of sales.

Further examination of the company’s records reveals the following

balances at November 15,2023:

Ordinary share capital P300,000

Share premium 20,000
Real property purchased for cash 200,000
Mortgage payable 80,000
Furniture and fixtures (of the acquisition
cost,
P6,000 remains unpaid as of Nov. 15) 29,000
Notes payable – bank 32,000
Accounts payable – trade 46,284
Expenses paid (excluding purchases) 60,756
Merchandise inventory at cost 93,920
Accounts receivable – trade 85,380
Total sales 340,000
1. How much was paid for inventory purchases?
A. P157,716 C. P183,636
B. P293,716 D. P251,636
2. How much was collected from customers?
A. P118,620 C. P50,620
B. P254,620 D. P340,000
3. How much is the cashier’s accountability at November 15, 2023?
A. P131,228 C. P145,228
B. P83,228 D. P151,228
4. What is the adjusted bank balance as of November 15, 2023?
A. P31,468 C. P29,616
 B. P26,328 D. P23,040
5. The cash shortage as of November 15, 023, totaled
A. P121,612 C. P127,612
B. P101,612 D. P206,992
SOLUTION 1-47

PROBLEM 1-48

COMPUTATION OF CASH SHORTAGE

Your client, a successful small business, has never given much attention
to a sound internal control. In its employ is Alex Coopit, the company’s
cashier-bookkeeper. Alex handles cash receipts, makes small
disbursements from the cash receipts, maintains accounting records, and
prepares the monthly bank reconciliation.

The bank statement for the month ended March 31, 2023, shows a cash
balance of P590,000. The following checks are outstanding on March 31:

No. 7163 P 8,623

No. 7284 7,320
No. 7285 10,612
No. 8722 6,322
No. 8724 12,280
No. 8733 6,200
The company’s general ledger shows a cash balance of P696,499 on
March 31, 2022:

Realizing that being the cashier-accountant of the company he can easily

misappropriate collections and conceal it, Alex removed all the cash on
hand in excess of P127,301, and then prepared the following reconciliation
in an effort to conceal his theft.

BANK RECONCILIATION

Balance per accounting records P696,499

Add: Outstanding checks
No. 8722 P6,322
No. 8724 12,280
No. 8733 6,200 20,802
Total 717,301
Deduct: Cash on Hand 127,301
Balance per bank statement, P590,000
March 31

1. How much was taken by the cashier-accountant?

A. 30,555 C. P4,000
B. P157,856 D. P26,555
2. What is the amount of cash that should be on hand at March 31,
2023?
A. 30,555 C. P4,000
B. P157,856 D. P26,555

SOLUTION 1-48