AUDIT OF CASH

PROBLEM NO. 1
In connection with your audit of Caloocan Corporation for the year ended December 31,
2016, you gathered the following:
1.
2.

Current account at Metrobank

Current account at BPI

3.

Payroll account

4.

Foreign bank account restricted (in equivalent pesos)

5.

Postage stamps

1,000

6.

Employees post dated check

4,000

7.

IOU from controllers sister

10,000

8.

Credit memo from a vendor for a purchase return

20,000

9.

Travelers check

50,000

10.

Not-sufficient-funds check

15,000

11.

Money order

30,000

12.

Petty cash fund (P4,000 in currency and expense

receipts for P6,000)

P2,000,000
(100,000)
500,000
1,000,000

10,000

13.

Treasury bills, due 3/31/17 (purchased 12/31/16)

200,000

14.

Treasury bills, due 1/31/17 (purchased 1/1/16)

300,000

Based on the above information and the result of your audit, compute for the cash
and cash equivalent that would be reported on the December 31, 2016 balance sheet.
a. P2,784,000
c.
P2,790,000
b. P3,084,000
d.
P2,704,000

PROBLEM NO. 2
The auditor of WARRIORS Inc. Examined the petty cash fund immediately after the close of the business, July 31,
2014, the end of the companys natural business year. The petty cash custodian presented the following during the
count:
Currency
Petty cash vouchers:
Postage
Office supplies expense
Transportation
Computer repairs
Advances to office staff

P1,650

A check drawn by Warriors payable to the

petty cash custodian

7,200

420
900
340
800
1,500

300
Postage stamps
1,000
Employees check, returned by the bank,
marked NSF
1,890
An envelope containing currency of P1,890
for a gift to a retiring employee
P16,000
1.) How much is the petty cash shortage or overage?
2.) What is the adjusted balance of the petty cash fund at July 31, 2014?
PROBLEM NO. 3
The books of Thunder's Service, Inc. disclosed a cash balance of P687,570 on December
31, 2006. The bank statement as of December 31 showed a balance of P547,800.
Additional information that might be useful in reconciling the two balances follows:

(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was
dishonored on December 29 (maturity date). The bank charged Thunder's account for
P142,650, including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was
actually a deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Thunder's account had been charged on December 26 for a customer's NSF check
for P12,960.
(g) Thunder properly deposited P6,000 on December 3 that was not recorded by the
bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650
had been collected on December 27, and the bank charged a P360 collection fee.
Based on the above and the result of your audit, determine the following:
1. Adjusted cash in bank balance
a. P583,200
c.
P589,200
b. P577,200
d.
P512,400
2.

Net adjustment to cash as of December 31, 2006

a. P104,370
c.
P 98,370
b. P110,370
d.
P175,170

PROBLEM NO. 4
The following information pertains to SPURS Corp:
SPURS Corp
Bank Reconciliation
November 30, 2014
Balance per bank
Less: Outstanding checks

P435,000
#4321
#4329
#4340
#4341

P6,000
15,000
1,700
4,675

Add: Deposit in transit

27,375
P407,625
16,200

Balance per books

P423,825

Check Register
December 2014
Date
12/1
12/3
12/7
12/12
12/15
12/16
12/18
12/21
12/22
12/28

Payee
UA, Inc.
OLFU Corp
AUF Enterprises
RCC Corp.
Payroll
BU, Inc.
HAU Co.
SPCF, Inc.
Petty cash fund
Payroll

No.
4342
4343
4344
4345
4346
4347
4348
4349
4350
4351

Bank Statement
CITY BANK
Period: November 30,2014 December 31, 2014
No.: 001-43-44
Date
Beginning Balance
December
1
1
4
4
5
6
8

Description

Cash deposit
Check issued
Check issued
Check issued
Check deposit
Check issued
Check deposit

Vouchers Payable
P10,000
4,200
3,755
12,000
96,000
6,300
14,200
7,000
10,000
98,000

Discount
P500
120
142
-

Cash
P9,500
4,200
3,755
11,880
96,000
6,300
14,058
7,000
10,000
98,000

Page 1 of 1

Check Number

Debit

4329
4342
4341

P15,000
9,500
4,675

4343

4,200

Credit

Balance
P435,000

16,200

451,200
436,200
426,700
422,025
471,025
466,825
480,825

49,000
14,000

10
15
22
28
29

Check issued
Encashment
Encashment
Encashment
Debit Memo
Service Charge
Credit Memo
Interest

29

4344
4346
4350
4351

3,755
96,000
10,000
98,000
1,000

477,070
381,070
371,070
273,070
272,070
,1,550

273,620

Deposits in transit at December 31 totaled P49,000

1.) What is the total book receipts for December?
A. P113,550
B. P80,750
C. P63,000
D. P112,000
2.) What is the cash balance per books on December 31, 2014?
A. P275,132
B. P226,132
C. P291,332
D. P274,370
3.) What is the total outstanding checks on December 31, 2014?
A. P68,313
B. P39,238
C. P46,938
D. P40,938
4.) What is the adjusted cash balance on November 30, 2014?
A. P446,375
B. P417,825
C. P423,825
D. P435,000
5.) What is the adjusted cash balance on December 31, 2014?
A. P281,682
B. P275,682
C. P226,682
D. P274,920
PROBLEM NO. 5
RAPTORS Companys check register shows the following entries for the month of December:
Date
12/2014
1
5
7
11
26
29

