Since 1977

AUDITING PROBLEMS OCAMPO/CABARLES/SOLIMAN/OCAMPO

AP.2904-Audit of Cash and Cash Equivalents OCTOBER 2020

INTERNAL CONTROL MEASURES FOR CASH

1. Cash receipts should be deposited intact – that is, in 5. Bank reconciliation statement should be prepared
the same amount and form as they are received. monthly.
2. All disbursements should be authorized and made by 6. Provide physical protection for cash.
check except those involving small amounts which
7. Minimize cash on hand in the office.
should be paid from petty cash fund.
8. Cash actually present in the office – petty cash,
3. Both receipts and disbursements should be properly
change fund and undeposited receipts can be
accounted for in the records.
periodically counted and compared with the company
4. There should be separation of personnel duties for records.
a. receiving cash
9. Adopt imprest fund system for petty cash.
b. recording receipts
c. depositing cash collections
d. reconciling bank account
e. authorizing disbursement
f. disbursing cash

SUBSTANTIVE AUDIT PROCEDURES FOR CASH

Cash Balances Occurrence: Recorded receipts represent actual collections

of cash from customers
Existence: Cash recorded on the books exist
For a sample of entries in cash receipts journal, trace to
1. Count cash on hand. the prelisting of cash receipts and to remittance advice.
2. Confirm bank balances. For a sample of entries, reconcile daily deposit to validated
3. Examine interbank transfers. deposit ticket.
4. Perform analytical procedures.
Classification: Cash receipts transactions have been
Completeness: All of the entity’s cash is included recorded in the proper accounts
5. Perform cash cutoff test. Review account coding for a sample of entries in the cash
6. Prepare proof of cash. receipts journal.

Accuracy (Valuation): Debits to cash and credits to

Rights and obligations: Any restrictions on cash have been accounts receivable are valued at amounts received
identified
For a sample of entries in cash receipts journal, examine
7. Examine standard bank confirmations and read the remittance advice and verify that discount taken was
minutes of the board of directors’ meetings to appropriate. Foot accounts receivable subsidiary ledger
determine whether any restrictions have been placed and reconcile to general ledger.
on cash.

Valuation and allocation: Cash is correctly valued. Cash Payments

8. Obtain bank cutoff statements directly from the bank
Completeness: All cash payments made are recorded
and use them to test the bank reconciliation as of the
balance sheet date. Reconcile cash payments per books with cash payments
per bank. Prepare or test bank reconciliation.

Occurrence: Recorded cash payments occurred

Presentation and disclosure: Cash is presented and
Examine paid checks for appropriate endorsements.
disclosed properly.
Examine documents underlying payments.
9. Review financial statements and perform analytical
procedures to determine whether accounts are Classification: Cash payments transactions have been
classified and disclosed in accordance with GAAP. recorded in the proper accounts
Check accuracy of accounts on invoices by reference to
chart of accounts.
Cash Collections
Accuracy (Valuation): Debits to various accounts and
Completeness: All receipts of cash and checks are
credits to cash are valued at proper amounts
recorded
Recalculate invoices paid.
For a sample of days, verify that all cash receipts are
recorded by reconciling daily listing(s) of cash receipts and
- end -
validated deposit ticket to cash receipts journal.

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EXCEL PROFESSIONAL SERVICES, INC.

