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Welcome to Auditing Problems

Auditing Problems is basically FAR
but extreme edition
Audit of Cash and
Cash equivalents
What to be included as Cash?
PAS 1, paragraph 66
States that an entity shall classify an asset as current when the asset is cash or cash
equivalent unless it is restricted to settle a liability for more than 12 months after
the end of the reporting period.

Cash items included in Cash

1. Cash on Hand
2. Cash in Bank
3. Cash fund
Provided that the fund is expected to be used within 12
months. (Current Asset Funds)
What is Cash equivalents?
PAS 7, par. 6 defines Cash equivalents as short term and highly liquid investments
that are readily convertible into cash and so near their maturity that they present
insignificant risk of changes in value because of changes in interest rates
Only highly liquid investments that are acquired 3 months before maturity can
qualify as cash equivalents.

Examples of Cash Equivalents

1. 3 month BSP Treasury Bill
2. 3 year BSP Treasury bill purchased 3 months before maturity
3. 3 month time deposit
4. 3 month money market instrument or commercial paper
Current Account 81,000 Cash
Savings Account 132,600 Cash
Undeposited Customers Check
Post Dated Customer Check 3,000 Added back to AR
The balance of 19,200 (22,200-3,000) Cash
Currency and Coins 3,480 Cash
Appropriated Cash 2,400,000 Long-Term Investment(NCA)
Petty Cash Fund 1,200 Cash
Legally Restricted Long-Term Investment(NCA)
Compensating Balance 120,000
2 month T.B. 90,000 Cash Equivalent
7 month T.B. 120,000 Short-Term Investment(CA)
Time Deposit 100,000 Cash Equivalent
Total Cash and Cash
427,480
Equivalents

Total Non Current

2,520,000
Assets

Total other Current

120,000
Assets
Cash on Hand (230,000-43k-75k) 112,000
Impukan Savings Account 9,500
Petty Cash Fund 13,500
Tipid Bank Account (160k+13k+5k) 178,000
Time Deposits:
30 days 30,000
90 days 40,000
Total Cash and Cash equivalents 383,000
Balance in Monte Bank
Checking Account 540,000
Savings Account 884,000
Undeposited Customers Check 208,000
Currency and Coins on Hand 23,200
Checking Account- Naic bank 800,000
Treasury Bill- 30 day maturity 600,000

Total 3,055,200
1. Cash
2. Cash Equivalent
3. Cash
4. Receivable from Employee
5. Cash Equivalent
6. Long- Term Investment (NCA)
7. Cash
8. Receivable
9. Short-Term Investment (CA)
10. Post Dated Check reverted back to AR

11. Part of Trading Securities ( A current asset)

Total Cash and Cash equivalents

12,763,050
C.A- Prime Bank Current Liability
C.A- Prime Bank Cash
Treasury Bill acquired 3 months before Cash Equivalent
maturity
Treasury Bill Maturing on 2017 Short-term investment
Payroll Account Fund Cash
Restricted Foreign Account Noncurrent Asset
Postage Stamps Prepaid Expenses (CA)
Employee postdated Check Reverted back as Rec.
IOU from VP Receivable
Credit Memo Deduction to Purchases
Travelers Check Cash
Money orders Cash
Petty Cash Fund Cash

Total Cash and Cash equivalents 861,900

1. Cash
2. Cash
3. Reverted back to Receivable
4. Post Dated Check
5. Cash

6. Added back to Cash

7. Only currency of 10,000 is Cash

8. Offset against Cash in Bank- Bank of

Manila
Total Cash 1,430,000
 Adjusted Petty Cash Fund Adjusted Cash in Bank
Book Bank
Unadj. Bal. 30,000 Unadj. Bal. 748,320 638,340
Dec. Expenses (16,250) NSF Check (22,500)
(3,500)
___________ Bank Error 1,800
Adjusted Balance 10,250 Unrecorded cash
receipt 3,500
Postdated
(67,300)
Checks
Unrecorded
Debit memos (230,000)
Interest Earned 1,950
BSC (1,260)
Deposit in Transit 68,950 (136,250-67,300)

