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Your client, a successful small business has never given much attention to a
sound internal control. In its employ is Alex Coopit, the companys cashierbookkeeper. Alex handles cash receipts, makes small disbursements from the
cash receipts, maintains accounting records, and prepares the monthly bank
reconciliation.
The bank statement for the month ended March 31,2014, shows a cash balance
of P590,000. The following checks are outstanding on March 31:
No. 7163
P 8,623
No. 7284
7,320
No. 7285
10,612
No. 8722
6,322
No. 8724
12,280
No. 8733
6,200
The companys general ledger shows a cash balance of P696,499 on March
31,2014.
Realizing that being the cashier-accountant of the company he can easily
misappropriate collections and conceal it, Alex removed all the cash on hand in
excess of P127,301, and then prepared the following reconciliation in an effort to
conceal this theft.
BANK RECONCILIATION
Balance per accounting records
Add: Outstanding checks
No. 8722
P 6,322
No. 8724
12,280
No. 8733
6,200
Total
Deduct: Cash on hand
Balance per bank statement, March 31
P 696,499
20,802
717,301
127,301
P 590,000
You started the audit on November 15. On that date, the cash on
hand per your surprise count was P 5, 140. Also on that date,
the bank confirmed that the balance of the companys current
account was P 26, 328. Your examination of the records reveals
that a check for P 1,852 was outstanding on November 15. The
companys mark-up is 40% of sales.
Further examination of the companys records reveals the
following balances at November 15, 2014:
Ordinary share capital
300,000
Share premium
20,000
Real property purchased for cash
200,000
Mortgage payable
Furniture & fixtures (of the acquisition cost,
P6,000 remains unpaid as of Nov. 15)
29,000
Notes payable-bank
32,000
Accounts payable-trade
46,284
Expenses paid (excluding purchase)
60,756
Merchandise inventory at cost
93,920
Accounts receivable-trade
Total sales
80,000
85,380
340,000
P 48,840
440
Maker
Cashier
P 4,000
10-19
10-28
10-31
Office Supplies
Total per count
Jem Company
Jem Company
CCP Co.
paid out of receipts
DWU,Inc.
PSU Co.
Jem Company
9,400
7,840
3,600
6,400
80,520
Receipts
P 102,000
70,000
120,000
172,000
260,000
280,000
P 964,000
Disbursements
P 60,000
110,000
68,000
92,000
122,000
180,000
P 668,000
Additional information:
1. Bank balance, July 1, 2014
2. Bank balance, December 31, 2014
3. Outstanding checks, December 31, 2014
(No checks were outstanding on July 1)
4. Undeposited receipts, December 31, 2014
(included in the December receipts)
5. Bank deposits, July 1 through December 31
1. What is the total shortage?
P 200,000
524,000
42,000
24,000
914,000
Amount
P 5,200
3,600
4,080
3,460
P 135,000
P 3,600
4,080
3,460
10,140
P 124,860
P46,140
2,500
48,640
P 173,500
P 247, 200
264, 095
25,325
750
3,500
From January 2, 2105, to January 15, 2015, the date of your cash count, total
cash receipts appearing in the cash records amounted to P 53,500. During the
same period, the bank had credited total deposits of P47, 965. The following
cash and cash items were on hand at the close of business on January 15, 2015:
Currency
Customers checks
Expense vouchers
P 1,425
1,950
375
P 3,750
AMOUNT
P 4,000
12/10/14
P 3,000
12/15/14
P 3,500
ENTRY MADE
Allowance for bad debts
4,000
Accounts receivable
Inventory
3,000
Accounts receivable
Not recorded
4,000
3,000
Accounts
Receivables
Cash
Sales
P 800
P 3,200
6,000
4,800
Sales
Discount
Net
Cash
P 800
3,136
5,880
4,664
2,400
10,504
4,000
11,680
P 64
120
96
2,400
10,800
4,000
12,000
3,600
800
P 45,200
216
240
3,600
P 3,200
P 936
800
P 47,464
The following are the companys accounts receivable subsidiary ledgers. All the
debits represent sales. The credit terms are 2%-10 days, net 30 days.
