Problem 1

Proof of Cash: Book to Bank Balances Format

The auditor of Tsikoy Company gathered the following information:
a. The November 30 bank statement balance include bank service charges of P2,000.
b. The November 30 cash balance in the general ledger was P244,500.
c. Outstanding checks o November 30 were P63,000 while undeposited receipts were P36,000.
d. The bank service charges as shown on the bank statement totaled P3,000.
e. The December 31 cash balance in the general ledger was P319,750, which recognizesP482,750 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
b. P404,500
c. P407,500
d. P405,500

2. What is the November 30 bank balance?

a. P271500
b. P269500
c. P268500
d. P266500

3. What is the total bank receipts in December?

a. P490000
b. P482750
c. P497250
d. P488000

4. What is the total bank disbursements in December?

a. P419000
b. P405500
c. P408500
d. P396000

5. What is the bank balance on December 31?

a. P316750
b. P363500
c. 2932502750
d. P366500
Solution 1-42
1. Checks written during December P405,500
Add: November bank service charges recorded on
Company books in December 2,000
Total book disbursements in December P407,500
Answer: C

Nov Receipts Disbursements Dec.

Balance per books P244,500 P482,750 P407,500 P319,750
Bank service charges:
Nov. (2000) (2,000)
Dec. 3,000 (3000)
Outstanding Checks:
Nov. 63000 ` 63,000
Dec. (75,500) 75500
Undeposited receipts:
Nov. (36000) 36,000
Dec. (28,750) (28750)
Balance per bank P269,500 P490,000 P396,000 P363,500

2. Bank balance, November 30 P269,500

Answer: B

3. Total bank receipts in December P490,000

Answer: A

4. Total bank disbursements in December P396,000

Answer: D
5. Bank balance, December 31 P363,500
Answer: B
 PROBLEM NO. 2 - Bank reconciliation and amount of shortage computation

You are conducting an audit of the Swerte Company for the year ended December 31,
2015. The internal control procedures surrounding cash transactions were not
adequate. The bookkeeper-cashier handles cash receipts, maintains accounting
records, and prepares the monthly bank reconciliations.

The bookkeeper-cashier prepared the following reconciliation at the end of the year

Balance per bank statement P 350,000

Add: Deposit in transit P 175,250
Note collected by bank 15,000 190,250
Total
540,250
Less outstanding checks 246,750
Balance per general ledger P 293,500

In the process of your audit, you gathered the following:

• At December 31, 2015, the bank statement and general ledger showed balances of P
350,000 and P293,500, respectively.
• The cut-off bank statement showed a bank charge on January 2, 2016 for P 30,000
representing correction of an erroneous bank credit.
• Included in the list of outstanding checks were the following:
a. A check payable to a supplier, dated December 29, 2015, in the amount of P 14,750,
released on January 5, 2016.
b. A check representing advance payment to a supplier in the amount of P 37,210, the
date of which is January 4, 2016, and released in December, 2015.
• On December 31, 2015, the company received and recorded customer's postdated check
amounting to P 50,000.

REQUIRED:
1. Compute for the following as at December 31, 2015:
a. Adjusted deposit in transit c. Adjusted cash in bank
b. Adjusted outstanding check d. Cash shortage

2. Adjusting entries as of December 31, 2015

 SOLUTIONS:
a. DIT, beg. P 175,250
Less: postdated checks (50,000)
Adjusted deposit in transit P 125,250

b. Unadjusted outstanding checks P 246,750

Unreleased check (14,750)

Postdated check delivered (37,210)

Adjusted outstanding checks P 194,790

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

Add: Add: DIT 125,250

Unreleased check 14,750 Total 475,250

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

a. Accounts Receivable 50,000

Cash in bank 50,000

b. Cash in Bank 14,750

Accounts Payable 14,750

c. Cash in Bank 37,210

Accounts Payable 37,210

d. Cash in bank 15,000

Account Receivable 15,000

e. Receivable from cashier 60,000

Cash in bank 60,000

Problem 1-41
Proof of Cash: Unadjusted to Adjusted Balances Format
The following data are assembled by the accountant of the HAROLD COMPANY:
Nov.30, 2010 Dec. 31,2010
Cash account balance 41,175 100,712.50
Bank statement balance 267,705 344,542.50
Deposits in transit 20,502.50 32,200
Outstanding checks 69,295 75,280
Bank service charges 1,800 1,500
NSF checks* 20,625
Company’s NR collected 179,537.50 202,250
*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:
Cancelled checks and debit memos 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

