On January 10, 2014, you started the audit of the financial records of the Glamor

Company for the year ended December 31, 2013. From your investigation, you
discovered the following:
1.

The bookkeeper also acts as the cashier. On December 31, 2013, the
bookkeepers year-end cash reconciliation contains the following items.
Cash per ledger, 12-31-13
Cash per bank, 12-31-13
Outstanding checks
Joe Co. check charge by bank in error
12-20-13; corrected by bank on 1-5-14
Cash in transit, credited by bank on 1-2-14

P736,800
778,200
62,640
1,800
8,640

2.

The cash account balances per ledger as of 12-31-13 were: Cash - P736,800;
petty cash - P1,800

3.

The count of the cash on hand at the close of business on January 10, 2014,
including the petty cash, was as follows:
Currency and coin
Expense vouchers
Employees IOUs dated 1-5-14
Customers checks in payment of account

P4,620
240
660
3,480
P9,000

4.

From January 2, 2014 to January 10, 2014, the date of your cash count, total
cash receipts appearing in the cash records were P103,200. According to the
bank statement for the period from January 2, 2014 to January 10, 2014, total
deposits were P91,200.

5.

On July 5, 2013, cash of P4,800 was received from an account customer; the
Allowance for Doubtful Accounts was charged and Accounts Receivable
credited.

6.

On December 5, 2013, cash of P3,600 was received from an account customer;

Inventory was charged and Accounts Receivable credited.

7.

Cash of P8,760 received during 2013 was not recorded.

8.

Checks received from customers from January 2, 2014 to January 10, 2014,
totaling P5,040, were not recorded but were deposited in bank.

9.

On July 1, 2013, the bank refunded interest of P240 because a note of the
Glamor Company was paid before maturity. No entry had been made for the
refund.

10.

In the cashiers petty cash, there were receipts for collections from customers
on January 9, 2014, totaling P10,200; these were unrecorded and undeposited.

11.

In the outstanding checks, there is one for P600 made payable to a trade
creditor; investigation shows that this check had been returned by the creditor
on June 14, 2013 and a new check for P1,200 was issued in its place; the
original check for P600 was made in error as to amount.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
1.
2.
3.
4.

The correct bank balance as of December 31, 2013 is

a. P726,600
b. P754,800
c. P726,000

d. P724,800

The cash shortage as of December 31, 2013 is

a. P28,800
b. P28,200
c. P27,600

d. P

The cash shortage for the period January 1 to 10, 2014 is

a. P20,040
b. P30,480
c. P15,240

d. P

Which of the following internal control procedures will most likely prevent
the concealment of a cash shortage resulting from improper write-off of a
trade account receivable?
a. Write-offs must be approved by a responsible officer after review of credit
department recommendations and supporting evidence.
b. Write-offs must be supported by an aging schedule showing that only
receivables overdue for several months have been written off.
c. Write-offs must be approved by the cashier who is in a position to know if
the receivables have, in fact, been collected.
d. Write-offs must be authorized by company field sales employees who are
in a position to determine the financial standing of the customers.

5.

As an in-charge auditor, you are reviewing a write-up of internal control in

cash receipt and disbursement procedures.
Which of the following
deficiencies alone should cause you the least concern?
a. Checks are signed by only one person.
b. Signed checks are distributed by the controller to approved payees.
c. The treasurer fails to establish bona fide names and addresses of check
payees.
d. Cash disbursements are made directly out of cash receipts.