PROBLEM NO. 1 5. Which of the following balance-related audit objectives

typically is assessed as having high inherent risk for
You were able to gather the following from the December
cash?
31, 2020 trial balance of Peso Corporation in connection
a. Existence c. Detail tie-in
with your audit of the company:
b. Cutoff d. Presentation and disclosure
Cash on hand P 372,000
6. The general cash account is considered a significant
Petty cash fund 10,000
account in almost all audits:
BPI current account 950,000
a. Where the ending balance is material.
Security Bank current account No. 01 1,280,000
b. Even when the ending balance is immaterial.
Security Bank current account No. 02 (40,000)
c. Except those of not-for-profit organizations.
PNB savings account 500,000
d. Where either the beginning or ending balance is
PNB time deposit 300,000
material.
Cash on hand includes the following items:
a. Customer’s check for P60,000 returned by bank on PROBLEM NO. 2
December 26, 2020 due to insufficient fund but
In connection with the audit of the financial statements of
subsequently redeposited and cleared by the bank on
Rupee Company for the year ended December 31, 2020,
January 8, 2021.
you performed a surprise count of the petty cash fund and
b. Customer’s check for P30,000 dated January 2, 2021,
undeposited collections under the custody of Ms. Jessie at
received on December 29, 2020.
8:15 a.m. on January 2, 2021. Your count disclosed the
c. Postal money orders received from customers,
following:
P36,000.
Bills and Coins
Bills Coins
The petty cash fund consisted of the following items as of
P100 10 pieces P1.00 410 pieces
December 31, 2020.
50 80 pieces 0.50 324 pieces
Currency and coins P 2,100 20 70 pieces 0.25 64 pieces
Employees’ vales 1,600 10 54 pieces
Currency in an envelope marked “collections
Unused postage stamps – P730
for charity” with names attached 1,200
Unreplenished petty cash vouchers 800 Checks
Check drawn by Peso Corporation, payable Date Payee Drawer Amount
to the petty cashier 4,600 Dec. 30 Cash Ms. Jessie P 2,400
P10,300 Dec. 30 Rupee Company Robert 28,000
Dec. 31 Rupee Company Jay Ar, sales
Included among the checks drawn by Peso Corporation manager 3,360
against the BPI current account and recorded in December Dec. 31 Rupee Company Francis 35,600
2020 are the following: Dec. 31 Rupee Company Ryan 16,600
Dec. 31 German Corp. Rupee
a. Check written and dated December 29, 2020 and
(not endorsed) Company 54,000
delivered to payee on January 2, 2021, P50,000.
b. Check written on December 27, 2020, dated January
Expense Vouchers
2, 2021, delivered to payee on December 29, 2020,
Date Payee Description Amount
P86,000.
Dec. 23 Jay Ar, Cash advance for
sales manager trip to Baguio
The credit balance in the Security Bank current account
City P14,000
No. 2 represents checks drawn in excess of the deposit
Dec. 27 Central Post Postage stamps
balance. These checks were still outstanding at December
Office 3,240
31, 2020.
Dec. 29 Messengers Transportation 300
Dec. 29 PC Express Computer repair 1,600
The savings account deposit in PNB has been set aside by
the board of directors for acquisition of new equipment.
Other items found inside the cash box:
This account is expected to be disbursed in the next 3
months from the balance sheet date. a) Two pay envelopes which had been opened and the
contents aggregating P15,000 representing unclaimed
QUESTIONS: salaries had been removed.
Based on the above and the result of your audit, compute b) The sales manager’s liquidation report for his Baguio
for the adjusted balances of following: trip:
1. Cash on hand Cash advance received on
a. P282,000 c. P408,000 Dec. 23 P14,000
b. P246,000 d. P342,000 Less: Hotel accommodation P9,000
Bus fare for two 800
2. Petty cash fund Cash given to Roy,
a. P6,700 c. P 2,100 salesman 600 10,400
b. P9,100 d. P10,000 Balance P 3,600
3. BPI current account Accounted for as follows:
a. P1,086,000 c. P1,000,000 Cash returned by Roy to the sales
b. P 914,000 d. P 950,000 manager P 240
Personal check of sales
4. Cash and cash equivalents
manager 3,360
a. P2,914,700 c. P2,614,700
Total P 3,600
b. P2,954,700 d. P3,414,700

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EXCEL PROFESSIONAL SERVICES, INC.