BA
June 3 3,200 June 10 3,200
4 4,800
30 800
BO
June 2 6,000 June 15 6,000
9 4,000
26 4,000
15 3,600
30 3,600
BU
June 2 6,000 June 10 10,800
10 4,800
30 800
BE
June 15 4,800 June 20 4.800
16 12,000
26 12,000
P94,508
2,214
96,722
18,972
77,750
500
77,250
1. What is the correct amount of cash that should be on hand for deposit
on November 30, 2014?
2. How much was stolen by the cashier?
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.
4. Taking only the information given, which of the following internal
control deficiencies allowed the cashier to steal cash and conceal his
theft?
5. What is the adjusted cash balance as of November 30, 2013?
P 442,550
207,300
98,830
P 5,876,170
none
18,330
3,000
3,615,260
1,865,830
40,000
A check for P100,000 had been cashed by the bookkeeper shortly before his departure. Although the
signature on the check had been obviously forged, it was paid by the bank and returned with other
cancelled checks.
A statement of financial position prepared from the books and other files follows:
Tanying Company
Statement of Financial Position
December 31, 2013
ASSETS
Cash
P 32,670
Accounts receivable
226,230
Inventory (at cost)
440,350
Furniture
P 74,560
Less: Accumulated depreciation
31,800
42,760
Total assets
P 742,010
LIABILITIESAND SHAREHOLDERS EQUITY
Accounts payable
Share capital
Retained earnings
Total liabilities and shareholders equity
1.
2.
3.
4.
5.
P 114,720
500,000
127,290
P 742,010
Nov.30
P 20,340
107,060
8,200
27,700
Dec.31
P 48,540
137,820
12,880
30,100
720
600
4,300
8,240
72,240
80,900
Additional information:
1.
2.
3.
4.
P249,100
218,340
172,880
211,900
1.
2.
3.
4.
5.
6.
2.
3.
P 637,860
576,420
306,220
P 685,180
637,220
356,080
64,140
36,080
5.
15,260
6.
16,140
7.
1,500
2,060
4.
8.
9.
980
180
780
60
Nov.30, 2014
P 41,175.00
267,705.00
20,502.50
69,295.00
1,800.00
175,537.50
202,250.00
*Redeposited in the same month. No entries made to take up the return and
redeposit.
The bank statement and the companys cash records show the following totals:
Canceled checks and debit memos
per bank statement
545,932,50
Cash receipts per cash book
Checks written per cash book
Deposits and credit memos per bank statement
1.What is the total book receipts in December?
2.What is the total book disbursements in December?
3.What is the adjusted book balance on November 30?
4.The adjusted bank receipts in December should be?
5.The adjusted book disbursements in December should be
6.What is the adjusted book balance on December 31?
P
411,592.50
529,792.50
622,770.00
P 145,000
346,000
114,500
67,000
94,162
39, 458
11,143
P 35,000
60,000
27,600
?
15,200
9,000
26,700
9,500
11,000
39,400
Bank Reconciliation
The cash receipts and the cash payments of LIEZEL COMPANY for April 2014
follow:
Cash Receipts (CR)
Date
Cash Debit
April 2
P 208,700
8
20,350
10
27,950
16
109,350
22
92,700
29
53,000
30
16,850
Total
P 528,900
The cash account of Liezel Company shows the following information at April 30 ,2014:
Date
April 1
30
30
Item
Balance
Ref.
CR 6
CP 11
CASH
Debit
Credit
528,900
546,200
Balance
P 95,550
624,450
78,250
P 95,550
P 16,300 EFT
208,700
20,350
12
17
22
23
Checks and other Debits:
April
7
13
14
18
21
26
30
30
Ending Balance
Explanation:
EFT
US
BC
SC
27,950
109,350
68,400 BC
92,700
P 44,550
69,500
45,150 US
7,350
10,950 EFT
73,600
50,000
1,000 SC
543,750
(335,300)
P 304,000