AUDIT OF CASH – EXERCISES

EXERCISE 1
Presented below are series of unrelated situations. You are to compute the amount of cash
shortage for each of these situations.

1. You were assigned to audit the cash on hand of JEM Company to determine the amount of
cash shortage. From the general ledger, you determined that the balance of cash on hand P90,000
as of April 30. A physical count of cash held by the cashier as of the same date revealed the
following:
Bills P 75,000
Coins 10,000
Total P 85,000

2. You were assigned to audit the cash in bank account of BREN Company on April 30. From
the general ledger, you determined that the balance of cash on in bank as of April 30 was
P90,000. The April bank statement showed an ending balance of P110,000. Further examination
revealed that there were checks issued in April that were presented to the bank for payment only
in May.

Check Number Amount

14297 P 20,000
15703 10,000

3. You are examining the financial statements of ZION Company which started operations on
January 2. ZION does not have a full-time bookkeeper and no formal records are maintained. To
verify the balance of cash as of April 30, you obtained copies of bank statement, sales invoices,
official receipts and expense vouchers.

The bank statement balance as of April 30 was P50,000. Further verification revealed that there
were checks totaling P30,000 which were issued in April but were presented for payments only
in May.

Details of the Company’s receipts and disbursements up to April 30 are as follows:

ZION's initial investment P 100,000

Proceeds of bank loan 200,000
Total cash collected from customers 150,000
Cash paid for acquisition of equipment 50,000
Cash paid for salaries 120,000
Payment for rent 80,000
Cash taken by ZION for personal use 20,000
Cash paid for other operating expenses 103,000
Total amount paid to the bank related to bank
loan (principal and interest) 52,000
4. The accountant of ABC Company provided the following data in reconciling the April 30 cash
in bank balance.

Balance per bank statement P 130,350

Balance per books 87,100
Bank service charges for the month of April 2,000
Deposits in transit 49,000
Outstanding checks 17,650
Note collected by bank not recorded in the books
136,000
Check drawn by SBC Co. erroneously
charged by bank to ABC's account. 54,600
An error was made in recording a collection in the cash receipts journal in April

Correct amount P 13,658

Recorded as 16,358

5. The following information is included in HSBC Company bank statement for the month of
April
A customer's check has been marked "NSF"
by the bank and returned P 13,000
Bank service charge for April 1,200

In comparing the bank statement to the company’s cash records, you found:

Outstanding checks on April 30 P 184,000

Deposits made but are not yet shown
in the April bank statement 14,000

You also found a customer’s check for P17,400 that had not yet been deposited and had not been
recorded in ABC’s books. Your clients books show a cash balance P40,000.

EXERCISE 2
IBM Corporation was organized on January 2, 2018. You were engaged to perform a detailed
examination of the transactions to determine whether irregularities exist.

You started the examination on June 30 and a surprise count conducted on this date revealed a
cash on hand of P1,285. A bank of statement as of the same date disclosed a balance of P6,582.
However, further verification revealed that a check issued for P463 has not yet cleared the bank.

Based on the available records and documents you were able to obtain the following information:
1. IBM issued P50,000 par value stocks for P80,000 cash.
2. P50,000 of the total proceeds from issuance of stocks was used to acquire a real
property.
 3. The real property was mortgaged to secure bank loan of P28,000.
4. Other furniture and equipment were acquired for a total cost of P7,250. Of the total
price, P1,500 remains unpaid.
5. Outstanding purchase invoices for merchandise purchases amounted to P11,571.
Inventory balance as of June 30 amounted to P23,480.
6. Total sales for the period amounted to P80,752. IBM sells at 40% above cost.
7. Total amount still due from customers amounted to P21,345.
8. Various operating expenses paid totaled P15,189.

