Composition of Cash and Cash Equivalent

In connection with your audit of Caloocan Corporation for the year ended December 31,
2010, you gathered the following:
Current account at Metrobank
Current account at BPI
Payroll account
Foreign bank account-restricted(in equivalent pesos)
Postage stamps
Employees post dated check
IOU from controllers sister
Credit memo from a vendor for a purchase return
Travelers check
Not-sufficient-fund check
Money order
Petty cash fund (P4,000 in currency and expense
Receipts for P6,000)
Treasury bills, due 3/30/11 (purchased 12/29/10)
Treasury bills, due 1/31/11 (purchased 2/1/10)

P 2,000,000
( 100,000)
500,000
1,000,000
1,000
4,000
10,000
20,000
50,000
15,000
30,000
10,000
200,000
300,000

Question:
Based on the above information and the result of your audit, compute for the cash
and cash equivalent that will be reported on the December 31, 2010 statement of
financial position.

Composition of Cash and Cash Equivalent

In the course of your audit of the Las Pinas Corporation, its controller is attempting to
determine the amount of cash to be reported on its December 31, 2010 statement of
financial position. The following information is provided:
1. Commercial savings account of P 1,200,000 and a commercial checking account
balance of P 1,800,000 are held at PS Bank.
2. Travel advances of P 360,000 for executive travel for the first quarter of the next
year (employee to reimburse through salary deduction).
3. A separate cash fund in the amount of P 3,000,000 is restricted for the retirement of
a long term debt.
4. Petty cash fund of P 10,000.
5. An I.O.U. from a company officer in the amount of P 40,000.
6. A basic overdraft of P 250,000 has occurred at one of the banks the company has
no deposits at this bank.
7. The company has two certificates of deposit, each totalling P 1,000,000. These
certificates of deposit have maturity of 120 days.
8. Las Pinas has received a check dated January 2, 2011 in the amount of P 150,000.
9. Las Pinas has agreed to maintain a cash balance of P 200,000 at all times at PS
Bank to ensure future credit availability.
10. Currency and coin on hand amounted to P 15,000.
Question:
Based on the above information and the result of your audit, how much will be
reported as cash and cash equivalents at December 31, 2010?

Computation of adjusted cash balance

The cash account of the Makati Corporation as of December 31, 2010 consists of the
following:

On deposit in current account with Real Bank

Cash collection not yet deposited to the bank
A customers check returned by the bank for
Insufficient fund
A check drawn by the Vice-President of the Corporation
Dated January 15, 2011
A check drawn by a supplier dated December 28, 2010
For goods returned by the Corporation
A check dated May 31, 2010 drawn by the Corporation
against the Piggy Bank in payment of customs duties.
Since the importation did not materialize, the check
was returned by the customs broker. This check was
an outstanding check in the reconciliation of the
Piggy Bank account.
Petty Cash fund of which P 5,000 is in currency; P 3,600
in form of employees I.O.U.s; and P 1,400 is
supported by approved petty cash vouchers for
expenses all dated prior to closing of the books on
December 31, 2010
Total
Less: Overdraft with Piggy Bank secured by a Chattel
mortgage on the inventories
Balance per ledger

P 900,000
350,000
150,000
70,000
60,000

410,000

10,000
1, 950,000
300,000
P 1,650,000

Question:
At what amount will the account cash appear on the December 31, 2010 statement
of financial position?

Computation of adjusted cash and cash equivalents

You noted the following composition of Malabon Companys cash account of
December 31, 2010 in connection with your audit:
Demand deposit account
Time deposit -30 days
NSF check of customer
Money market placement (due June 30, 2011)

P 2,000,000
1,000,000
40,000
1,500,000

Savings deposit in a closed bank

IOU from employee
Pension fund
Customers check dated January 1, 2011
Customers check outstanding for 18 months
Total

100,000
20,000
3,000,000
50,000
40,000
P 7,760,000

Additional information follows:

a) Check of P 200,000 in payment of accounts payable was recorded on December
31, 2010 but mailed to suppliers on January 5, 2011.
b) Check of P 100,000 dated January 15, 2011 in payment of accounts payable was
recorded and mailed on December 31, 2010.
c) The company uses the calendar year. The cash receipt journal was held open until
January 15, 2011, during which time P 400,000 was collected and recorded on
December 31, 2010.
Question:
The cash and cash equivalent to be shown on the December 31, 2010 statement of
financial position is

Computation of adjusted cash balance

The Cash account in the ledger of Pateros Company had a balance of P 844,800 at
December 31, 2010. An examination of the account, however, disclosed the following:

The sales book was left open up to January 5, 2011, and cash sales totalling P
120,000 were considered as sales in December.
Checks of P 74,400 in payment of liabilities were prepared before December 31,
2010, recorded in the books, but not mailed or delivered to payees.
Post-dated checks totalling P 62,400 are being held by the Cashier as part of Cash.
The companys experience shows that post-dated checks are eventually realized.

Customers check for P 12,000 deposited with but returned by Bank, NSF on
December 27, 2010.
The Cash account includes P 320,000 earmarked for the purchase of personal
computers which will soon be delivered.

Question:
The cash balance to be shown on the statement of financial position at December 31,
2010 should be

Computation of adjusted cash balance

You were able to gather the following from the December 31, 2010 trial balance of Mandaluyong
Corporation in connection with your audit of the company:
Cash on hand
P 500,000
Petty cash fund
10,000
BPI current account
1,000,000
Security Bank current account No. 01
1,080,000
Security Bank current account No. 02
(80,000)
PNB savings account
1,200,000
PNB time deposit
500,000
Cash on hand includes the following items:
a. Customers check for P 40,000 returned by bank on December 26, 2010 due to insufficient
fund but subsequently redeposited and cleared by the bank on January 8, 2011.
b. Customers check for P 20,000 dated January 2, 2011, received on December 29, 2010.
c. Postal money orders received from customers P 30,000

The petty cash fund consisted of the following items as of December 31, 2010.
Currency and coins
P 2,000
Employees vales
1,600
Currency in an envelope marked collections for
Charity with names attached
1,200
Unreplenished petty cash vouchers
1,300
Check drawn by Mandaluyong Corporation, payable to
the petty cashier
4,000
Included among the checks drawn by Mandaluyong Corporation against the BPI current account and
recorded in December 2010 are the following:
a. Check written and dated December 29, 2010 and delivered to payee on January 2, 2011,
P 80,000.
b. Check written on December 27, 2010, dated January 2, 2011, delivered to payee on
December 29, 2010, P 40,000.
The credit balance in the Security Bank account No. 2 represents checks drawn in excess of the
deposit balance. These checks were still outstanding at December 31, 2010.
The savings account deposit in PNB has been set aside by the board of directors for acquisition of
new equipment. This accounts is expected to be disbursed in the next 3 months after the end of the
reporting period.
Questions:
Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on Hand
2. Petty cash fund
3. BPI current account
4. Cash and cash equivalents

Bank reconciliation: Computation of adjusted cash in bank balance

The books of Manilas Service, Inc. disclosed a cash balance of P 687,570 on December
31, 2010. The bank statement as of December 31 showed a balance of P 547,800.
Additional information that might be useful in reconciling the two balances follows:
a) Check number 748 for P 30,000 was originally recorded on the books as P 45,000.
b) A customers note dated September 25 was discounted on October 12. The note
was dishonoured on December 29 (maturity date). The bank charged Manilas
account for P 142,650, including a protest fee of P 2,650.
c) The deposit of December 24 was recorded on the books as P 28,950, but it was
actually a deposit of P 27,000.
d) Outstanding checks totalled P 98,850 as of December 31.
e) There were bank service charges for December of P 2,100 not yet recorded on the
books.

f) Manilas account had been charges on December 26 for a customers NSF check
for P 12, 960.
g) Manila properly deposited P 6,000 on December 3 that was not recorded by the
bank.
h) Receipts of December 31 for P 134,250 were recorded by the bank on January 2.
i)

A bank memo stated that a customers note for P 45,000 and interest of P 1,650 had
been collected on December 27, and the bank charged a P360 collection fee.

