PHILIPPINE CHRISTIAN UNIVERSITY

College of Business Administration and Accountancy

AUDITING

PROBLEM I

Mila Lim is the cashier of the Plaridel Glass Company. As representative of the Reyes,
Tan and Associates, CPA, you were assigned to verify her cash on hand in the morning
January 4, 20x7. You began to count at 9:00 A.M in the presence of Miss Lim. In the
course of your counting, you found currencies in paper bills and coins together with
checks, vouchers and other items, which are mentioned below:

Bills
2 fifties, 9 twenties, 13 tens

Coins
P 5.00 5 loose
1.00 74 loose
0.25 - 5 rolls and 32 loose (50 pieces to a roll)
0.10 - 10 rolls and 15 loose (50 pieces to a roll)
0.05 - 16 rolls and 9 loose (40 pieces to a roll)

Maker Date Payee Amount

Jose Cruz, Asst. Manager 12/36/X6 Plaridel Glass Co. P 60.00
Mila Lim, Cashier 12/26/X6 Plaridel Glass Co. 40.00

I.O.Us
A. David, Janitor 12/20/X6 P 35.00
R. Tirao, Clerk 12/22/X6 25.00
Pedro Munar, Bookkeeper 12/24/X6 15.00

Your Investigation also disclosed the following:

1. The balance of petty cash fund per books is P900.
2. Cash sales of January 2, 20x7 amounted to P865 per sales records, while Cash
Receipts Book and Deposit slip showed that only P7656 was deposited in the bank
on January 3, 20X7.
3. The following employees’ pay had been opened and the money removed. Each
envelope was marked “unclaimed”.

N. Roy P33.25
G. Gloria 24.75

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 PHILIPPINE CHRISTIAN UNIVERSITY
College of Business Administration and Accountancy

Required:
1. Prepare working papers showing your cash count.
2. Prepare necessary adjusting journal entries without explanation in the books of
the company.

PROBLEM II

Payee Date Account Charged Amount

L. Bilbao, Messenger 12/16X6 Advances to Employees P10.00
Rosario & Co. 12/17/X6 Supplies 14.50
Victor Liner 12/18/X6 Freight-in 18.25
Bureau of Posts (stamps) 12/18/X6 Supplies 30.00
A. Vallo, Carpenter 12/20/X6 Repairs 45.00
B. Tello 12/21/X6 Miscellaneous Expense 15.40

On your examination of the financial statements of Heroes Group Company for the year
ended December 31, 20X7 you obtained the following information on the checking
account of the company:

The bank statement on November 30,20X7 showed a balance of P15,300. Among the
bank credits in November was customer’s note for P5,000 collected for the account of the
company which the company recognized in December among its receipts. Including in
the bank debits were cost of checkbooks amounting to P60 and a P2,000 check which
was charged by the bank in error against Heroes Group Co. account. Also, In November
you ascertained that there were deposits in transit amounting to P4,000 and outstanding
checks totaling P8,500.

The bank statement for the month of December showed total credits of P20,800 and total
charges of P10,200. Company books for December showed total receipts of P36,780 and
disbursements of P20,360. Bank debit memos for December were: No. 4418 for service
charges, P80 and No.4 on a customer’s returned check marked “Refer to Drawer” to
P1,200.

The bank error of P2,000 in November was corrected by the bank in December.

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 PHILIPPINE CHRISTIAN UNIVERSITY
College of Business Administration and Accountancy

On December 29, 20X7 the company placed with the bank a customer’s promissory note
with a face value of P6,000 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,20X8.

A check for P198 was recorded in the company cash payments book in December as
P1,980.

Required:
1. Prepare a four (4) column bank reconciliation statement for the month of
December,20X7 for Heroes Group Co. Develop your reconciliation statement by
starting with bank balances and providing these balances per book balances.

2. Present a computation:
a. Deposit in transit, December 31,20x7.
b. Outstanding checks, December 31, 20x7.

PROBLEM III

The following information pertains to the cash of Rosal Company:

1.
July 31 August 31
Balance shown on a bank statement P 2,738 P 2,696
Balance shown in general ledger before
reconciling in the bank accounts 2,578 2,500
Outstanding Checks 863 1,015
Deposit in Transit 685 1,245

2.
For August
Deposit shown on a bank statement P 5,588
Charges shown on a bank statement 5,630
Cash Receipts shown on company’s books 5,398
Cash payments shown on company’s books 5,476

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College of Business Administration and Accountancy

3. The bank service charge was P18 in July (recorded by the company
during august) and P24 in August (not yet recorded by the company).

4. Included with the August bank statement was a check for P500 that had been
received on August 25 from a customer on account. The returned check, marked
“NSF” by the bank, has not yet been recorded on the company’s book.

5. During the August bank collected P750 of bonds interest for Rosal Company sand
credited the proceeds to the company’s account. The company earned the interest
during the current accounting period but has not yet recorded it.

6. During August, the company issued a check for P696 for equipment. The check,
which cleared the bank during August, was incorrectly recorded by the company
for P896.

Requirement: Prepare a proof of cash for August.

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