Additional information: • Included in the list of outstanding checks were the

following:
a) The custodian is not authorized to cash checks.
a. A check payable to a supplier, dated December 29,
b) The last official receipt included in the deposit on 2020, in the amount of P14,750, released on
December 30 is No. 351 and the last official receipt January 5, 2021.
issued for the current year is No. 355. The following b. A check representing advance payment to a
official receipts are all dated December 31, 2020. supplier in the amount of P37,210, the date of
which is January 4, 2021, and released in
O.R. No. Amount Form of payment
December, 2020.
352 P27,200 Cash
353 35,600 Check • On December 31, 2020, the company received and
354 7,200 Cash recorded customer’s postdated check amounting to
355 16,600 Check P50,000.

c) The Petty Cash balance per general ledger is P20,000. QUESTIONS:

The last replenishment of the fund was made on Based on the above and the result of your audit, answer
December 22, 2020. the following:
1. The adjusted deposit in transit as at December 31,
REQUIRED:
2020 is
1. Computation of shortage or overage, if any a. P175,250 c. P225,250
b. P125,250 d. P125,000
2. Adjusting entries as of December 31, 2020
3. Who is responsible, at all times, for the amount of the 2. The adjusted outstanding checks as at December 31,
petty cash fund? 2020 is
a. General cashier a. P298,710 c. P209,540
b. President of the company b. P232,000 d. P194,790
c. Petty cash custodian 3. The adjusted cash to be presented in the statement of
d. Chairman of the Board of Directors financial position at December 31, 2020 is
4. What is the effect of not replenishing the petty cash a. P235,460 c. P265,460
fund at year-end and not making the appropriate b. P250,460 d. P310,460
adjusting entry? 4. The cash shortage as of December 31, 2020 is
a. A detailed audit is necessary. a. P45,000 c. P60,000
b. The petty cash custodian should turn over the b. P58,040 d. P 8,040
petty cash to the general cashier.
c. Cash will be overstated and expenses understated. 5. The starting point for the verification of the balance in
d. Expenses will be overstated and cash will be the general bank account is to obtain:
understated. a. A bank reconciliation from the client.
b. The client's cash account from the general ledger.
5. An imprest petty cash fund would least likely be used c. A cutoff bank statement directly from the bank.
to pay for which of the following items? d. The client's year-end bank statement.
a. Minor office supplies
b. Monthly interest expense 6. Which of the following substantive audit procedures is
c. Stamps for small mailings most likely to be performed by the auditor to gather
d. Small contributions to a local charity evidence in support of the balance per bank?
a. Confirm directly with bank
b. Compare to general ledger.
PROBLEM NO. 3 c. Trace to cash receipts journal.
d. Trace items on the cutoff bank statement to bank
You are conducting an audit of the Swerte Company for reconciliation.
the year ended December 31, 2020. The internal control
procedures surrounding cash transactions were not 7. Which of the following substantive audit procedures is
adequate. The bookkeeper-cashier handles cash receipts, least likely to be performed by the auditor to gather
maintains accounting records, and prepares the monthly evidence in support of the deposits in transit?
bank reconciliations. a. Inspect supporting documents for reconciling item
not appearing on cutoff bank statement.
The bookkeeper-cashier prepared the following b. Trace items on the bank reconciliation to cutoff
reconciliation at the end of the year: bank statement.
c. Trace to cash receipts journal.
Balance per bank statement P350,000
d. Inspect bank credit memo.
Add: Deposit in transit P175,250
Note collected by bank 15,000 190,250
8. Which of the following substantive audit procedures is
Total 540,250
least likely to be performed by the auditor to gather
Less outstanding checks 246,750
evidence in support of the outstanding checks?
Balance per general ledger P293,500
a. Confirm directly with bank.
b. Trace to cash disbursements journal.
In the process of your audit, you gathered the following:
c. Ascertain reason for unusual delay.
• At December 31, 2020, the bank statement and d. Trace items on the bank reconciliation to cutoff
general ledger showed balances of P350,000 and bank statement.
P293,500, respectively.
• The cut-off bank statement showed a bank charge on
January 2, 2021 for P30,000 representing correction of
an erroneous bank credit.