Question:
Based on the above and the results of your audit, determine the following:
1. Adjusted cash in bank balance
2. Net adjustment to cash as of December 31, 2010

Bank reconciliation: Computation of adjusted cash in bank balance

Navotas Companys newly hired assistant prepared the following bank reconciliation on
December 31, 2010:
Book balance
Add: December 31 deposit in transit P 1,500,000
Collection of note
5,000,000
Interest in note
300,000
Total
Less: Novaliches Companys deposit
to our account
2,200,000
Bank service charge
90,000
Adjusted book balance
Bank balance
Add: Error on check No. 193
Total

P 2,810,000

6,800,000

2,290,000
P 7,320,000
P 11,260,000
9,000
11,269,000

Less: Preauthorized payments for

Water bills
NSF check
Outstanding check
Adjusted bank balance

P 248,000
440,000
3,219,000

3,907,000
P 7,362,000

Check No. 193 was made for the proper amount of P 489,000 in payment of account.
However it was entered in the cash payments journal as P 498,000. Navotas authorized the
bank to automatically pay its water bill as submitted directly to the bank.
Question:
Base on the above and the result of your audit, the correct cash in bank balance as of
December 31, 2010 is

Bank reconciliation: Computation of adjusted cash in bank balance

Shown below is the bank reconciliation for Marikina Company for November 2010:
Balance per bank, Nov. 30, 2010
Add: Deposits in transit
Total
Less: Outstanding checks
Bank credit recorded in error
Cash balance per books, Nov. 30, 2010

P 150,000
24,000
174,000
P 28,000
10,000

38,000
P 136,000

The Bank statement for December 2010 contains the following data:
Total deposits
Total charges, including an NSF check of P 8,000
and a service charge of P400

P 110,000
96,000

All outstanding checks on November 30, 2010, including the bank credit, were cleared in
the bank in December 2010.
There were outstanding checks of P 30,000 and deposits in transit of P 38,000 on
December 31, 2010.
Question:
Base on the above and the result of your audit, answer the following:
1.
2.
3.
4.
5.

How much is the cash balance per bank on December 31, 2010?
How much is the December receipts per books?
How much is the December disbursements per books?
How much is the cash balance per books on December 31, 2010?
The adjusted cash in bank balances as of December 31, 2010 is

Proof of cash: Computation of adjusted balances

The accountant for the Muntinlupa Company assembled the following data:

Cash account balance

Bank statement balance
Deposits in transit
Outstanding checks
Customers 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 companys
notes receivable

June 30
P 15,822
107,082
8,201
27,718

July 31
P 39,745
137,817
12,880
30,112

8,250
71,815

The bank statement and the companys cash records show these totals:

80,900

Disbursements in July per bank statement

Cash receipts in July per Muntinlupas books

P 218,373
236,452

Questions:
Base on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1.
2.
3.
4.
5.

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

How much is the adjusted bank receipts for July?
How much is the adjusted book disbursements for July?
How much is the adjusted cash balance as of July 31?
How much is the cash shortage as of July 31?

Proof of cash: Computation of unadjusted and adjusted balances

In the audit of Pasig Companys cash account, you obtained the following information:
The companys bookkeeper prepared the following bank reconciliation as of November 30, 2010:
Bank balance-November 30, 2010
Undeposited collections
Bank service charges
Bank collection of customers note
Outstanding checks:

P 90,800
5,000
100
(8,000)
Number Amount
1159
P 3,000
1767
5,000
1915
2,000

Book balance- November 30, 2010

(10,000)
P 77,900

Additional data are given as follows:

a.

b.

Company recordings for December:

Total collections from customers
Total checks drawn
Bank statement totals for December:

P 165,000
98,000

Charges
Credits

P 123,800
169,000

c.

Check no. 1159 dated November 25, 2010, was entered as P 3,000 in payment of a voucher
for P 30,000. Upon examination of the checks returned by the bank, the actual amount of
the check was P 30,000.
d. Check no.2113 dated December 20, 2010 was issued to replace a mutilated check (no.
1767), which was returned by the payee. Both checks were recorded in the amount drawn,
P 5,000, but no entry was made to cancel check no. 1767.
e. The December bank statement included a check drawn by Sipag Company for P 1,500.
f. Undeposited collections on December 31, 2010 P 8,000.
g. The service charge for December was P 150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P 7,000 on December 28, 2010, but the collection
was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2010, were:
Check No.
Amount Check No.
Amount
1767
P 5,000
2910
P 2,300
2856
1,300
2925
4,100
Question:
Base on the above and the result of your audit, determine the following:
1. Unadjusted cash balance per books as of December 31, 2010
2. Adjusted cash balance as of November 30, 2010
3. Adjusted book receipts for December 2010
4. Adjusted bank disbursement for December 2010
5. Adjusted cash balance as of December 31, 2010
Proof of cash: Computation of unadjusted and adjusted balances
Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements
for the month of August, 2010.
The bank reconciliation prepared by San Juan Company at July 31 is reproduced below: (All book
adjustments were recorded in August).
Bank balance

P 52,000

Add: Deposit in transit, July 31

Total
Less outstanding checks
No. 436
No. 450
No. 451
No. 454
Adjusted balance

900

52,900
P 200
1,800
1,400
600

4,000
P 48,900

Book balance
Add: Proceeds of note receivable
collected by bank in July
Deposit made in bank on
July 31 not recorded in
books until August
Total
Less bank service charge

P 40,000
8,000
1,000
49,000
100

P 48,900

Upon inquiry about the clients August 31 bank reconciliation, you were informed that it has been
lost and that client is too busy at this time to prepare another. Your senior told you to get the august
bank statement and paid checks ant to prepare the August 31 reconciliation so that you may compete
the August proof of cash.

The August bank statement is reproduced below:

Knights Bank
Account Name: San Juan Company
Date
July 31

Debits

Credits
August 1

1,800

900
August 6
August 9
August 12
August 15
August 20
August 27
August 29
August 31
August 31

1,400
600
140
1,000
700
1,440
100
440
300
1,820

DM

10,000
140
14,000

EC
SV
DM

100 EC

SV Service Charge; DM - Debit Memo;

EC Error Corrected; CM Credit Memo
The paid checks accompanying this bank statement ( all clearing in August) were ( checks listed in
order of payment by bank).
No. 450
P 1,800
No. 455
P 1,000
No.458
P 1,440
451
1,400
456
700
459
1,820
The check register revealed that the last check issued in August was no. 460 for P 1,000 and that
check no.457 for P 2,400.
Cash received for the period August 21 through 31 of P 9,400 was deposited in the bank on
September 1.
The debit memo on August 12 and August 31 were customer NSF checks returned by the bank. The
check on August 12 was immediately redeposited without entry. The check returned on August 31
was redeposited by the client in the bank on September 1 without entry.

Questions:
Base on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1.
2.
3.
4.
5.

How much is the unadjusted book receipts in August?

How much is the unadjusted book disbursements in August?
How much is the adjusted book receipts in August?
How much is the adjusted book disbursements in August?
How much is the adjusted cash balance as of August 31, 2010?

.
Computation of cash shortage
You were engaged to audit the accounts of Taguig Corporation for the year ended December 31,
2010. In your examination, you determined that the Cash account represents both cash on hand and
cash in bank. You further noted that the companys internal control over cash is very poor.
You started the audit on January 15, 2011.Based on your cash count on this date, cash on hand
amounted to P 19,200. Examination of the cash book and other evidence of transactions disclosed
the following:
a.
b.
c.
d.
e.

f.
g.
h.

January collections per duplicate receipts, P 75,200.

Total duplicate deposit slips, all dated January, P 44,000. This amount includes a deposit
representing collections on December 31.
Cash book balance at December 31, 2010 amounted to P 186,000. Representing bth cash on
hand and cash in bank.
Bank statement for December showed a balance of P 170,000.
Outstanding checks at December 31:
November checks
December checks
No. 280
P 1,800
No. 331
P 2,400
290
6,600
339
1,600
345
20,000
353
3,600
364
10,000
Undeposited collections at December 31, 2010 amounted to P 20,000
An amount of P 4,400 representing proceeds of a clean draft on a customer was credited by
bank, but is not yet taken up in the companys books.
Bank service charges for December, P 400.

