Lecture Guide 1

Audit of Cash
LECTURE GUIDE 1 (Computation of Account Balances):
For each individual situation, determine the required amount.

Case 1:
Reported as Reported as
Items Amount “Cash” “Cash Equiv.”
Checking account balance P 950,000 P P
Certificate of deposit 1,400,000
Cash advance to subsidiary 980,000
Utility deposit paid to gas company 1,800
Total P P

Case 2:
Reported as
Reported as “Non-Current
Items Amount “Cash” Assets”
Checking account balance P 600,000 P P
A special checking account overdraft at the
same bank as normal checking account (10,000)
Cash held in bond sinking fund 200,000
Petty Cash Fund 3,000
Coins and currency on hand 1,350
Total P P

Case 3:
Reported as
Reported as “Accounts
Items Amount “Cash” Receivable”
Checking account balance P 600,000 P P
Post-dated check from customer 11,000
Cash restricted due to maintaining
compensating balance requirement 100,000
Certified check from customer 9,8000
Total P P

Case 4:
Reported as
Reported as “Accounts
Items Amount “Cash” Receivable”
Checking account balance at bank P 35,000 P P
NSF Check received from customer 8,000
Un-deposited receipts 50,000
Petty Cash Fund (with expense receipts of
P 2,000 of various dates) 5,000
Total P P

Case 5:
Reported as Reported as
“Cash and Cash “Non-current
Items Amount Equivalents” assets”
Checking account balance P 800,000 P P
Cash restricted for future plant expansion 500,000
Cash in bank – Sinking Fund 500,000
Short-term treasury bills – 60 days 180,000
Cash advance to company executive
payable on demand 7,000
Refundable deposit paid to Philippine
government to guarantee performance on
construction project 2,500,000
Balance in closed foreign bank (in Pesos) 89,000
Total P P

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Case 6:
Reported as
Items Amount “Cash and Cash Reported as
Equivalents” “Prepayments”
Balance in general checking account, PNB P 60,000 P P
An overdraft in checking account BPI (20)
IOU held from company president, received six
weeks ago because of a cash loan 40,000
Deposit in transit 6,000
Cash held by salespersons as advances on
expense accounts 800
Postage stamps on hand received from mail
order customers 200
Postage stamps on hand 500
Total P P

Case 7:
Reported as Reported as
Items Amount “Cash and Cash “Accounts
Equivalents” Receivable”
Reconciled balance in BDO checking account P 180,000 P P
Balance in BDO Savings Account 50,000
Un-deposited sales receipts 10,400
Petty Cash Fund, net of expense receipts of
P 3,000 supported by Petty Cash Vouchers 2,000
Postage Stamps 500
Employee IOUs 1,250
Traveler’s Checks 6,000
Postal Money Order 5,000
Undelivered Check to suppliers 10,000
Customer’s Post-dated Check 2,500
Customer’s NSF Check 3,000
Total P P

LECTURE GUIDE 2 (Computation of the correct amount to be reported as Cash)

During your audit of Baguio Corporation for the year 2018, the cash and cash equivalent account in its statement
of financial position showed a balance of P 1,100,000 with the following breakdown:

Currencies and coins P 100,000

BDO Savings Account - Funds for plant expansion 500,000
Petty cash fund, including un-replenished petty expenses of P 1,000 5,000
BPI Checking Account - Fund for payroll 50,000
Savings deposit 95,000
BPI Checking Account - Fund to pay long-term-obligations 150,000
BDO Checking account, net of undelivered check of P 10,000 190,000
Postal Money Order 10,000
Total P 1,100,000

During your audit, you found out that an amount of P 26,000 segregated to pay current obligation was not included
in the total amount of cash because the corresponding payment has been recorded in the books of account.

Required:
A. Determine the correct amount of Cash to be reported in the statement of financial position as of December
31, 2017.
B. Prepare necessary adjusting journal entries at December 31, 2018.

