ACCOUNTING REVIEW

SY 2016-2017

J.M. Tang
1 Semester
st

AUDIT OF CASH

SBC 161701_ACCREV E04

PROBLEM NO. 1 - CASH COUNT

Cash shortage

440

Note: Since no vouchers were given in the problem, then it is presume that the unused postage stamps of 60 was
there and acquired out of the undeposited collections being accounted for.
PROBLEM NO. 2 - TEST OF KITING

a.
b.
c.
d.

Bank A Deposits
Per Books
Per Bank
12-29-16
01-02-17
12-30-16
01-03-17
01-04-17
01-02-17
12-31-16
12-31-17

Bank B Transfers
Per Books
Per Bank
01-02-17
01-03-17
12-31-16
01-02-17
01-02-17
01-04-17
12-30-16
01-03-17

Note:
Kiting is way of concealing shortage by making bank transfer from one bank to another. It is done by:
Recording the deposit in one bank then delay the recording of disbursement against another bank
Hint:
1. Observe the PER BOOKS
2. Check the bank where deposit take place
3. Then check if disbursement were recorded in the same month or year.
Choices explained:
a. Book records receipt in December but record disbursement in January
b. Receipt and disbursement were recorded both on December (so no issue). The bank reflects deposit and
disbursement in January so it becomes DIT and O/C
c. Book records receipt and disbursement in January and both were reflected in January so no recon items
in bank recon.
d. Receipt and disbursement were recorded both on December (so no issue). The bank reflects
disbursement in January so it becomes O/C

PROBLEM NO. 3: BANK RECONCILIATION

DEMA-ALA COMPANY

Total
Cash shortage
Adjusted cash balance

Book

Bank

88,370
(4,210)
84,160

84,160
______
84,160

Note:
If after reconciliation, the book > bank, then shortage exists as not all receipts recorded made it with the
bank.

Adjusting entry:
Cash
Notes receivable
Due to custodian
Cash

800
800
4,210
4,210

PROBLEM NO. 4: PROOF OF CASH

AJE #
Unadjusted bank balances
Undeposited collections
November
December
Outstanding checks
November
December
Erroneous bank debits
November
December
Erroneous bank credits
November
December

Beginning
130,560

Receipts
149,951

600

(600)

(1,000)

Disb
110,098

Ending
170,413

(900)

900

(1,000)
(3,000)

(3,000)

Adjusted bank balances

127,353

154,007

111,612

169,748

Unadjusted book balances

Customers' note collected by bank
November
December
NSF checks
November

126,429

151,230

111,423

166,236

127,353

154,007

111,612

169,748

December
Bank service charges
November
December
Adjusted book balances

Undeposited collections, December 31:

Deposit in transit, November. 30
Book receipts
Less receipts not representing collections for December:
Customers' note collected by bank, November. 30
Total collections that should have been credited
Bank receipts

5,200
151,230

1,500

149,951

149,730
154,930

Less receipts not representing deposits:

Customers' note collected by bank, December 4,277
Erroneous bank debit, November. 30
600
Erroneous bank credit, December
3,000

7,877

142,074
12,856

Outstanding checks, December 31:

Outstanding checks, November 30

8,007

Book disbursements

111,423

Less disbursements not representing checks for December:

NSF checks, November
526
Bank service charge, November
50

576

Book disbursements representing checks

110,847
118,854

Bank disbursements

110,098

Less disbursements not representing checks:

NSF checks, December
Bank service charge, December
Erroneous bank debit, December
Erroneous bank credit, November

700
65
900
1,000

2,665

107,433
11,421

Adjusting Journal Entries

(1
)
(2
)
(3
)

Accounts receivable
Cash in bank
Cash in bank
Note receivable
Bank service charge
Cash in bank

PROBLEM NO. 5: PROOF OF CASH

1. Adjusted cash receipts at December 31

P 61,480

700
700
4,277
4,277
65
65

2. Adjusted cash disbursements at December 31

P 57,820
3. In a proof of cash, the NSF check:
Should be deducted in the December 31 column since this was returned back and not paid by the bank,
thus not considered as receipts.
4. Adjusted December 31 cash balance
P 29,260
5. Adjusted November 31 cash balance
P 25,600

6. The check issued but was incorrectly recorded as P8,960 should be adjusted by:
d. Cash

2,000
Equipment

2,000

HAAY COMPANY

Balance per book

Service charge Nov. 30
- Dec. 31
NSF check
Interest earned
Book error
Adjusted Balance
Balance per bank
Outstanding check Nov.
- Dec.
Deposit in transit - Nov
- Dec
Adjusted balance

Nov. 30
25,780

Receipts
53,980

Disburs.
54,760

Dec. 31
25,000

__________
25,600

_________
61,480

(2,000)
57,820

2,000
29,260

Nov. 30
27,380

Receipts
55,880

Disburs.
56,300

Dec. 31
26,960

25,600

61,480

57,820

29,260

Adjusting entry
Service charge
Cash

240

Accounts receivable
Cash

5,000

Cash
Interest income

7,500

Cash
Equipment

2,000

240
5,000
7,500
2,000