The company cashier presented to you the following reconciliation statement for December, 2010,
which he has prepared:
Balance per books, December 31, 2010
Add: Outstanding checks
No. 331
P 2,400
339
1,600
345
2,000
353
3,600
364
1,000
Total
Bank service charge
Undeposited collections
Balance per bank, December 31, 2010

P 180,600

10,600
191,200
(400)
(20,400)
P 170,400

Questions:
Base on the above and the result of your audit, answer the following:
1.
2.
3.
4.

How much is the adjusted cash balance as of December 31, 2010?

How much is the cash shortage as of December 31, 2010?
How much is the cash shortage for the period January 1 to 15, 2011?
Which of the following is not a method used by the cashier to cover up the
shortage as of December 31, 2010?

Computation of cash flows and shortage

The Valenzuela Corporation was organized on January 15, 2010 and started operation soon
thereafter. The Company cashier who acted also as the bookkeeper had kept the accounting
records very haphazardly. The manager suspects him of defalcation and engaged you to
audit his account to find out the extent of the fraud, if there is any.
On November 15, when you started the examination of the accounts, you find the cash on
hand to be P 25,700. From inquiry at the bank, it was ascertained that the balance of the
Companys bank deposit in current account on the same date was P 131,640. Verification
revealed that the check issued for P 9,260 is not yet paid by the bank. The corporation sells
at 40% above cost.
Your examination of the available records disclosed the following information:
Share capital issued at par for cash
Real state purchased and paid in full
Mortgage liability secured by real state
Furniture and fixtures (gross) bought on which
there is still balance unpaid of P 30,000
Outstanding notes due to bank
Total amount owed to creditors on open account
Total sales

P 1,600,000
1,000,000
400,000
145,000
160,000
231,420
1,615,040

Total amount till due from customers

Inventory of merchandise on November 15 at cost
Expenses paid excluding purchases

426,900
469,600
303,780

Questions:
Base on the above and the result of your audit, compute for the following as of
November 15, 2010:
1. Collection from sales
2. Payments for purchases
3. Total cash disbursements
4. Unadjusted cash balance
5. Cash shortage

Computation of cash in bank

Cash in bank balance of Novaliches Co. on January 1, 2010 was P 1,400,000 representing 35% paidup capital of its authorized share capital of P 4,000,000. During the year you ascertained the
following postings to come accounts, as follows:

Petty cash fund

Accounts receivable trade
Subscription receivable
Delivery equipment
Accounts payable trade
Bank loan
Accrued expenses
Subscribed share capital
Unissued share capital
Authorized share capital
Sales
Purchases
Expenses (including depreciation of
P 100,000 and accrued expenses of
P 30,000)

Debit
P 40,000
9,000,000
1,200,000
1,000,000
5,600,000
700,000

Credit
P 5,800,000
1,000,000
8,600,000
1,600,000
30,000
1,200,000

2,600,000
4,000,000
9,000,000
8,600,000
1,800,000

Question:
The cash in bank balance at December 31, 2010 is

Cash flow computations

In connection with your audit, Quezon Metals Company presented to you the following information :
Quezon Metals Company
Comparative Statements of Financial Position
December 31, 2010 and 2009

ASSETS
Current Assets:
Cash
Available for sale securities
Accounts receivable
Inventory
Prepaid expenses
Total Current Assets
Property, plant, and equipment
Accumulated depreciation
Total Assets
Liabilities and Equity
Current Liabilities:
Accounts payable
Accrued expense
Dividends Payable
Total Current Liabilities
Notes payable-due 2012
Total Liabilities
Equity:
Share capital
Retained earnings
Total Equity

2010
P 476,000
236,000
1,248,000
1,112,000
140,000
3,212,000
2,144,000
(304,000)
1,840,000
P 5,052,000
2010

2009
P 392,000
1,016,000
956,000
84,000
2,448,000
1,636,000
(212,000)
1,424,000
P 3, 872,000
2009

P 848,000
392,000
160,000
1,400,000
500,000
1,900,000

P 792,000
304,000
1,096,000
1,096,000

2,400,000
752,000
3,152,000

2,200,000
576,000
2,776,000

Total Liabilities and Equity

P 5,052,000

P 3,872,000

Quezon Metals Company

Condensed Comparative of Income Statements
For the Years December 31, 2010 and 2009

Net Sales
Cost of Goods Sold
Gross Profit
Expense
Net Income

2010
P 14,244,000
11,156,000
3,088,000
2,084,000
P 1,004,000

2009
P 13,016,000
10,272,000
2,744,000
1,944,000
P 800,000

Additional information for Quezon:

a)
b)
c)

All accounts receivable and accounts payable relate to trade merchandise.

The proceeds from the notes payable were used to finance plant expansion.
Share capital was sold to provide additional working capital.

Questions:
1. Cash collected from accounts receivable, assuming all sales are on account
2. Cash payments made on accounts payable to suppliers, assuming that all purchases of
inventory are on account.
3. Cash payments for dividends.
4. Cash receipts that were not provided by operations.
5. Cash payments for assets that were not reflected in operations.
Proof of cash; Accounts receivable hypothecation; Computation of adjusted balances
You were able to obtain the following information in connection with your audit of the Cash account of the
Pasay Company as of December 31, 2010:
November 30
P 480,000
504,000
244,000
150,000

December 31
P 420,000
539,000
300,000
120,000

a.
b.
c.
d.

Balances per bank

Balances per book
Undeposited collections
Outstanding checks

e.

The bank statement for the month of December showed total credits of P 240,000 while the
debits per books totalled P 735,000.
NSF checks are recorded as a reduction of cash receipts. NSF checks written are later
redeposited are then recorded as regular receipts. Data regarding NSF checks are as
follows:
1. Returned by the bank in Nov. and recorded by the company in Dec., P 10,000.
2. Returned by the bank in Dec. and recorded by the company in Dec., P 25,000.
3. Returned by the bank in Dec. and recorded by the company in Jan., P 29,000.
Check of Pasaway Company amounting to P 90,000 was charged to the companys account
by the bank in error on December 31.
A bank memo stated that the companys account was credited for the net proceeds of
Anitos note for P 106,000.
The company has hypothecated its account and increases the amount of the loan for 80% of
the hypothecated accounts receivable. The company performs accounting and collection of
the accounts. Adjustments of the loan are made from daily sales reports and deposits.
The bank credits the company account and increases the amount of the loan for 80% of the
reported sales. The loan agreement states specifically that the sales report must be accepted
by the bank before the company is credited. Sales reports are forwarded by the company to
the bank on the first day following the date of sale. The bank allocates each deposit 80% to
the payment of the loan, and 20% to the company account. Thus, only 80% off each days

f.

g.
h.
i.
j.

sales and 20% of each collection deposits are entered on the bank statement. The company
accountant records the hypothecation of new accounts receivable (80% of sales) as a debit
to Cash and a credit to the bank loan as of the date of sales. One hundred percent of the
collection on accounts receivable is recorded as a cash receipt; 80% of the collection is
recorded in the cash disbursements book as a payment on the loan. In connection with the
hypothecation, the following facts were determined:
Included in the undeposited collections is cash from the hypothecation of accounts
receivable. Sales were P 180,000 on November 30, and P 200,000 at December
31. The balance was made up from collections which were entered on the books in
the manner indicated above.
Collections on accounts receivable deposited in December, other than deposits in
transit, totalled P 725,000.
k. Interest on the bank loan for the month of December charged by the bank but not recorded
in the books, amounted to P 38,000.
Questions:
1. How much is the adjusted cash balance as of November 30, 2010?
2. How much is the adjusted book receipts for December, 2010?
3. How much is the adjusted book disbursements for December 2010?
4. How much is the adjusted cash balance as of December 31, 2010?
5. How much is the cash shortage as of December 31, 2010?