LECTURE GUIDE 3 (Computation of the correct amount to be reported as Cash)

You are auditing the cash account of Manila Corporation as of December 31, 2018. An analysis of this account
is presented below:

Cash on hand P 318,000

Undeposited collections 40,000
Checking account – Metrobank (50,000)
Savings deposit - Metrobank 500,000
Cash in bank - RCBC (20,000)
Sinking Fund deposited in RCBC 1,000,000
Cash in Bank – LBC Bank (Closed bank) 2,000

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 Cash in Bank - BPI 700,000
Petty Cash Fund (fully replenished as of year-end) 10,000
Total P 2,500,000

Required:
Compute the correct amount of Cash to be reported in the statement of financial position as of December 31,
2018.

LECTURE GUIDE 4 (Computation of the correct amount to be reported as Cash)

On December 31, 2018, the Ginebra Corporation showed a Cash balance of P 810,000 which includes the
following:

Demand deposit P 160,000

Time deposit that cannot be pre-terminated until April 1, 2019 55,000
Un-deposited customer’s check 5,000
Customer NSF Check 2,000
Deposit in foreign bank - unavailable 90,000
Overdraft in another bank (20,000)
Time deposit in a closed loan association 45,000
Cash advances to officers 32,000
Sinking fund cash 150,000
Pension Fund 220,000
Petty Cash Fund 2,000
Customer check dated January 31, 2019 59,000
Customer check outstanding for 18 months 10,000

Additional information:
a) The petty cash fund consists of P 600 in cash, P 400 in IOUs, and P 1,000 receipts for expenses.
b) Check of P 50,000 in payment of accounts was recorded in December 31, 2018 but mailed to creditors on
January 15, 2019.
c) Check of P 30,000 dated January 31, 2019 in payment of accounts was recorded and mailed on December
31, 2018.
d) The company uses the calendar year.
e) The cash receipts journal was held open until January 15, 2019 during which time P 100,000 was collected
on accounts and recorded on December 31, 2018.

Required:
1. What is the correct “Cash” balance for the statement of financial position as at December 31, 2018?
2. Prepare the necessary adjusting journal entries at December 31, 2018.

LECTURE GUIDE 5 (Cash Balance Computation)

During the year 2018, the account balances of certain accounts are as follows:

January 1, 2018 December 31, 2018

Cash P 1,200,000 P ?
Accounts Receivable 500,000 600,000
Accounts Payable 750,000 700,000

Related transactions during the year 2017 are as follows:

1. Credit sales, P 5,000,000
2. Cash sales, P 200,000
3. Sales returns and allowances, P 20,000
4. Accounts written off, P 180,000.
5. Credit purchases, P 6,000,000
6. Cash purchases, P 500,000
7. Bank borrowings, P 1,000,000
8. Partial payment of bank borrowings, P 400,000
9. Issuance of shares of stocks, P 10,000,000
10. Operating expenses payments, P 3,100,000
11. Dividend payments, P 800,000
12. Acquisition of land, P 5,200,000

Required: Compute the following:

A. Cash receipts from customer’s collection of credit sales _____________________
B. Cash payments to suppliers from credit purchases _____________________
C. Total cash receipts during the year______________________
D. Total cash disbursements during the year_______________________
E. Cash balance at December 31, 2018_______________________

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LECTURE GUIDE 6 (Bank Reconciliation Statement)
Presented below are the accounting information from the accounting records and documents of SUNNY
Corporation for the month December, 2017.

Cash balance per ledger P 308,400

Cash balance per bank statement 599,540
Proceeds of bank loan discounted on December 1, 2017 for one year at 14% 258,000
Debit memo for checkbook 50
Un-deposited collections on December 31 32,300
Deposit of December 2 was erroneously recorded by bank at P 76,540; the correct
amount is 45,670
Erroneous bank debit 3,750
Check issued in payment of an accounts payable had been recorded as P 34,560; the
correct amount is 63,450
The ledger account for cash was the only cash account kept by the company; it included
a petty cash account comprised of the following items: Currency and coins, P 4,000;
Supplies, P 2,000; Transportation, P 3,000; Postage, P 1,000 10,000
Erroneous bank credit 65,000
Deposit of December 29 omitted from bank statement 87,740
Outstanding checks (including certified check of P 30,000) 130,000

Required:
1. Prepare Bank Reconciliation Statement as of December 31, 2017.
2. Prepare the necessary adjusting journal entries.

LECTURE GUIDE 7 (Preparation of Bank Reconciliation and Proof of Cash)

In the audit of Luzon Manufacturing Company for the year 2018, the bank statement and cash receipts book
were made available to you.

DECEMBER, 2018 BANK STATEMENT

Date Check No. Transactions Withdraw Deposit Balance
al
Dec. 2 86,520
2 10,800 97,320
2 660 2,400 94,920
2 661 1,040 93,880
4 663 1,850 92,030
4 4,000 96,030
4 642 300 95,730
4 638 1,280 94,450
6 14,600 109,050
6 Returned Deposit 4,000 RT 105,050
6 640 400 104,650
10 636 800 103,850
12 Service Charge 10 SC 103,840
12 24,800 128,640
13 666 6,200 122,440
13 669 2,400 120,040
13 662 1,200 118,840
17 664 200 118,640
17 8,200 126,840
17 667 600 126,240
20 665 Certified Check 10,000 116,240
20 2,000 118,240
23 670 1,600 116,640
24 672 8,000 108,640
24 668 4,000 104,640
24 10,000 114,640
24 675 Manager’s Check 13,000 101,640
24 677 400 101,240
24 671 3,000 98,240
24 673 10,000 88,240
25 Service Charge 20 SC 88,220
25 4,000 RT 92,220
26 Debit Memo 10,000 82,220
26 3,600 85,820
26 674 2,000 83,820
26 676 1,800 82,020
26 678 7,000 75,020
27 Service Charge 16 75,004

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 27 16,000 91,004
27 687 10,400 80,604
27 682 600 80,004

NOTES: The DM of P 10,000 represents promissory note of company deducted on the current account.

DECEMBER, 2018 CASH BOOK

Check Amount
Date Deposit No. of Check

Dec. 2 660 2,400

2 661 1,040
2 662 1,200
4 4,000
4 663 1,850
4 664 200
5 665 10,000
6 14,600
6 666 6,200
6 667 600
6 668 4,000
10 669 2,400
12 24,800
12 670 1,600
12 671 3,000
12 672 8,000
16 673 10,0000
17 8,000
17 674 2,000
20 2,000 675 13,000
20 676 1,800
21 677 400
22 678 7,000
22 679 1,200
22 680 1,200
23 10,000
23 681 2,000
23 682 600
25 683 8,000
26 3,600
26 684 4,000
26 685 3,000
26 686 6,000
27 16,000
27 687 10,400
27 6,400
27 688 1,000

Required:
1. Statement reconciling the balance of P 94,540 as of November 30, 2018 appearing in the cashbook with
December 2, 2018 shown in the bank statement.
2. Bank Reconciliation as of December 31, 2018. Show tick marks with legend in bank statement and in cash
books.
3. Journal entries that may be needed in connection with the data and figures appearing in the statement.
4. Proof of Cash for December, 2018 using the adjusted balance method.

LECTURE GUIDE 8 (Eight Column Proof of Cash)

You have been assigned to the audit of Jackson Company. You acquired the following information:

a. Balances of cash account per the general ledger at November 30, 2018 and December 31, 2018, were
P 380,200 and P 97,700, respectively.

b. Balance on checking accounts at the Philippine National Bank at December 31, per bank confirmation
was P 100,000.

c. Outstanding checks at December 31 amounted to P 40,000.

d. An NSF Check for P 2,450 was charged by the ban in December. This check was obtained from a
customer on account.

