ILLUSTRATION No.

The Silver Company’s internal control over its cash transactions is very weak.
Actually, the company’s cash position at December 31, 2020, were as follows:

The cash book showed a balance of Php1,500,000, which included cash on hand. A
credit of Php15,000 on the bank’s records did not appear on the company’s books.
The bank statement showed a balance of Php1,230,000; and the outstanding checks
were: 0100-Php12,000; 0201-Php10,000; 0300- Php23,000; 1501-Php11,000; 1510-
Php14,000 and 1515-Php15,000.

The cashier removed all of the cash on hand in excess of Php300,000 and then
prepared the following reconciliations:

Balance per books, December 31, 2020 Php 1,500,000

Add: Outstanding checks:
No. 1501 Php 11,000
1510 14,000
1515 15,000
-------------- 30,000
-------------------------
Php 1,530,000
Deduct cash on hand 300,000
------------------------
Balance per bank, Dec 31, 2020 1,230,000
Deduct- Unrecorded credit 15,000
------------------------
True cash, Dec 31, 2020 Php 1,215,000
==============
Requirements:
1. The cash shortage if any, is ___________.
2. A correct reconciliation will show that the cashier’s accountability for cash on
hand is _________.
3. The adjusted cash in bank balance for the balance sheet of December 31,
2020 is ___________.

Solution:

Unadjusted book balance Php 1,500,000

Add: Unrecorded bank credit 15,000
Adjusted book balance (Total
Accountability) 1,515,000
Unadjusted bank balance 1,230,000
Less: Outstanding checks
No. 0100 Php 12,000
0201 10,000
0300 23,000
01501 11,000
01510 14,000
01515 15,000 85,000
 Adjusted bank balance (3) 1,145,000
Cash on hand to be accounted for 370,000
(2)
Actual cash on hand 300,000
Cash shortage (1) 70,000

ILLUSTRATION No. 2

A count of the undeposited receipts under the custody of Pau G, cashier of

Sealine Company, on October 1, 2020, 9:00am, showed the following composition:

Currency and coins Php 14,750

Checks:
Date Payee Drawer Amount
02/29/20 Cash Pau G Php 1,000
09/29/20 Sealine Co. Cebu Corp 3,400
09/30/20 Sealine Co. L Reyes 2,500
09/30/20 Meralco Sealine Co. 1,900
Total 8,800
Postage and documentary stamps 120
Paid vouchers covering transportation expenses 1,200
Customer’s check returned by bank, NSF 900
Money in envelop with list of contributors
to Sweepstakes pool 800
IOUs from employees 500
---------------------
Total Php 27,070
============

If the cashier’s accountability is Php24,500, the amount of overage/shortage on

October 1, 2020 was __________.

Solution:

Currency and coins Php 14,750

Postage and documentary stamps 120
Accommodating check (02/29/20-Cash) 1,000
Checks:
09/29/20 Cebu Corporation Php3,400
09/30/2020 L. Reyes 2,500
------------- 5,900
Paid vouchers covering transportation expense 1,200
IOUs 500
--------------------
Total per count 23,470
Accountability 24,500
---------------------
Cash shortage 800
============
  It is assume that the cashier’s accountability of Php24,500 does not include
the collection for the sweepstakes pool as well as customer’s NSF check.

Illustration No. 3

In your year-end audit of mabuhay Corporation, the cashier showed a cash

accountability of Php120,000 as at December 31, 2020. Selected transactions of the
corporation for 2020, in summary form, follows:

Accounts written off Php 50,000

Depreciation of fixed assets 300,000
Disbursement for cost and expenses 7,500,000
Income tax accrued 100,000
Payment of bank loan 400,000
Subscriptions receivable 3,000,000
Subscribed share capital 9,000,000
Proceeds from short-term bank loan 1,000,000
Purchase of fixed assets 4,500,000
Sales (80% collected in 2020) 7,000,000

The cashier’s correct cash accountability at December 31, 2020 was _______.