1. What is the total book receipts in December?

a. P613,842.50
b. P591,130
c. P411,592.50
d. P580,330

2. What is the total book disbursements in December?

a. P531,592.50
b. P529,792.50
c. P533,092.50
 d. P531,292.50

3. What is the adjusted book balance on November 30?

a. P220,712.50
b. P222,512.50
c. P218,912.50
d. P217,412.50

4. The adjusted bank receipts in December should be

a. P634,168.50
b. P622,770
c. P632,667.50
d. P634,467.50
e. 613,842.50

5. The adjusted book disbursements in December should be

a. P545,932.50
b. P552,517.50
c. P548,917.50
d. P551,917.50
e. 531,292.50

6. What is the adjusted book balance on December 31?

a. P301,462.50
b. P302,662.50
c. P322,087.50
d. P280,537.50

Solution 1-41
1. Cash receipts per cash book P411,592.50
Add: Notes collected by the bank in November 179,537.50
Total book receipts in December P591,130.00

Answer: B
2. Checks written per cash book P529,792.50
Add: Bank service charge in November 1,800.00
Total book disbursements in December P531,592.50

Answer: A
 Nov Receipts Disbursements Dec.
Balance per bank P267,705 P622,770 P545,932.50 P344,542.50
Outstanding Checks:
Nov. (69295) ` (69295)
Dec. 75280 (75280)
Deposit in transit:
Nov. 20502.50 (20502.50)
Dec. 32200 32200
NSF check: (20625) (20625)

Bank balances P218912.50 P613,842.50 P531,292.50 P301462.50

(Adjusted)

Nov Receipts Disbursements Dec.

Balance per books P41,175 P591,130 P531,592.50 P100,712.50
Bank service charges:
Nov. (1800) (1800)
Dec. 1500 (1500)
Collections of notes:
Nov. 179537.50 (179537.50)
Dec. 202250 202250
Book balances P218912.50 P613,842.50 P531,292.50 P301462.50
(Adjusted)

3. Adjusted Book balance, November 30, 2010 P218912.50

Answer: C
4. Adjusted bank receipts in December
Answer: SHOULD BE E P613,842.50 NOT D P634467.50
5. Adjusted book disbursements in December
Answer: SHOULD BE E NOT P531,292.50 D P551917.50
6. Adjusted nook balance, December 31 P301462.50
Answer: A
PROBLEM NO. 6 – Cash shortage computation

You were engaged to audit the books of Davao Company. From the records of the
company, you gathered the following information:

Davao Company started operations on October 2, 2015 with the owners investing
P150,000 cash. Monthly bank reconciliation statements have not been prepared;
however, bank statements for October, November and December were made available
to you. Your analysis of these bank statement; showed total bang; credits (deposits) of
P575,000 including the owners' initial investment and a bank loan, details of which are
in additional data. The bank statement in December, 2015 showed an ending balance of
P91,500.

Examination of the paid checks disclosed that checks totaling P4,500 were issued by
the company in December, 2015, and were presented for payment only in January,
2016. Cash count of the cashier's accountability amounted to P5,000. You were told by
the cashier that these were collection; from credit sales on December 30, 20I5,
deposited on January 2, 2016:

Additional information are as follows:

a. At counts receivable subsidiary ledgers had a total balance of P70,000 at December 31,
2015. P5,000 of this was ascertained to be uncollectible.

b. Suppliers' unpaid invoices for merchandise totaled P15,000; while an account for store
fixtures bought for P50,000 had an unpaid balance of P5,000.

c. Merchandise inventory at December 31, 2015 amounted to P30,000 but P5,000 of these
were spoiled with no resale value.

d. The bank statement in October showed a bank credit for P98,000, dated October 2, 2015.
Inquiry from the cashier disclosed that the amount represents proceeds of a 90-day,
discounted bank note. P 80,000 of this loan was paid by check in December, 2015.

e. Operating expenses paid during the period totaled P 180,000; while merchandise purchases
amounted to P250,000.

f. The gross profit rate is 120% of cost.

REQUIRED:

Determine the cash shortage as of December 31, 2015.

SOLUTIONS:

Unadjusted balance per bank, Dec. 31 91,500

Outstanding checks ( 4,500)
Deposit in transit 5,000
Adjusted balance per bank 92,000
Cash balance per books, Dec. 31 122,000
Cash over (short) ( 30,000)
Cash receipts:
Owner’s investment 150,000
Proceeds from loan 98,000
Collections from customers 414,000
Total 662,000
Cash disbursements:
Purchases (250,000 – 15,000) 235,000
Store fixtures (50,000 – 5,000) 45,000
Loan payment 80,000
Expenses paid 180,000 540,000
Cash balance per books, Dec. 31 122,000