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 e. Deposits in transit at the beginning and end of month were P 25,000 and P 35,000, respectively.

f. Exchange and collection charges deducted by the bank in the amount of P 250 for December have not
been recorded. Those charges for the month of November totaled P 200.

g. The reconciliation data as of November 30 showed that the balance per bank statement was P
450,000 and the outstanding checks totaled P 100,000.

h. In November, the bank charged in error a P 2,600 check to the Jackson Company account. It was
corrected by the bank in December.

i. Total deposits shown by the bank statement for December amounted to P 1,000,000.

j. Following is a summary of cash receipts and disbursements for the month indicated: November –
Receipts, P 1,024,700 and Disbursements, P 1,298,800; December – Receipts, P 1,007,400 and
Disbursements, P 1,289,900.

Required:
1. Prepare an eight-column proof of cash for December, 2018.
2. Make the necessary adjusting journal entries at December 31, 2018.
3. What amount should be reported as cash in the statement of financial position as of December 31, 2018?

LECTURE GUIDE 9 (Cash Shortage determined through Bank Reconciliation)

The Grandioso Company had poor internal control over its cash transactions. Facts about its cash position at
November 30, 2018 were as follows:

The cash book showed a balance of P 189,016.20, which included undeposited receipts. A credit of P 1,000 on
the bank’s records did not appear on the books of the company. The balance per bank statement was P 155,500.
Outstanding checks were: # 62 for P 1,162.50, #183 for P 1,500, #284 for P 2,532.50, #8621 for P 1,907.10,
#8623 for P 2,068, and #8632 for P 1,452.80.

The cashier abstracted all undeposited receipts in excess of P 37,944.10 and prepared the following
reconciliations:

Balance per books, November 30, 2018 P 189,016.20

Add: Outstanding checks #8621 P 1,907.10

#8623 2,068.00
#8632 1,452.80 4,427.90
P 193,444.10
Less: Un-deposited receipts 37,944.10
Balance per bank, November 30, 2018 P 155,500.00
Less: Unrecorded credit 100.00
True cash, November 30, 2018 P 154,500.00

Required: Prepare a supporting schedule showing how much the cashier abstracted.

Lecture Guide 10 (Verification of Outstanding Checks)

In connection with your audit of the Morayta Corporation at December 31, 2018, you were given a bank reconciliation
by a company employee which shows:

Balance per bank P 152,670

Deposit in Transit 189,280
Total P 341,950
Check Outstanding 213,780
Balance per books P 128,170

As part of your verification, you obtain the bank statement and cancelled checks from the bank on January 15, 2019.
Checks issued from January 1 to 15, 2019 per books were P 112,410. Checks returned by the bank on January 15
amounted to P 292,190. Of the checks outstanding December 31, 2018, P 48,000 were not returned by the bank with
the January 15th statement, and of those issued per books in January, 2019. P 36,000 were not returned.

Required: Prepare a schedule showing the above date in proper form.

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Lecture Guide 11 (Audit of Petty Cash Fund)
As part of your engagement to audit the financial statements of Hopeful Company for the year ended December
31, 2018, you were assigned to verify the petty cash fund and the cash on hand in the morning of January 3,
2019. You began to count at 9:00 AM in the presence of Ms. Cao, the petty cash custodian. In the course of your
counting you found the following items:

Bills Coins
Pieces Denomination Pieces Denomination
10 P 200 100 P 10.00
20 100 450 5.00
40 20 804 1.00
1,410 0.25
1,520 0.10
810 0.05

Checks:
Maker Date Payee Amount
Navee Go, Manager 12/05/2018 Hopeful Company P 800
Nina Cao, Cashier 12/28/2018 Hopeful Company 500

Note: Navee Go’s check was returned on December 29, 2018 for insufficiency of fund.