Checks
Beginning Balance
Deposit
Check # 14344
Check # 14345
Deposit
Check # 14346

Deposits
P65,000

P32,500
14,000
49,000
8,600

Balance
P89,300
154,300
120,800
106,800
155,800
147,200

RAPTORSs bank reconciliation for November revealed one outstanding check (No. 14343) for P12,000 (written
on November 28), and one deposit in transit for P5,550 (made on November 29)
The following is from RAPTORSs bank statement for December 2014:
Date
12/2014
1
1
4
5
14
15
20
29
31

Checks
Beginning Balance
Deposit
Check No. 14344
Deposit
Check No. 14345
Loan Proceeds
NSF check
Service charge
Interest

P5,550
P32,500
56,000
14,000
500,000
7,600
1,000

Assume that all errors were committed by RAPTORS Company, not the bank.
Based on the preceding information, determine the following:
1.) Adjusted cash balance on November 30
A. P89,300
B. P95,750
C. P102,200
D. P101,300
2.) Outstanding checks on December 31
A. P46,500

Deposits

3,600

Balance
P95,750
101,300
68,800
124,800
110,800
610,800
603,200
602,200
605,800

B. P45,500
C. P8,600
D. P20,600
3.) Deposit in transit on December 31
A. P52,600
B. P49,000
C. P5,550
D. P43,450
4.) Total bank receipts in December
A. P114,000
B. P119,550
C. P565,150
D. P61,550
5.) Adjusted cash balance on December 31
A. P663,800
B. P634,200
C. P748,200
D. P597,200
PROBLEM NO. 6
The following information was obtained in connection with the audit of PACERS Companys cash account as of
December 31, 2014.
Outstanding checks, 11/30/2014
Outstanding checks, 12/31/2014
Deposit in transit, 11/30/2014
Cash balance per ledger, 12/31/2014
Actual company collections from its customers during
December
Company checks paid by bank in December
Bank service charges recorded on company books in
December
Bank service charges per December bank statement
Deposits credited by bank during December
November bank service charges recorded on company books
in December

P16,250
12,500
12,500
37,500
152,500
130,000
2,500
3,250
145,000
1,500

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

The bank erroneously charged the companys account for a P3,750 check of another depositor. This bank error
was corrected in January 2015.
1.) How much is the deposit in transit on December 31, 2014?
A. P5,000
B. P20,000
C. P22,500
D. P17,500
2.) The total unrecorded bank service charges as of December 31, 2014
A. P750
B. P2,250
C. P1,750
D. P4,250
3.) What is the total book receipts in December?
A. P150,000
B. P152,000
C. P155,000
D. P147,500
4.) What is the total amount of company checks issued in December?
A. P130,000
B. P123,000
C. P133,750
D. P126,250
5.) What is the total book disbursements in December?
A. P123,750
B. P128,500
C. P126,250
D. P128,750
6.) What is the book balance on November 30, 2014?
A. P16,250
B. P21,250
C. P37,500
D. P35,000
7.) What is the bank balance on November 30, 2014?
A. P23,000
B. P18,500
C. P43,500
D. P16,250
8.) What is the total bank receipts in December?

A. P120,000
B. P140,000
C. P145,000
D. P150,000
9.) What is the total bank disbursements in December?
A. P154,500
B. P132,500
C. P129,500
D. P137,000
10.) What is the bank balance on December 31, 2014?
A. P21,500
B. P26,500
C. P31,000
D. P33,250
PROBLEM NO. 7
The BULLS Company had weak internal control over its cash transactions. Facts about its cash position at
November 30, 2014 were as follows:
The cash books showed a balance of P94,508, which included undeposited receipts. A credit of P500 on the
banks 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 reconcillation:
Balance per books, Nov. 30, 2014
Add: Outstanding checks
8621
8623
8632

P94,508
P954
1,034
726

2,214
96,722
18,972
77,750
500
77,250

Less: Undeposited receipts

Balance per bank, Nov. 30, 2014
Less: Unrecorded credit
True cash, Nov. 30, 2014

1.) What is the correct amount of cash that should be on hand for deposit on November 30, 2014?
A. P23,069
B. P18,972
C. P22,569
D. P22,069
2.) How much cash was stolen by the cashier?
A. P3,597
B. P3,097
C. P4,097
D. P0
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
B. II and III only
C. I 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 and conceal the theft?
A. The cashier is also responsible for preparing the reconciliation
B. No one other than the cashier is 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, 2014?
A. P95,008
B. P91,411
C. P94,008
D. P87,814
PROBLEM NO. 8
The accountant for the Lakers Company assembled the following data:

Cash account balance

Bank statement balance
Deposits in transit
Outstanding checks
Bank service charge

June 30

July 31

P 15,822
107,082
8,201
27,718
72

P 39,745
137,817
12,880
30,112
60

Customer's check deposited July 10, returned by

bank on July 16 marked NSF, and redeposited
immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable

8,250

71,815

80,900

The bank statements and the company's cash records show these totals:
Disbursements in July per bank statement
Cash receipts in July per Lakers's books

P218,373
236,452

QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1.