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9. A partial-period bank statement and the related 2. Cash balance per books as of December 31, 2020 is
canceled checks, duplicate deposit slips, and other a. P133,000 c. P138,000
documents included in bank statements, mailed by the b. P127,000 d. P122,000
bank directly to the CPA firm's office, is called:
3. The cash shortage as of December 31, 2020 is
a. A four-column proof of cash.
a. P35,000 c. P30,000
b. A year-end bank statement.
b. P46,000 d. P41,000
c. A cutoff bank statement.
d. A short-period bank statement. 4. The primary purpose of sending a standard
confirmation request to financial institutions with which
10. An auditor who is engaged to examine the financial
the client has done business during the year is to
statements of a business enterprise will request cutoff
a. Detect kiting activities that may otherwise not be
bank statement primarily in order to
discovered.
a. Verify the cash balance reported on the bank
b. Corroborate information regarding deposit and loan
confirmation inquiry form.
balances.
b. Verify reconciling items on the client’s bank
c. Provide the data necessary to prepare a proof of
reconciliation.
cash.
c. Detect lapping.
d. Request information about contingent liabilities and
d. Detect kiting.
secured transactions.
5. The auditor should ordinarily mail confirmation
PROBLEM NO. 4 requests to all banks with which the client has
conducted any business during the year, regardless of
You were engaged to audit the books of Davao Company.
the year-end balance, since
From the records of the company, you gathered the
a. The confirmation form also seeks information
following information:
about indebtedness to the bank.
b. This procedure will detect kiting activities which
Davao Company started operations on October 2, 2020
otherwise not be detected.
with the owners investing P150,000 cash. Monthly bank
c. The mailing of confirmation forms to all such banks
reconciliation statements have not been prepared;
is required by GAAS.
however, bank statements for October, November, and
d. This procedure relieves the auditor of any
December were made available to you. Your analysis of
responsibility with respect to non-detection of
these bank statements showed total bank credits
forged checks.
(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, 2020
PROBLEM NO. 5
showed an ending balance of P91,500.
You were able to obtain the following information during
Examination of the paid checks disclosed that checks your audit of Euro Company:
totaling P4,500 were issued by the company in December,
2020, and were presented for payment only in January, Reconciling items:
2021. Cash count of the cashier’s accountability amounted
Nov. 30 Dec. 31
to P5,000. You were told by the cashier that these were
Undeposited collections P200,000 P120,000
collections from credit sales on December 30, 2020,
Outstanding checks 80,000 60,000
deposited on January 2, 2021.
Customer’s notes collected by
bank 100,000 120,000
Additional information are as follows:
Bank service charges 2,000 3,000
a. Accounts receivable subsidiary ledgers had a total
Erroneous bank debits 10,000 20,000
balance of P70,000 at December 31, 2020. P5,000 of
Erroneous bank credits 40,000 30,000
this was ascertained to be uncollectible.
NSF checks not redeposited 5,000 7,000
b. Suppliers’ unpaid invoices for merchandise totaled
Customer's check deposited
P15,000; while an account for store fixtures bought for
December 10, returned by
P50,000 had an unpaid balance of P5,000.
bank on December 16
c. Merchandise inventory at December 31, 2020
marked NSF, and
amounted to P30,000 but P5,000 of these were spoiled
redeposited immediately;
with no resale value.
no entry made on books for
d. The bank statement in October showed a bank credit
return or redeposit 10,000
for P98,000, dated October 2, 2020. Inquiry from the
cashier disclosed that the amount represents proceeds
Unadjusted balances:
of a 90-day, discounted bank note. P80,000 of this
loan was paid by check in December, 2020. Books ? 90,000
e. Operating expenses paid during the period totaled Bank 230,000 ?
P180,000; while merchandise purchases amounted to
P250,000. December Transactions:
f. The gross profit rate is 120% of cost.
Bank Books
QUESTIONS: Receipts P420,000 P270,000
Disbursements 500,000 407,000
Based on the above and the result of your audit, answer
the following: REQUIRED:

1. Total collections from sales for 2020 is 1. Prepare a 4-column bank reconciliation for the month
a. P414,000 c. P419,000 of December, using the form that reconciles both the
b. P425,000 d. P430,000 book and bank balances to a correct cash amount.
2. Adjusting entries as of December 31.