Outstanding
(276,380)
Checks ___________ ___________
432,710 432,710
Accounts Receivable 22,500
Accounts Receivable 67,300
Accounts Payable 230,000
Bank Service Charges 1,260
Cash in Bank – Tsunami Bank 315,510
Advances to Employees 3,500
Interest Income 1,950
 Adjusted Petty Cash Fund Adjusted Cash in Bank
Book Bank
Unadj. Bal. 30,000 Unadj. Bal. 748,320 638,340
Dec. Expenses (16,250) NSF Check (22,500)
(3,500)
___________ Bank Error 1,800
Adjusted Balance 10,250 Unrecorded cash
receipt 3,500
Postdated
Cash and Cash Equivalents (67,300)
Checks
Cash in Bank 432,710 Unrecorded
Petty Cash Fund 10,250 Debit memos (230,000)
Time Deposit 1,000,000 Interest Earned 1,950
Money Market Instru. 4,000,000 BSC 1,260
Total 5,442,960 Deposit in Transit 68,950 (136,250-67,300)

Outstanding
(276,380)
Checks ___________ ___________
432,710 432,710
Currency 1,650
Vouchers
(420+900+340+800+1,500) 3,960
Replenishment Check 7,200
NSF Check charge to PCF 1,000
Petty Cash accounted for 13,810
Petty Cash fund per ledger 16,000
Petty Cash Shortage 2,190

Currency 1,650
Replenishment Check 7,200
Adjusted petty cash bal. 8,850
Currency 3,200 1. C
Petty Cash Vouchers 2. A
(3,460+2,240+840) 6,540 3. C
Petty Cash accounted 9,740 4. D
Petty Cash per ledger 10,000 5. C
Shortage 260
Cash Advance 20,000
Less:
Actual cash disbursed
Hotel, meals, etc. 16,000
Bus Fare 1,200 Collections per OR nos. 4352-4355 43,300
Payment to Salesman Unreceipted collections 14,000
(1000-120) 880 Total undeposited Collections 57,300
Cash that should be returned 1,920
Cash actually returned 1,680
Shortage due from sales manager 240

Travel Expenses
Total actual expenses of the Sales Manager 18,080
Cash Count Sheet
Bills and Coins 3,764
Checks paid to Benjamin Co.
Maker Cash to be accounted for

Custodian 1,200 Unclaimed Salary 7,500

SLV, Inc. 14,000 Excess travel advance 1,680
Sales Manager 1,680
Collections with receipt 43,300
MSU Corp 17,800
42,980 Collections without receipt 14,000
Ateneo Inc. 8,300
Petty Cash 25,000
Unreimbursed Vouchers
Total cash to be accounted 91,480
Account
Advances 20,000
Postage 1,620 Total cash to be accounted 91,480
Transportation 150 Total Cash accounted for 69,314
Repairs 800 22,570
Cash Shortage 22,166
Total Cash accounted for 69,314
Coins and Currency 756
Total fund disbursements 8,944
Petty Cash accounted for 9,700 Bank Reconciliation
Custodian’s accountability 10,000 Book Bank
Petty Cash shortage 300 320,600 260,880
Unadj bal, May 31
Deposit in Transit 120,000
Cash on Hand 9,840
Petty Cash Fund 2,000 Outstanding Checks (34,000)
Office Supplies Expense 3,920 Note Collected by Bank 37,200
IOU from employee 1,200 Bank Service Charge (1,080)
__________ __________
Shipping Expense 2,298 356,720 356,720
Adjusted Balances
Miscellaneous expense 1,526
Cash shortage 300 Adjusted Cash in Bank 357,720
Cash 11,244 Petty Cash Fund 12,000
Total Cash Balance 368,720
 Bank Reconciliation
Book Bank
Unadj. Balances 85,000 130,350
Bank Service Charge (2,000)
DIT 49,000
OS (17,650)

Note Collected
by Bank 136,000

Bank Error 54,000

Book error
(13,658-16,358) (2,700)
___________ ___________
Adjusted Balance 216,300 216,300
2.
Unadj. Balance per books 36,420
Unrecorded customer’s check 17,400
Bank Service Charge (1,200)
NSF Check (13,000)
Adjusted Cash Balance 39,620

3.