Proof of cash; Accounts receivable hypothecation; Computation of adjusted balances

You obtained the following information on the current account of Paranaque Company
during your examination of its financial statements for the year ended December 31, 2010.
The bank statement on November 30, 2010 showed a balance of P 306,000. Among the
bank credits in November was customers note for P 100,000 collected for the account of
the company which the company recognized in December among its receipts. Included in
the bank debits were cost of check books amounting to P 1,200 and a P 40,000 check
which was charged by the bank in error against Paranaque Co. account. Also in November
you ascertained that there were deposits in transit amounting to P 80,000 and outstanding
checks totalling P 170,000.
The bank statement for the month of December showed total credits of P 416,000 and total
charges of P 204,000. The companys books for December showed total debits of P
735,600, total credits of P 407,200 and a balance of P 485,000. Bank debit memos for
December were No. 121 for service charges, P 1,600 and No. 122 on a customers returned
check marked Refer to Drawer for P 24,000.
On December 31, 2010 the company placed with the bank a customers promissory note
with a face value of P 120,000 for collection. The company treated this note as part of its
receipts although the bank was able to collect on the note only in January, 2011.
A check for P 3,000 was recorded in the company cash payments books in December as P
39,600.

Questions:
Base on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1.
2.
3.
4.
5.
6.

How much is the undeposited collections as of December 31, 2010?

How much is the outstanding checks as of December 31, 2010?
How much is the adjusted cash balance as of November 30, 2010?
How much is the adjusted bank receipts for December?
How much is the adjusted book disbursements for December?
How much is the adjusted cash balance as of December 31, 2010?

Proof of cash; Identification of reconciling items and computation of adjusted

balances
Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements
for the month of December, 2010.
The bank reconciliation prepared by Cubao Company at November 30 is reproduced below:
Unadjusted bank balance
P 96,800
Unadjusted book balance
P 58,640
Add: deposit in transit
18,000
Add: CM-Note collected
40,320
Less: outstanding checks
Less: DM bank charges
160
No. 276
P 2,400
282
7,200
284
4,800
285
1,600
16,000
Adjusted balance
P 98,800
Adjusted balance
P 98,800
The December bank statement, which has a beginning balance of P 96,800 is reproduced below:
May Bank
Account Name: Cubao Company
Date
Debits
Credits
December 01
P 18,000
December 02
P 7,200
40,000
December 04
24,000
December 06
48,000
December 08
400,000 CM83
December 10
40,000 DM97
December 11
56,000
December 16
20,000
December 18
64,000
December 21
72,400

December 28
36,000
80,000
December 31
4,000 DM98
64,000 CM84
Totals
P 131,200
P 842,400
DM97- Customers DAIF check
CM83 Note collected by the bank
DM98- Service Charges
CM84 Account collected by the bank
The companys cash receipts and cash disbursements journals for the month of December 2010 are
provided below:
Cash receipts Journal
OR No.
Amount
415
P 40,000
416
48,000
417
56,000
418
64,000
419
72,000
420
80,000
421
88,800

Date
Dec. 01
05
10
17
20
27
31
Total

P 440,800

Cash Disbursements Journal

Check No.
Amount
286
P 16,000
287
24,000
288
32,000
289
20,000
290
28,000
291
36,000
292
40,000
293
44,000
31
294
48,000
Total
P 304,000
Date
Dec. 01
03
10
14
20
23
26

The companys Cash in Bank ledger appears below:

Balance
12/01/10
12/10/10
12/31/10

GJ
GJ (CM83)
CRJ

Cash in Bank
P 58,640
12/31/10 CDJ
40,320
400,000
440,800

P 304,000

Questions:
Base on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1.
2.
3.
4.
5.

How much is the outstanding checks as of December 31, 2010?

How much is the adjusted book receipts for December, 2010?
How much is the adjusted book disbursements for December, 2010?
How much is the adjusted cash balance as of December 31, 2010?
How much is the cash shortage as of December 31, 2010?