Solution:
Total cash receipts:
Collections from subscribed share capital:
Subscribed share capital Php 9,000,000
Subscriptions receivable 3,000,000
--------------------- Php 6,000,000
Proceeds from short-term bank loan 1,000,000
Collections from sales (Php7,000,000 x 80%) 5,600,000
-------------------------
Total 12,600,000
Less: Total Cash Disbursements
Disbursement for cost and expenses Php 7,500,000
Payment of bank loan 400,000
Purchases of fixed assets 4,500,000
------------------- 12,400,000
------------------------
Cashier’s correct cash accountability Php 200,000
==============

ILLUSTRATION NO. 4

In your audit of the Kenzo Company as of December 31, 2020, you gather the
following:

Balance per books Php 10,000,000

Balance per bank 10,000,000
Bank charges 25
Outstanding checks 2,375
 Deposit in transit 3,125
Customer’s note collected by bank 3,755
Interest on customer’s note 150
Customer’s check returned NSF 625
Depositor’s note charged to account 2,500

The correct cash balance amounts to __________. 10,000,750

Solution:

Balance per bank Php 10,000,000 Balance per books Php 10,000,000
Add(Deduct): Add(Deduct):
Outstanding checks (2,375) Bank charges (25)
Deposit in transit 3,125 Customer’s note
collected by bank 3,755
Interest on
customer’s note 150
Customer’s check
returned-NSF (625)
Depositor’s note
charged to account (2,500)
10,000,750 10,000,755
Shortage (5)
Adjusted balances 10,000,750 Adjusted balance 10,000,750

ILLUSTRATION No. 5

You are examining the records of Camil Company where internal control is found to
be weak. Part of your work includes reconciliation of cash for December 2020. You
have determined that the client’s reconciliation as of November 30, 2020 is correct.
The following information is available to you:

Client’s Reconciliation, Nov 30 2020

Cash per general ledger Php 263,174
Less: cash on hand 21,089
---------------------
242,085
Bank service charge 900
---------------------
241,185
Add: Outstanding checks 99,100
---------------------
Balance per bank Php 340,285
============
Cash receipts are summarized weekly; the cash receipts book for December
appears below:
Dec 1 Balance from Nov 30 Php 263,174
8 Received on accounts 2,577,480
15 Received on accounts 2,744,756
22 Received on accounts 465,982
29 Received on accounts 588,685
---------------------
Php 6,530,077
============

The cash payments record for December was as follows:

Dec 1 November service charge Php 900
3 Checks 523,650
5 Checks 364,521
8 Checks 1,639,489
10 Checks 1,587,342
12 Checks 484,889
19 Checks 362,283
22 Checks 369,209
31 Checks 765,770
Balance – December 31 431,124
----------------------
Php 6,530,077
=============
Cash on hand December 31 amounted to Php10,000**. The transactions per the
December bank statement, which are correctly recorded by the bank, show that
deposits amounted to Php6,287,092; checks paid amounted to Php5,795,203*;
service charge for the month were Php1,000*; and a charge of Php10,000* was
made against the account because of the returned unpaid of a customer’s check.
The service charge and the returned check were not recorded on the client’s books.
The total of outstanding checks as of December 31 was found to be Php411,050***.

Required:
Prepare the proof of cash for December. Use adjusted balances method.
 Camil Company
Proof of Cash
For the month ended December 31, 2020
December
Nov 30 Receipts Disbursements Dec 31
Unadjusted bank
balance Php 340,285 Php 6,266,902 5,806,203*
Undeposited
collections:
November 30 21,089 (21,089)
December 31 10,000** 10,000
Outstanding
Checks:
November 30 (99,100) (99,100)
December 411,050*** (411,050)
Adjusted Bank
Balance Php 262,274 Php 6,276,003 Php 6,118,153 Php 420,124
Unadjusted book
balance Php263,174 6,266,903 6,098,953 431,124
Bank service
charge:
November (900) (900)
December 31 1,000 (1,000)
Returned-NSF
Checks 10,000 (10,000)
Understatement
of Dec receipts 110,000 110,000
Overstatement of
Dec Disbursement (900) 900
Balance Php 262,274 Php 6,376,903 Php 6,108,153 Php 531,024
Cash Shortage (100,900) 10,000 (110,900)
Adjusted Balance Php 262,274 Php 6,276,003 Php 6,118,153 Php 420,124

Correct Receipt Php 6,376,903

Per book (Php6,530,077-Php263,174) 6,266,903
-----------------------
Understated in CRB 110,000
=============

Correct Disbursement Php 6,098,053

Per book (6,530,077-431,124) 6,098,953
------------------------
Overstated in CDB 900
==============

Reconciliation:
Understated in CRB Php 100,000 shortage in cash
Overstated in CDB 900 shortage in cash
-----------------------
Total shortage in cash Php 100,900
============