Unadj. Balance per bank 200,000

OS (15,000)
DIT 25,000
Adjusted Balance 210,000
Unadj. Balance per books 45,000 Unadj. Balance per bank ~50,000~
Bank Credits 15,000 DIT 12,500
Bank Charges (5,000) OS (7,500)
Adjusted Balance 55,000 Adjusted Balance 55,000
5.
Unadj. Balance per bank 175,000
OS (55,000)
DIT 37,500
Adjusted Balance 157,500

6.
Unadj. Balance per book 225,000
Bank collection 4,700
NSF Check (1,600)
Book Error
Overstatement
of Receipts (2,700-2,250) (450)
Overstatement
of expenses (485-395) 90
Adjusted cash balance 227,740
 Bank Reconciliation

Books Banks

Unadj. Bal 35,000

BSC (3,000) Unadj. Bal 209,500

Book error DIT 176,000

(34,200-24,300) 9,900 Outstanding Check ~(343,600)~
Adjusted Cash Balance 41,900 Adjusted Cash Balance 41,900
 Bank Reconciliation
Bank Book
Unadj. Bal. 585,284 ~541,714~
a. OS (52,810)
b. DIT 23,000
c. Book Error 900
d. NP payment (18,000)
e. BSC (740)
f. Bank Error (35,000)
g. NSF (3,400)
_________ _________
520,474 520,474
Cash in Bank-Adjusted Balance 520,474
Petty Cash Fund 8,000
Treasury Bills (400,000 x ½) 200,000
Total Cash and Cash Equivalent 728,474
 Bank Reconciliation
Book Bank
Unadjusted Bal. 20,490 30,426
OS Check 178 (2,150)
Check 181 (13,217)
DIT 11,774
Book Error (26-167-26,417) 250
Automatic Loan 8,150
Interest 82
NSF Check (1,000)
Bank service Charge (600)
____________ ____________
27,372 26,833
Arithmetic Errors
Stated End Bal 20,490
Correct End Bal 19,951 (539)
____________
26,833
1. Dec. 5 Deposit 49,000
4. Adjusted Cash Balance 423,825
Dec. 8 Deposit 14,000 The balance per books is already the adjusted because there not
Dec. 31 DIT 49,000 book reconciling items
Total Book Receipts 112,000 Bank Reconciliation
Book Bank
2. Cash Bal., Nov 30 423,825 Unadjusted Balances 275,132 273,620
Add: Dec. Receipt 112,000 DIT 49,000
Less: Disbursements 260,693 OS (46,938)
Cash Bal., Dec 31 275,132 Service Charge (1,000)
Interest 1,550
___________ ___________
3. Outstanding Checks, Dec. 31
Check no. 4321 6,000 Adjusted Balances 275,682 275,682
Check no. 4340 1,700
Check no. 4345 11,880
Check no. 4347 6,300
Check no. 4348 14,058
Check no. 4349 7,000
Total 46,938
Sales 6,235,200
Less: AR (165,400)
Collections from
Customers 6,069,800
 Total Payments for Purchases
Beg, Mat
Purchases 4,433,640
Less: End Materials ________________
Direct Materials used
Direct Labor
OH ________________
Total Manufacturing Cost
Add: WIP, Beg 0
________________
Cost of Goods Put into Process
0
Less: WIP, End ________________
Cost of Goods Manufactured
Add: FG, Beg ________________0 Total
Goods Available for Sale
Less: FG, end (69,000) Cost of
________________
2 types of Mark-up/Gross-profit Goods Sold 4,364,640
Based on Sales Based on Cost (6,235,200 x 70%)
Sale100% Sale XX Total Purchases 4,433,640
COS (XX) COS (100%) Less: AP, Dec. 31 (389,650)
MU/GP XX MU/GP XX
Payments for purchases 4,043,990
Collections from Customers 6,069,800
Issuance of Shares 1,650,000
Notes Payable 500,000
Total Cash Receipts 8,219,800
Payments for purchases 4,043,990
Land 1,000,000
Building 1,400,000
Furniture's and Fixtures 367,000
OPEX Paid
(1,005,150-400,000) 605,150

Total Cash Disbursements 7,416,140

 Cash, Beg 0
Cash Receipts per book 8,219,800
Cash Disbursements per book (7,416,140)
Cash Balance per Book 803,660

Bank Reconciliation
Book Bank
Unadjusted Balance 803,660 892,000
Deposit in Transit 384,660
Service Charge (2,000)
Outstanding Checks __________ (475,000)
__________
Adjusted Balance 801,660 801,660
1. Banks Receipts December 346,000
Less: DIT, Nov 30 (39,458)
NSF check redeposited (11,143)
Books Receipts December 295,399
2. Bank balance, Dec. 1, 2016 145,000
Add: Bank Receipts 346,000
Less: Bank Disbursements ~376,500~
Bank balance, Dec. 31, 2016 114,500
3. Bank Disbursements, Dec. 376,500
Add: OS, Dec. 31 94,162
Less: OS, Nov 30 (67,000)
NSF Check 11,143
Book Disbursements, Dec. 392,519
1. Principal ~27,000~
Interest 800
Collection Fee (200)
Proceeds 27,600
 Bank Reconciliation