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SOLUTION GUIDE: QUESTIONS:

Based on the above and the result of your audit, answer
Bank
the following:
(B) (R) (D) (E)
1. How much is the unadjusted cash balance per books as
11/30 Dec. Dec. 12/31
of November 30?
Unadjusted bal.
a. P13,290 c. P11,690
DIT – 11/30
b. P12,490 d. P11,190
- 12/31
OC – 11/30 2. How much is the unadjusted book receipts for
- 12/31 December?
Error, Dr.–11/30 a. P284,840 c. P279,540
- 12/31 b. P281,640 d. P282,190
Error, Cr.–11/30 3. How much is the unadjusted book disbursements for
- 12/31 December?
NSF check red. a. P273,100 c. P275,335
Adjusted bal. b. P271,565 d. P274,635

Books 4. How much is the unadjusted cash balance as of

December 31?
(B) (R) (D) (E) a. P18,195 c. P21,580
11/30 Dec. Dec. 12/31 b. P17,495 d. P24,965
Unadjusted bal.
5. Auditors are likely to prepare a proof of cash when the
Note coll.– 11/30
client has:
- 12/31
a. Material control weaknesses in cash receipts and
BSC – 11/30 cash disbursements.
- 12/31 b. Material control weaknesses in accounts receivable
NSF check–11/30 and revenue.
- 12/31 c. Material control weaknesses in accounts payable
NSF check red. and inventory.
Adjusted bal. d. Material control weaknesses in payroll.
6. A proof of cash represents:
PROBLEM NO. 6 a. A test of controls and substantive test of
transactions.
In your audit of the cash account of Cebu Company, you b. A substantive test of transactions.
were requested by the client to prepare a four-column c. A substantive test of transactions and test of
reconciliation of receipts, disbursements, and balances to details of balances.
reconstruct the balances per books. d. A test of details of balances.
Nov. 30 Dec. 31
a) Balances per bank P14,010 P19,630
SOLUTION GUIDE (Questions 1 to 4):
b) Deposits in transit 2,740 3,110
c) Outstanding checks 4,260 3,870 (B) (R) (D) (E)
d) Bank collections not in 11/30 Dec. Dec. 12/31
books 1,200 1,600 Unadj. bank bal.
e) Bank charges not in DIT – 11/30
books 950 640 - 12/31
f. Of the checks outstanding on December 31, one check OC – 11/30
for P700 was certified at the request of the payee. - 12/31
g. Receipts for December, per bank statement –
CM-coll.– 11/30
P281,070.
- 12/31
h. DAIF check from customer was charged by the bank on
DM-BSC – 11/30
December 28, and has not been recorded – P800.
- 12/31
i. DAIF check returned in November and recorded in
December, P1,050. DAIF checks: (h)
j. DAIF check returned and recorded in December, P900. (i)
k. Check of Cibo Company charged by the bank in error, (j)
P2,010. Bank error, Dr.
l. Receipt on December 6 paid out in cash for travel Receipts used for
expenses, P750. Recorded as receipts and payments
disbursements per books. Book errors: (m)
m. Error in recording customer’s check on December 20, (n)
P165 instead of P465. Unadj. book bal.
n. Error in disbursements journal for December, P3,250
instead of P325.

You noted in your audit that the DAIF checks returned by

the bank are recorded as a reduction on the cash receipts
journal instead of recording it at cash disbursements
journal; redeposits are recorded as regular cash receipts.
- now do the DIY drill -

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EXCEL PROFESSIONAL SERVICES, INC.