IOUs:
Name Date Amount
Mando Rucot, Janitor 12/19/2018 P 250
Mandy Diquat, Clerk 12/20/2018 150
Cory Pot, Bookkeeper 12/22/2018 200

Petty Cash Vouchers:

Payee Date Account Charged Amount
Po Tato, Messenger 12/14/2018 Advances to employees P 125
Green P. Bookstore 12/15/2018 Supplies 150
Laurel Transit 12/19/2018 Freight out 192
Bureau of post (stamps) 12/20/2018 Supplies 300
Onion Computer Shop 12/21/2018 Repairs 450
Spice Co. (supplier) 01/02/2019 Miscellaneous Expense 154

Note: Unused Stamps, P50

Additional Information
1. The balance of petty cash fund per books is P 12,000.
2. Cash sales of January 2, 2019 amounted to P 8,000 per sales records, while cash receipts book and deposit
slip showed that only P 6,600 was deposited in the bank on January 3, 2019.
3. The following employee’s pay envelopes have been opened and the money removed. Each envelope was
marked “unclaimed.”
a) Nilo Co, P 400
b) Nato Khang, P 200

Requirements:
A. Cash shortage as of December 31, 2018
B. Amount of Petty Cash Fund to be presented in the financial statements
C. Compound adjusting entry to correct petty fund account as of December 31, 2018.

Lecture Guide 12 (Preparation of Cash Count Sheet)

As the representative of Bautista, Chavez and Company, CPAs, you are auditing the books and records of
Sagada Corporation as of December 31, 2018.

On January 4, 2019, at 9:05AM, you began counting the petty cash fund and other cash which might be on hand
with the cashier, Miss Ana Marie Querol, and you found bank notes, coins, checks, vouchers, and so forth as
disclosed below:

BILLS: Two (2) one hundreds, five (5) fifties, five (5) twenties
COINS: P 5.00 – 50 pieces; P 1.00 – 109 pieces; P 0.25 - 6 rolls and 47 loose (50 pieces to a roll)

CHECKS:
Maker Date Payee Amount
Melba dela Cruz, General Manager (BPI) 12/24/2018 Sagada Corporation P 500
Ana Marie Querol, Petty Cashier (PNB) 12/24/2018 Sagada Corporation 500
Sagada Corporation (BDO) 12/26/2018 Ana Marie Querol 12,000
Sagada Corporation (BDO) 12/28/2018 PLDT 3,500
Sagada Corporation (BDO) 06/03/2018 Aezelle Servidad 1,500

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VALE SLIPS:
Employees Date Amount
Arthur Galicio, Messenger 12/27/2018 P 200
John Carl Bautista, Accountant 12/28/2018 500
Remuel Bernardo, Clerk 12/28/2018 300

UNREPLENISHED PETTY CASH VOUCHERS:

Payee Date Transactions Amount
Safety First Freight Services (PCV No. 820) 12/26/2018 Freight-in P 750
Cesario Cadao, Janitor (PCV No. 821) 12/26/2018 Salary advances 500
National Book Store (PCV No. 822) 12/27/2018 Various office supplies 225
Arthur Galicio, Messenger (PCV No. 823) 12/28/2018 Miscellaneous expenses 204
Philippine Post (PCV No. 824) 12/29/2018 Supplies 250
Pandayan Book Shop, Inc. (PCV No. 825) 01/04/2019 Supplies 167

The petty cash fund balance per general ledger has an imprest balance of P 12,500. Last replenishment was
dated December 23, 2018.

Further audit disclosed that cash sales of January 3, 2019 amounted to P 15,000 as shown by the sales records
while cash receipts book and the bank deposit slip on January 4, 2019 showed that only P 14,000 was deposited
in the bank.

On the other hand, inside the petty cash box are the following:
1) Pay envelope of Aiko Villavicencio, P 4,000, opened;
2) Pay envelope of Cleofe Santiago, P 4,500, sealed;
3) Envelope containing employee contributions for the wedding of co-employee, P 3,000, opened;
4) Postage stamps, 20 pieces at P 10 each.

Required:
A. The necessary working paper showing your cash count.
B. The necessary adjusting journal entries AT December 31, 2018.
C. The amount of the Petty Cash Fund to be reported in the audited statement of financial position as at
December 31, 2018.