Bank Book
Unadjusted Bal. 60,000 35,000
Note collection 27,600
Debit memo ~(100)~
_______
DIT 15,200
Bank Error (9,000)
Bank Error 26,700
Petty Cash Fund (10,000)
Bank Error (11,000)
OS (39,400-10,000) (29,400)
Adjusted Balances 52,500 52,500
4. Petty Cash accounted for 9,500
Petty Cash to be accounted for 10,000
Petty Cash Shortage (500)

5. Adjusted balance 3,000

1. Deposit in Transit, Apr. 30
Apr. 29 collection 53,000 5. Bank Reconciliation
Apr. 30 collection 16,850
Book Bank
Total 69,850
Unadjusted Balance 78,250 304,000
2. Outstanding Checks, Apr 30 Deposit in Transit 69,850
Check no. 4119 31,600 Outstanding Check (241,000)
Check no. 4120 83,750
Book Error (96,500-69,500) 27,000
Check no. 4121 5,000
EFT-Rent 16,300
Check no. 4122 120,650 Bank Collection 68,400
Total OS 241,000 Unauthorized Check (45,150)
EFT-Insurance (10,950)
3. Total Bank Receipts in April Service Charge (1,000) _________
as shown in Bank Statement 543,750
Adj. Bal, Apr 30 132,850 132,850
4. Total Bank Disbursements in April
as shown in Bank Statement 335,300
1. Unadj bal. per bank, Nov 30 95,750
OS, November (12,000)
DIT, November 5,550
Adj. bal. per bank, Nov 30 89,300

2. Outstanding Checks on December

Check #14343 12,000
Check #14646 8,600
Total 20,600

3. Deposit in Transit on December

Dec. 26 Deposit 49,000

4. Total Bank Receipts

The total bank receipts is the total amount credited by the
bank
565,150
5. Bank Reconciliation

Book Bank
Unadjusted Balances 147,200 605,800
DIT 49,600
OS (20,600)
Book Error (65,000-56,000) (9,000)
Loan Proceeds 500,000
NSF Check (7,600)
Interest 3,600
Service Charge (1,000)
__________ __________
Adjusted Balances 634,200 634,200
 1. Outstanding Checks, Dec. 31
Correct total of list 22,625 Bank Reconciliation

Book Bank
2. No journal entry is necessary. Unadjusted Balances 34,350 51,050
No information given indicates that
there those include in the list of OS were DIT 5,325
not taken up properly on the books. Returned Check (4,000)
Bank Service Charge (1,000)
Entries Outstanding Check (22,625)
AR 4,000 Note Collected 8,000
Cash 4,000 Book Error (3,600)
_________ _________
BSC 1,000 Adjusted Balances 33,750 33,750
Cash 1,000
Cash 8,000
Notes Receivable 8,000 Total Debits to Cash 8,000
AP 3,600 Total Credits to Cash 8,600
Cash 3,600 Net Credit 600
Checks cleared by the bank from
Jan 1 to 15 58,438
Checks cleared by the bank that
were from December Outstanding
Checks
(33,156)
(42,756 - 9,600)
Checks cleared by the bank that are
25,282
January Checks
Checks not cleared by the bank that
are January Checks 7,200

Total Disbursements as computed 32,482

Total Disbursements as reported 22,482
Difference in disbursements 10,000
 Bank Reconciliation

1. Proceeds= Principal - Interest Book Bank

Unadjusted Balance 19,829 47,174
18%/12 X 3 = 4.5%
Outstanding Checks (63,000)
100% - 4.5% = 95.5%
DIT 6,260
47,750 \ 95.5% = 50,000
Service Charge (1,000)
2. Prepaid Interest = Discount on Bank Loan
Proceeds of Bank Loan 47,750
not yet expensed Bank Error 9,170
Returned Check (77,320)
50,000-47,750= 2,250
Bank Error 1,440
2,250 x 2.5/3 = 1,875 Bank Error 13,600
Proceeds from note 25,625
3. Principal 25,000 Bank Error 5,000
Interest 1,125 (1,800)
Bank Error
Collection Fee ~(500)~ Bank Error ____________ (3,500)
____________
Proceeds 25,625 Adjusted Balances 14,344 14,344
Unadjusted Balance 19,829
Net Credit Adjustment 4,945