DO-IT-YOURSELF (DIY) DRILL

PROBLEM NO. 1 3. How much is the June outstanding checks?
a. P201,210 c. P290,210
You are assigned to audit the cash accounts of Foul
b. P264,210 d. P291,210
Corporation for the fiscal year ended June 30, 2020. The
following is an excerpt of the company’s trial balance as of 4. What is the correct balance of the cash in bank
June 30, related to the company’s cash accounts: account as of June 30, 2020?
a. P1,901,430 c. P1,946,430
Petty cash fund, imprest balance P 120,000
b. P1,911,030 d. P1,964,430
Cash in bank, Metrobank 1,631,730
5. Which statement is true regarding audit of cash?
Audit notes: a. When the year-end cash balance is immaterial, the
a. You rendered a cash count on the company’s petty cash audit of the cash account is unnecessary.
fund on June 30. The custodian presented to you the b. The risk of the company issuing checks near year-
following: end and mailing them subsequently is not
important to the auditor as the action does not
Currencies and coins P37,620 affect cash balances.
A disbursement check payable to the c. Cash is no longer considered highly susceptible to
custodian 46,800 theft because of the advent of computers, safes
An officer’s personal check and armored cars.
accommodated by the fund 12,000 d. The auditor is responsible for auditing the
Manager’s check marked NSF 6,000 necessary disclosures when material lines of credit
Petty cash expense vouchers: and compensating balance arrangements have
6/20 Transportation 4,500 been made by the client with a lender.
6/24 Office repairs 2,700
6/27 Miscellaneous 6,300
Unused postage stamps 1,500 PROBLEM NO. 2
An enveloped marked “collections for
charity” with list of names and In connection with your examination, the MQM Company
corresponding amounts contributed. presented to you the following information regarding its
There is no money inside the Cash in Bank account for the month of December:
envelope. 7,500 a) Balances per bank statements: November 30,
P215,600, and December 31, P230,400.
b. The bank reconciliation statement for the month of May b) Balances of cash in bank account in company’s books:
included the following information: November 30, P165,450, and December 31, P226,800.
c) Total receipts per books were P2,221,900 of which
Balance per general ledger P 980,490
P12,100 was paid in cash to a creditor on December
Note collected by the bank in May 375,000
24.
Interest on the note receivable in May 37,500
d) Total charges in the bank statement during December
Bank service charge in May (16,800)
were P2,189,700.
Customer NSF check (75,000)
e) Undeposited receipts were: November 30, P90,600
Adjusted balance P1,302,190
and December 31, P101,200.
Balance per statement in May P1,402,500 f) Outstanding checks were: November 30, P26,750,
Deposits in transit 167,370 and December 31, P19,300, of which a check for
Outstanding checks (295,380) P5,000 was certified by the bank on December 26.
Bank charge error in May 26,700 g) NSF checks returned, recorded as reduction of cash
Adjusted balance P1,302,190 receipts, were:
• Returned by bank on December, recorded also in
The May book reconciling items were recorded in the
December, P10,400.
books in June while the bank charge error in May was
• Returned by bank on December but recorded in
automatically corrected by the bank in June. The bank
January, P8,600
collected another P300,000 note receivable in June with
h) Collections by bank not recorded by Company were
a P30,000 interest on the company’s behalf. Bank
P121,500 in November and P116,400 in December.
service charge for June was P24,300. The company
i) Bank service charges not entered in company’s books
erroneously recorded a disbursement check amounting
were: November 30, P7,500 and December 31,
to P168,000 as P195,000 in June. The error is yet to be
P4,200.
corrected. The bank erroneously credited the company
j) A check for P9,500 of QMQ Company was charged to
for P63,000 representing a deposit of Fool Corporation.
MQM Company in error.
The bank discovered and corrected the error in June.
k) A check drawn for P8,400 was erroneously entered in
Total bank credits and debits appearing in the June the books as P4,800.
bank statement were at P8,011,800 and P7,325,760
respectively. Moreover, total receipts per the general QUESTIONS:
ledger were at P 7,977,330.
Based on the above and the result of your audit, answer
the following:
QUESTIONS:
6. How much is the adjusted cash balance as of
1. What is the petty cash shortage as of June 30, 2020?
November 30?
a. P 4,080 c. P11,580
a. P215,600 c. P279,450
b. P10,080 d. P17,580
b. P151,750 d. P274,450
2. How much is the June deposits in transit?
7. How much is the adjusted book receipts for December?
a. P 77,100 c. P140,100
a. P2,204,700 c. P2,227,200
b. P113,400 d. P167,100
b. P2,113,900 d. P2,216,800

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EXCEL PROFESSIONAL SERVICES, INC.

