(Bank Reconciliation; shortage)

A. In the course of your audit to ABC Co., you have noticed that the accountant
and the cashier position are held by same person, Ms. Sarah. In light of the
suspicion, you have gathered the following data regarding on cash in bank.
a. Balances per bank statement on December 31 is P700,000
b. Outstanding checks as confirmed in the cash disbursement journal:
No. 1123 P45,600
No. 1134 30,490
No. 1135
14,300
c. Collections deposited in the bank on the night of December 31 is
P206,980
d. Ms. Sarah beforehand prepared a bank reconciliation for the management.
ABC Co.
Statement of Bank Reconciliation
December 31, 2016
Balance per ledger
Add:
Outstanding checks

P 880,500
#1123
#1134
#1135

Bank Charges
Less:
Deposits in Transit
Note Collected by bank, with interest
Balance per bank statement

P 4,560
30,490
14,300
100

46,350

206,980
19,970
P700,000

1. How much is the shortage? Prepare the necessary entries to correct and
reconcile the cash balances. (2%)
2. What will be your suggested countermeasures to the weak internal control
regarding cash? (1%)
3. How did Ms. Sarah tried to conceal the cash shortage? (1%)
4. How much is the adjusted cash balance on December 31, 2016? (1%)
(Petty Cash)
B. On January 5 2017, you have conducted a surprise cash count on the petty
cash fund of Excellence Co. The petty cash custodian was present on the
counting that started on 8:40am and was finished on 9:00am.
You have encountered the following:
Custodians accountability:
P15,000
Currency and Coins

4,090

Checks:
Date
Amount
12/13/14
2,560
12/18/14

Payee

Maker

Drawee Bank

Excellence Co. ABC Co.

BPI

Excellence Co. DEF Co.

PS Bank

Excellence Co. GHI Co.

BDO

JKL Co.

PS Bank

3,420
12/21/14
2,000
12/31/14

Excellence Co.

1,100
Unreplenished vouchers:
Unused postage stamps
100

2,390

You have noticed that there is an envelope containing P500 that pertains to a
cash gift contributed by employees to be given to the manager. The
custodian said that the amount in the envelope is P3,000.
1. How much is the shortage/overage? (1%)
2. What will be the entry required to adjust the overage/shortage? (1%)
3. Prepare a cash count sheet. (2%).