How much is the adjusted cash balance as of June 30?

a. P87,565
c. P107,082
b. (P3,695)
d. P15,822

2.

How much is the adjusted bank receipts for July?

a. P253,787
c. P245,537
b. P214,802
d. P232,881

3.

How much is the adjusted book disbursements for July?

a. P220,767
c. P181,782
b. P212,517
d. P206,673

4.

How much is the adjusted cash balance as of July 31?

a. P137,817
c. P22,513
b. P112,335
d. P120,585

5.

How much is the cash shortage as of July 31?

a. P8,250
c. P196,144
b. P71,815
d. P0

PROBLEM NO. 9
Select the best answer for each of the following:
1. An auditor would consider a cashiers job description to contain compatible duties if the
cashier
receives remittance from the mailroom and also prepares the
a. Daily deposit slip.
c. Remittance advices.
b. Prelist of individual checks.
d. Monthly bank reconciliation.
2.

Which of the following internal control procedures will most likely

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

3.

An entitys internal control structure requires every check request that there be an
approved voucher, supported by a prenumbered purchase order and a prenumbered
receiving report. To determine whether checks are being issued for unauthorized
expenditures, an auditor most likely would select items for testing from the population
of all
a. Cancelled checks.
c. Purchase orders.
b. Approved vouchers.
d. Receiving reports.

4.

Which of the following auditing procedures would the auditor not apply to a cutoff bank
statement?
a. Trace year end outstanding checks and deposits in transit to the cutoff bank statement.
b. Reconcile the bank account as of the end of the cutoff period.
c. Compare dates, payees and endorsements on returned checks with the cash disbursements
record.
d. Determine that the year end deposit in transit was credited by the bank on the first working
day of the following accounting period.

5.

A client maintains two bank accounts. One of the accounts, Bank A, has an overdraft of
P100,000. The other account, Bank B, has a positive balance of P50,000. To conceal the
overdraft from the auditor, the client may decide to
a. Draw a check for at least P100,000 on Bank A for deposit in Bank B. Record the receipt but not
the disbursement and list the receipt as a deposit in transit. Record the disbursement at the
beginning of the following year.
b. Draw a check for at least P100,000 on Bank B for deposit in Bank A. Record the receipt but not
the disbursement and list the receipt as a deposit in transit. Record the disbursement at the
beginning of the following year.
c. Draw a check for P100,000 on Bank B for deposit in Bank A. Record the disbursement but not
the receipt. List the disbursement as an outstanding check, but do not list the receipt as a
deposit in transit. Record the receipt at the beginning of the following period.
d.
Draw a check for at least P100,000 on Bank A for deposit in Bank B.
Record the
disbursement but not the receipt and list the disbursement as an outstanding check.
Record the receipt at the beginning of the following year.

6.

While performing an audit of cash, an auditor begins to suspect check kiting. Which of the
following is the best evidence that the auditor could obtain concerning whether kiting is taking
place?
a. Documentary evidence obtained by vouching credits on the latest bank statement to
supporting documents.
b.
Documentary evidence obtained by vouching entries in the cash account to supporting
documents.
c. Oral evidence obtained by discussion with controller personnel.
d. Evidence obtained by preparing a schedule of interbank transfers.

7.

Two months before year-end, the bookkeeper erroneously recorded the receipt of a long-term
bank loan by a debit to cash and a credit to sales. Which of the following is the most effective
procedure for detecting this type of error?
a. Analyze bank confirmation information.
b. Analyze the notes payable journal.
c. Prepare year-end bank reconciliation.
d. Prepare a year-end bank transfer schedule.

8.

Postdated checks received by mail in settlement of customers accounts should be

a. Returned to customer.
b. Stamped with restrictive endorsement.
c. Deposited immediately by the cashier.
d. Deposited the day after together with cash receipts.

9.

The cashier of Milady Jewelries covered a shortage in the cash working fund with cash obtained at
December 31 from a bank by cashing but not recording a check drawn on the company out of
town bank. How would you as an auditor discover the manipulation?
a. By confirming all December 31 bank balances.
b. By counting the cash working fund at the close of business on December 31.
c. By investigating items returned with the bank cut-off statements of the succeeding month.
d. By preparing independent bank reconciliations as of December 31

10. An essential phase of the audit of the cash balance at the end of the year is the auditor's review of
cutoff bank statement. This specific procedure is not useful in determining if
a. Kiting has occurred.
b. Lapping has occurred.
c. The cash receipts journal was held open.
d. Disbursements per the bank statement can be reconciled with total checks written.
--end of cash handouts--