8. How much is the adjusted book disbursements for DATE DEBITS CREDITS
December? 22 8,735
a. P2,169,450 c. P2,157,350 23 8,246
b. P2,179,850 d. P2,169,450 26 8,913 6,885
29 5,152 5,913
9. How much is the adjusted cash balance as of
30 2,238
December 31?
31 5,857
a. P317,300 c. P307,800
b. P330,400 d. P326,800 TOTALS P 75,304 P 77,150

10. Which of the following would normally be discovered as Additional information:

part of the audit of the bank reconciliation? 1. Hangover makes a journal entry for service charges,
a. Failure to bill a customer direct deposits, and interest earned in the month
b. Failure to include a deposit in transit on the bank subsequent to the month the items are reflected on
reconciliation the bank statement.
c. Duplicate payment of a vendor's invoice 2. Barek Co. makes a direct deposit of P675 to
d. Payment to an employee for more hours than she Hangover’s account at the bank on the 30th of every
worked month. This payment, which is rent revenue to
Hangover, is not recorded by Hangover until the bank
statement is received.
PROBLEM NO. 3 3. On the 23rd of July, an NSF check for P472 was
Hangover Company received the following bank returned by the bank. The check was redeposited on
statement on August 1: July 27th, and no entry was made by Hangover.
4. Check no. 1145 dated July 29 was written for P1,492
DATE DEBITS CREDITS BALANCE of wages, but recorded by Hangover on its books as
July 1 66,405 P1,000.
2 2,502 63,903 5. On July 16, the bank recorded a withdrawal of P386 for
3 2,240 1,050 62,713 Hangover that should have been for Handover
5 2,106 64,819 Company.
6 5,535 70,354 6. The bank service charge for June was P165 and for
8 5,817 76,171 July was P175.
9 8,181 67,990 7. The interest earned on June was P3,054 and in July
10 4,317 72,307 was P3,160.
11 6,819 4,926 65,488 8. During June, Hangover wrote check no. 1095 for
12 7,425 62,989 P9,850 for rent expense but recorded the check on its
13 62,989 books as P8,955. Hangover discovered the mistake in
15 3,509 66,498 July, when the cancelled checks were returned with the
16 9,777 56,721 June bank statement but neglected to correct the error
17 6,221 7,702 58,202 on the books at that time.
18 6,484 51,718 9. At the end of June, Hangover had P3,156 of deposits in
19 3,418 55,136 transit, and checks totaling P4,742 that had not
20 5,310 60,446 cleared the bank. In addition, all of Hangover’s
22 6,492 66,938 transactions with the bank after July 29 have not
23 5,546 61,392 cleared the bank.
24 61,392
25 8,735 52,657 QUESTIONS:
26 8,246 60,903
27 9,385 70,288 11. How much is the adjusted cash balance as of June 30
29 7,060 63,228 a. P74,303 c. P64,819
30 63,228 b. P58,507 d. P67,991
31 6,405 8,987 65,810 12. How much is the adjusted bank receipts for July?
TOTALS P77,395 P76,800 a. P75,410 c. P76,354
b. P75,024 d. P75,882
Hangover’s cash account shows the following information
13. How much is the adjusted book disbursements for
for the month of July:
July?
a. P78,124 c. P78,596
The June 30 balance was P62,150.
b. P78,038 d. P77,652
DATE DEBITS CREDITS
14. How much is the adjusted cash balance as of July 31
July 1 3,729 165
a. P62,577 c. P74,291
2 5,535
b. P69,815 d. P61,805
3 8,181
5 5,817 15. Which of the following represents a normal substantive
6 4,317 audit procedure for cash balances?
8 6,819 a. Review cash received by the client from the bank.
9 4,926 7,425 b. Verify material deposits-in-transit to subsequent
12 3,509 statements.
13 9,391 c. Foot cutoff bank statements provided by the
15 7,702 financial institutions.
16 6,221 d. Perform kiting techniques to transfer cash between
17 3,418 6,484 two client accounts.
18 5,310
19 6,492 J - end of AP.2904 - J
20 5,074

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