Required: Based on the above data, answer the following:

1. Cash paid to suppliers for merchandise purchase
a. P57,680 b. P81,160 c. P69,589 d. P92,731
2. Cash received from customers
a. P80,752 b. P59,407 c. P102,097 d. P60,692
3. Total cash accountability
a. P26,879 b. P25,594 c. P34,283 d. P7,867
4. Cash balance to be reported on June 30 financial statements.
a. P7,867 b. P7,404 c. P6,119 d. P26,879
5. Cash shortage
1. P19,475 b. P7,867 c. P18,190 d. P25,594

EXERCISE 3
You are engaged to audit the books of ZION ENTERPRISES. From the records of the company,
you gathered the following information:

ZION ENTERPRISES started operation on October 2, 2018 with ZION investing P150,000 cash.
The bank statement in December, 2018 showed an ending balance of P130,500.

Examination of the paid checks disclosed that checks totaling P4,500 were issued by the
company in December, 2018, and were presented for payment only in January, 2019. Cash count
as of December 31, amounted to P8,500. You were told by the cashier that P5,000 of these, in
checks, were cash sales on December 29,2018, deposited on January 3, 2019. The balance, in
currency and coins, represents petty cash fund.

Additional data:
1. Accounts receivable subsidiary ledgers had a total balance of P70,000 at December
31, 2018.
2. Supplier’s unpaid invoices for merchandise totaled P60,000.
3. The bank statement in October showed a bank credit for P98,000, dated October 2,
2018. Inquiry from the cashier disclosed that the amount represents proceeds of a 90-
day, discounted bank note. P80,000 of this loan was paid by check in December,
2018.
4. Merchandise inventory at December 31, 2018 amounted to P30,000.
5. Operating expenses paid during the period totaled P180,000; while merchandise
purchases amounted to P250,000.
6. The gross profit rate is 120% of cost.
1. What is the adjusted balance per bank as of December 31, 2018?
a. P135,500 b. P130,000 c. P131,000 d. P134,000
2. Total payment for merchandise purchased in 2018 is:
a. P180,000 b. P190,000 c. P250,000 d. P310,000
3. How much is the cost of goods sold in 2018?
a. P190,000 b. P250,000 c. P220,000 d. P280,000
4. Total sales in 2018 should be:
a. P220,000 b. P264,000 c. P484,000 d. P372,000
5. The amount of cash shortage as of December 31, 2018 is:
a. P81,000 b. P77,500 c. P59,000 d. P0

EXERCISE 4
The bank statement for the account of JVC COMPANY at December 31, 2018 showed a credit
balance of P20,000, while the company’s ledger balance of the cash account as of November 30,
2018 was a debit of P40,000. During December, 2018, the ledger showed two postings: a debit of
P60,000 and a credit of P39,000 from the Cash Receipts and Check Disbursements Journal,
respectively.

Your examination revealed that the cash column of the receipts book was underfoot by P6,400.
The receipts book recorded only the collections from customers and did not include a bank credit
in December for P8,000, representing loan proceeds of a P10,000 promissory note.

The December Check Disbursement Journal which was overfooted by P500, records only the
checks issued by the company. In the month of December, 2018, the bank charged JVC
COMPANY for P5,000 representing a loan guaranteed by the client but was dishonored by the
maker, the company’s vice president. The outstanding checks as of December 31, 2018
amounted to P5,600.

In the morning of January 2, 2019, a cash count conducted disclosed a cash on hand in the form
of bills and coins totaling P38,700.

Required:
How much is the cash shortage as of December 31,2018?
EXERCISE 5
The following information was obtained during the audit of LANDERS COMPANY’s financial
statements:

Outstanding Checks:
30-Nov 8,007
31-Dec ?
Deposits in transit:
30-Nov ?
31-Dec 13,356
Customer's Notes Collected by Bank:
30-Nov 1,500
31-Dec 4,277
NSF Checks:
30-Nov 526
31-Dec 700
Bank Services Charges:
30-Nov ?
31-Dec 65
Erroneous Bank Debits:
30-Nov 600
31-Dec 900
Erroneous Bank Credits:
30-Nov 1,000
31-Dec 3,000
Balances:
Book of December 31, 2018 166,236
Book of November 30, 2018 130,640
December Transactions
Receipts:
Book 151,230
Bank 149,451
Disbursement:
Book 111,513
Bank 110,098

Required:
1. Outstanding checks as of December 31:
2. Deposits in transit as of November 30:
3. Adjusted cash balance as of November 30:
4. Adjusted cash balance as of December 31: