AUDIT OF CASH AND CASH EQUIVALENTS

INTERNAL CONTROL MEASURES FOR CASH

1. Cash receipts should be deposited intact – that is, in f. disbursing cash

the same amount and form as they are received. 5. Bank reconciliation statement should be prepared
monthly.
2. All disbursements should be authorized and made by
check except those involving small amounts which 6. Provide physical protection for cash.
should be paid from petty cash fund.
7. Minimize cash on hand in the office.
3. Both receipts and disbursements should be properly
8. Cash actually present in the office – petty cash,
accounted for in the records.
change fund and undeposited receipts can be
4. There should be separation of personnel duties for periodically counted and compared with the company
a. receiving cash records.
b. recording receipts
9. Adopt imprest fund system for petty cash.
c. depositing cash collections
d. reconciling bank account
e. authorizing disbursement

SUBSTANTIVE AUDIT PROCEDURES FOR CASH

Cash Balances For a sample of entries, reconcile daily deposit to validated

deposit ticket.
Existence: Cash recorded on the books exist
Classification: Cash receipts transactions have been
1. Count cash on hand.
recorded in the proper accounts
2. Confirm bank balances.
3. Examine interbank transfers. Review account coding for a sample of entries in the cash
4. Perform analytical procedures. receipts journal.

Completeness: All of the entity’s cash is included Accuracy (Valuation): Debits to cash and credits to
accounts receivable are valued at amounts received
5. Perform cash cutoff test.
6. Prepare proof of cash. For a sample of entries in cash receipts journal, examine
remittance advice and verify that discount taken was
appropriate. Foot accounts receivable subsidiary ledger
Rights and obligations: Any restrictions on cash have and reconcile to general ledger.
been identified
7. Examine standard bank confirmations and read the
Cash Payments
minutes of the board of directors’ meetings to
determine whether any restrictions have been placed
Completeness: All cash payments made are recorded
on cash.
Reconcile cash payments per books with cash payments
Valuation and allocation: Cash is correctly valued. per bank. Prepare or test bank reconciliation.
8. Obtain bank cutoff statements directly from the bank
Occurrence: Recorded cash payments occurred
and use them to test the bank reconciliation as of the
balance sheet date. Examine paid checks for appropriate endorsements.
Examine documents underlying payments.

Classification: Cash payments transactions have been

Presentation and disclosure: Cash is presented and recorded in the proper accounts
disclosed properly.
Check accuracy of accounts on invoices by reference to
9. Review financial statements and perform analytical chart of accounts.
procedures to determine whether accounts are
classified and disclosed in accordance with GAAP. Accuracy (Valuation): Debits to various accounts and
credits to cash are valued at proper amounts
Recalculate invoices paid.
Cash Collections
- end –
Completeness: All receipts of cash and checks are
recorded
For a sample of days, verify that all cash receipts are
recorded by reconciling daily listing(s) of cash receipts and
validated deposit ticket to cash receipts journal.
Occurrence: Recorded receipts represent actual
collections of cash from customers
For a sample of entries in cash receipts journal, trace to
the prelisting of cash receipts and to remittance advice.

PROBLEM NO. 1

Page 1 of 7
You were able to gather the following from the December 5. Which of the following balance-related audit objectives
31, 2020 trial balance of Peso Corporation in connection typically is assessed as having high inherent risk for
with your audit of the company: cash?
a. Existence c. Detail tie-in
Cash on hand P 372,000
b. Cutoff d. Presentation and disclosure
Petty cash fund 10,000
BPI current account 950,000 a. The general cash account is considered a
Security Bank current account No. 01 1,280,000 significant account in almost all audits:Where the
Security Bank current account No. 02 (40,000) ending balance is material.
PNB savings account 500,000 b. Even when the ending balance is immaterial.
PNB time deposit 300,000 c. Except those of not-for-profit organizations.
d. Where either the beginning or ending balance is
Cash on hand includes the following items: material.
a. Customer’s check for P60,000 returned by bank on
December 26, 2020 due to insufficient fund but
PROBLEM NO. 2
subsequently redeposited and cleared by the bank on
January 8, 2021. In connection with the audit of the financial statements of
b. Customer’s check for P30,000 dated January 2, 2021, Rupee Company for the year ended December 31, 2020,
received on December 29, 2020. you performed a surprise count of the petty cash fund and
c. Postal money orders received from customers, undeposited collections under the custody of Ms. Jessie at
P36,000. 8:15 a.m. on January 2, 2021. Your count disclosed the
following:
The petty cash fund consisted of the following items as of Bills and Coins
December 31, 2020. Bills Coins
Bills and coins P 2,100 P100 10 pieces P1.00 410 pieces
Employees’ vales 1,600 50 80 pieces 0.50 324 pieces
Currency in an envelope marked “collections 20 70 pieces 0.25 64 pieces
for charity” with names attached 1,200 10 54 pieces
Unreplenished petty cash vouchers 800 Unused postage stamps – P730
Check drawn by Peso Corporation, payable
to the petty cashier 4,600 Checks
P10,300 Date Payee Drawer Amount
Dec. 30 Cash Ms. Jessie P 2,400
Included among the checks drawn by Peso Corporation Dec. 30 Rupee Company Robert 28,000
against the BPI current account and recorded in December Dec. 31 Rupee Company Jay Ar, sales
2020 are the following: manager 3,360
Dec. 31 Rupee Company Francis 35,600
a. Check written and dated December 29, 2020 and
Dec. 31 Rupee Company Ryan 16,600
delivered to payee on January 2, 2021, P50,000.
Dec. 31 German Corp. Rupee
b. Check written on December 27, 2020, dated January
(not endorsed) Company 54,000
2, 2021, delivered to payee on December 29, 2020,
P86,000.
Expense Vouchers
The credit balance in the Security Bank current account Date Payee Description Amount
No. 2 represents checks drawn in excess of the deposit Dec. 23 Jay Ar, Cash advance for
balance. These checks were still outstanding at December sales manager trip to Baguio
31, 2020. City P14,000
Dec. 27 Central Post Postage stamps
The savings account deposit in PNB has been set aside by Office 3,240
the board of directors for acquisition of new equipment. Dec. 29 Messengers Transportation 300
This account is expected to be disbursed in the next 3 Dec. 29 PC Express Computer repair 1,600
months from the balance sheet date.
Other items found inside the cash box:
QUESTIONS: a) Two pay envelopes which had been opened and the
Based on the above and the result of your audit, compute contents aggregating P15,000 representing unclaimed
for the adjusted balances of following: salaries had been removed.

1. Cash on hand b) The sales manager’s liquidation report for his Baguio
a. P282,000 c. P408,000 trip:
b. P246,000 d. P342,000 Cash advance received on
Dec. 23 P14,000
2. Petty cash fund
Less: Hotel accommodation P9,000
a. P6,700 c. P 2,100
Bus fare for two 800
b. P9,100 d. P10,000
Cash given to Roy,
salesman 600 10,400
Balance P 3,600
3. BPI current account Accounted for as follows:
a. P1,086,000 c. P1,000,000 Cash returned by Roy to the sales
b. P 914,000 d. P 950,000 manager P 240
4. Cash and cash equivalents Personal check of sales
a. P2,914,700 c. P2,614,700 manager 3,360
b. P2,954,700 d. P3,414,700 Total P 3,600
Additional information: a. A check payable to a supplier, dated December 29,
2020, in the amount of P14,750, released on
a) The custodian is not authorized to cash checks.
January 5, 2021.
b) The last official receipt included in the deposit on b. A check representing advance payment to a
December 30 is No. 351 and the last official receipt supplier in the amount of P37,210, the date of
issued for the current year is No. 355. The following which is January 4, 2021, and released in
official receipts are all dated December 31, 2020. December, 2020.
O.R. No. Amount Form of payment  On December 31, 2020, the company received and
352 P27,200 Cash recorded customer’s postdated check amounting to
353 35,600 Check P50,000.
354 7,200 Cash
355 16,600 Check QUESTIONS:
Based on the above and the result of your audit, answer
c) The Petty Cash balance per general ledger is P20,000. the following:
The last replenishment of the fund was made on
1. The adjusted deposit in transit as at December 31,
December 22, 2020.
2020 is
a. P175,250 c. P225,250
REQUIRED:
b. P125,250 d. P125,000
1. Computation of shortage or overage, if any P40,332
2. The adjusted outstanding checks as at December 31,
2. Adjusting entries as of December 31, 2020 2020 is
3. Who is responsible, at all times, for the amount of the a. P298,710 c. P209,540
petty cash fund? b. P232,000 d. P194,790
a. General cashier 3. The adjusted cash to be presented in the statement of
b. President of the company financial position at December 31, 2020 is
c. Petty cash custodian a. P235,460 c. P265,460
d. Chairman of the Board of Directors b. P250,460 d. P310,460
4. What is the effect of not replenishing the petty cash 4. The cash shortage as of December 31, 2020 is
fund at year-end and not making the appropriate a. P45,000 c. P60,000
adjusting entry? b. P58,040 d. P 8,040
a. A detailed audit is necessary.
b. The petty cash custodian should turn over the 5. The starting point for the verification of the balance in
petty cash to the general cashier. the general bank account is to obtain:
c. Cash will be overstated and expenses understated. a. A bank reconciliation from the client.
d. Expenses will be overstated and cash will be b. The client's cash account from the general ledger.
understated. c. A cutoff bank statement directly from the bank.
d. The client's year-end bank statement.
5. An imprest petty cash fund would least likely be used
to pay for which of the following items? 6. Which of the following substantive audit procedures is
a. Minor office supplies most likely to be performed by the auditor to gather
b. Monthly interest expense evidence in support of the balance per bank?
c. Stamps for small mailings a. Confirm directly with bank
d. Small contributions to a local charity b. Compare to general ledger.
c. Trace to cash receipts journal.
d. Trace items on the cutoff bank statement to bank
PROBLEM NO. 3 reconciliation.

You are conducting an audit of the Swerte Company for 7. Which of the following substantive audit procedures is
the year ended December 31, 2020. The internal control least likely to be performed by the auditor to gather
procedures surrounding cash transactions were not evidence in support of the deposits in transit?
adequate. The bookkeeper-cashier handles cash receipts, a. Inspect supporting documents for reconciling item
maintains accounting records, and prepares the monthly not appearing on cutoff bank statement.
bank reconciliations. b. Trace items on the bank reconciliation to cutoff
bank statement.
The bookkeeper-cashier prepared the following c. Trace to cash receipts journal.
reconciliation at the end of the year: d. Inspect bank credit memo.
Balance per bank statement P350,000
8. Which of the following substantive audit procedures is
Add: Deposit in transit P175,250
least likely to be performed by the auditor to gather
Note collected by bank 15,000 190,250
evidence in support of the outstanding checks?
Total 540,250
a. Confirm directly with bank.
Less outstanding checks 246,750
b. Trace to cash disbursements journal.
Balance per general ledger P293,500
c. Ascertain reason for unusual delay.
d. Trace items on the bank reconciliation to cutoff
In the process of your audit, you gathered the following:
bank statement.
 At December 31, 2020, the bank statement and
general ledger showed balances of P350,000 and
P293,500, respectively.
 The cut-off bank statement showed a bank charge on
January 2, 2021 for P30,000 representing correction of
an erroneous bank credit.
 Included in the list of outstanding checks were the
following:
9. A partial-period bank statement and the related b. P127,000 d. P122,000
canceled checks, duplicate deposit slips, and other
3. The cash shortage as of December 31, 2020 is
documents included in bank statements, mailed by the
a. P35,000 c. P30,000
bank directly to the CPA firm's office, is called:
b. P46,000 d. P41,000
a. A four-column proof of cash.
b. A year-end bank statement. 4. The primary purpose of sending a standard
c. A cutoff bank statement. confirmation request to financial institutions with which
d. A short-period bank statement. the client has done business during the year is to
a. Detect kiting activities that may otherwise not be
10. An auditor who is engaged to examine the financial
discovered.
statements of a business enterprise will request cutoff
b. Corroborate information regarding deposit and loan
bank statement primarily in order to
balances.
a. Verify the cash balance reported on the bank
c. Provide the data necessary to prepare a proof of
confirmation inquiry form.
cash.
b. Verify reconciling items on the client’s bank
d. Request information about contingent liabilities and
reconciliation.
secured transactions.
c. Detect lapping.
d. Detect kiting. 5. The auditor should ordinarily mail confirmation
requests to all banks with which the client has
conducted any business during the year, regardless of
PROBLEM NO. 4 the year-end balance, since
a. The confirmation form also seeks information
You were engaged to audit the books of Davao Company.
about indebtedness to the bank.
From the records of the company, you gathered the
b. This procedure will detect kiting activities which
following information:
otherwise not be detected.
c. The mailing of confirmation forms to all such banks
Davao Company started operations on October 2, 2020
is required by GAAS.
with the owners investing P150,000 cash. Monthly bank
d. This procedure relieves the auditor of any
reconciliation statements have not been prepared;
responsibility with respect to non-detection of
however, bank statements for October, November, and
forged checks.
December were made available to you. Your analysis of
these bank statements showed total bank credits
(deposits) of P575,000 including the owners’ initial
PROBLEM NO. 5
investment and a bank loan, details of which are in
additional data. The bank statement in December, 2020 You were able to obtain the following information during
showed an ending balance of P91,500. your audit of Euro Company:

Examination of the paid checks disclosed that checks Reconciling items:

totaling P4,500 were issued by the company in December,
2020, and were presented for payment only in January, Nov. 30 Dec. 31
2021. Cash count of the cashier’s accountability amounted Undeposited collections P200,000 P120,000
to P5,000. You were told by the cashier that these were Outstanding checks 80,000 60,000
collections from credit sales on December 30, 2020, Customer’s notes collected by
deposited on January 2, 2021. bank 100,000 120,000
Bank service charges 2,000 3,000
Additional information are as follows: Erroneous bank debits 10,000 20,000
a. Accounts receivable subsidiary ledgers had a total Erroneous bank credits 40,000 30,000
balance of P70,000 at December 31, 2020. P5,000 of NSF checks not redeposited 5,000 7,000
this was ascertained to be uncollectible. Customer's check deposited
b. Suppliers’ unpaid invoices for merchandise totaled December 10, returned by
P15,000; while an account for store fixtures bought for bank on December 16
P50,000 had an unpaid balance of P5,000. marked NSF, and
c. Merchandise inventory at December 31, 2020 redeposited immediately;
amounted to P30,000 but P5,000 of these were spoiled no entry made on books for
with no resale value. return or redeposit 10,000
d. The bank statement in October showed a bank credit
for P98,000, dated October 2, 2020. Inquiry from the Unadjusted balances:
cashier disclosed that the amount represents proceeds Books ? 90,000
of a 90-day, discounted bank note. P80,000 of this Bank 230,000 ?
loan was paid by check in December, 2020.
e. Operating expenses paid during the period totaled December Transactions:
P180,000; while merchandise purchases amounted to
P250,000. Bank Books
f. The gross profit rate is 120% of cost. Receipts P420,000 P270,000
Disbursements 500,000 407,000
QUESTIONS:
REQUIRED:
Based on the above and the result of your audit, answer 1. Prepare a 4-column bank reconciliation for the month
the following: of December, using the form that reconciles both the
1. Total collections from sales for 2020 is book and bank balances to a correct cash amount.
a. P414,000 c. P419,000 2. Adjusting entries as of December 31.
b. P425,000 d. P430,000
SOLUTION GUIDE:

2. Cash balance per books as of December 31, 2020 is Bank

a. P133,000 c. P138,000
 (B) (R) (D) (E) Based on the above and the result of your audit, answer
11/30 Dec. Dec. 12/31 the following:
Unadjusted bal.
1. How much is the unadjusted cash balance per books as
DIT – 11/30
of November 30?
- 12/31 a. P13,290 c. P11,690
OC – 11/30 b. P12,490 d. P11,190
- 12/31
Error, Dr.–11/30 2. How much is the unadjusted book receipts for
- 12/31 December?
Error, Cr.–11/30 a. P284,840 c. P279,540
- 12/31 b. P281,640 d. P282,190
NSF check red. 3. How much is the unadjusted book disbursements for
Adjusted bal. December?
a. P273,100 c. P275,335
Books b. P271,565 d. P274,635
(B) (R) (D) (E) 4. How much is the unadjusted cash balance as of
11/30 Dec. Dec. 12/31 December 31?
Unadjusted bal. a. P18,195 c. P21,580
Note coll.– 11/30 b. P17,495 d. P24,965
- 12/31
5. Auditors are likely to prepare a proof of cash when the
BSC – 11/30 client has:
- 12/31 a. Material control weaknesses in cash receipts and
NSF check–11/30 cash disbursements.
- 12/31 b. Material control weaknesses in accounts receivable
NSF check red. and revenue.
Adjusted bal. c. Material control weaknesses in accounts payable
and inventory.
d. Material control weaknesses in payroll.
PROBLEM NO. 6
6. A proof of cash represents:
In your audit of the cash account of Cebu Company, you a. A test of controls and substantive test of
were requested by the client to prepare a four-column transactions.
reconciliation of receipts, disbursements, and balances to b. A substantive test of transactions.
reconstruct the balances per books. c. A substantive test of transactions and test of
details of balances.
Nov. 30 Dec. 31
d. A test of details of balances.
a) Balances per bank P14,010 P19,630
b) Deposits in transit 2,740 3,110
c) Outstanding checks 4,260 3,870
SOLUTION GUIDE (Questions 1 to 4):
d) Bank collections not in
books 1,200 1,600 (B) (R) (D) (E)
e) Bank charges not in 11/30 Dec. Dec. 12/31
books 950 640 Unadj. bank bal.
f. Of the checks outstanding on December 31, one check DIT – 11/30
for P700 was certified at the request of the payee. - 12/31
g. Receipts for December, per bank statement – OC – 11/30
P281,070. - 12/31
h. DAIF check from customer was charged by the bank on
CM-coll.– 11/30
December 28, and has not been recorded – P800.
- 12/31
i. DAIF check returned in November and recorded in
DM-BSC – 11/30
December, P1,050.
- 12/31
j. DAIF check returned and recorded in December, P900.
k. Check of Cibo Company charged by the bank in error, DAIF checks: (h)
P2,010. (i)
l. Receipt on December 6 paid out in cash for travel (j)
expenses, P750. Recorded as receipts and Bank error, Dr.
disbursements per books. Receipts used for
m. Error in recording customer’s check on December 20, payments
P165 instead of P465. Book errors: (m)
n. Error in disbursements journal for December, P3,250 (n)
instead of P325. Unadj. book bal.

You noted in your audit that the DAIF checks returned by

the bank are recorded as a reduction on the cash receipts
journal instead of recording it at cash disbursements
journal; redeposits are recorded as regular cash receipts.

QUESTIONS:
- now do the DIY drill -
 DO-IT-YOURSELF (DIY) DRILL
PROBLEM NO. 1 b. P264,210 d. P291,210
You are assigned to audit the cash accounts of Foul 4. What is the correct balance of the cash in bank
Corporation for the fiscal year ended June 30, 2020. The account as of June 30, 2020?
following is an excerpt of the company’s trial balance as of a. P1,901,430 c. P1,946,430
June 30, related to the company’s cash accounts: b. P1,911,030 d. P1,964,430
Petty cash fund, imprest balance P 120,000 5. Which statement is true regarding audit of cash?
Cash in bank, Metrobank 1,631,730 a. When the year-end cash balance is immaterial, the
audit of the cash account is unnecessary.
Audit notes: b. The risk of the company issuing checks near year-
a. You rendered a cash count on the company’s petty cash end and mailing them subsequently is not
fund on June 30. The custodian presented to you the important to the auditor as the action does not
following: affect cash balances.
c. Cash is no longer considered highly susceptible to
Currencies and coins P37,620 theft because of the advent of computers, safes
A disbursement check payable to the and armored cars.
custodian 46,800 d. The auditor is responsible for auditing the
An officer’s personal check necessary disclosures when material lines of credit
accommodated by the fund 12,000 and compensating balance arrangements have
Manager’s check marked NSF 6,000 been made by the client with a lender.
Petty cash expense vouchers:
6/20 Transportation 4,500
6/24 Office repairs 2,700 PROBLEM NO. 2
6/27 Miscellaneous 6,300
Unused postage stamps 1,500 In connection with your examination, the MQM Company
An enveloped marked “collections for presented to you the following information regarding its
charity” with list of names and Cash in Bank account for the month of December:
corresponding amounts contributed. a) Balances per bank statements: November 30,
There is no money inside the P215,600, and December 31, P230,400.
envelope. 7,500 b) Balances of cash in bank account in company’s books:
November 30, P165,450, and December 31, P226,800.
b. The bank reconciliation statement for the month of May c) Total receipts per books were P2,221,900 of which
included the following information: P12,100 was paid in cash to a creditor on December
24.
Balance per general ledger P 980,490
d) Total charges in the bank statement during December
Note collected by the bank in May 375,000
were P2,189,700.
Interest on the note receivable in May 37,500
e) Undeposited receipts were: November 30, P90,600
Bank service charge in May (16,800)
and December 31, P101,200.
Customer NSF check (75,000)
f) Outstanding checks were: November 30, P26,750,
Adjusted balance P1,302,190
and December 31, P19,300, of which a check for
Balance per statement in May P1,402,500 P5,000 was certified by the bank on December 26.
Deposits in transit 167,370 g) NSF checks returned, recorded as reduction of cash
Outstanding checks (295,380) receipts, were:
Bank charge error in May 26,700  Returned by bank on December, recorded also in
Adjusted balance P1,302,190 December, P10,400.
 Returned by bank on December but recorded in
The May book reconciling items were recorded in the
January, P8,600
books in June while the bank charge error in May was
h) Collections by bank not recorded by Company were
automatically corrected by the bank in June. The bank
P121,500 in November and P116,400 in December.
collected another P300,000 note receivable in June with
i) Bank service charges not entered in company’s books
a P30,000 interest on the company’s behalf. Bank
were: November 30, P7,500 and December 31,
service charge for June was P24,300. The company
P4,200.
erroneously recorded a disbursement check amounting
j) A check for P9,500 of QMQ Company was charged to
to P168,000 as P195,000 in June. The error is yet to be
MQM Company in error.
corrected. The bank erroneously credited the company
k) A check drawn for P8,400 was erroneously entered in
for P63,000 representing a deposit of Fool Corporation.
the books as P4,800.
The bank discovered and corrected the error in June.
Total bank credits and debits appearing in the June QUESTIONS:
bank statement were at P8,011,800 and P7,325,760
Based on the above and the result of your audit, answer
respectively. Moreover, total receipts per the general
the following:
ledger were at P 7,977,330.
6. How much is the adjusted cash balance as of
QUESTIONS: November 30?
a. P215,600 c. P279,450
1. What is the petty cash shortage as of June 30, 2020?
b. P151,750 d. P274,450
a. P 4,080 c. P11,580
b. P10,080 d. P17,580 7. How much is the adjusted book receipts for December?
a. P2,204,700 c. P2,227,200
2. How much is the June deposits in transit?
b. P2,113,900 d. P2,216,800
a. P 77,100 c. P140,100
b. P113,400 d. P167,100 8. How much is the adjusted book disbursements for
December?
3. How much is the June outstanding checks?
a. P2,169,450 c. P2,157,350
a. P201,210 c. P290,210
b. P2,179,850 d. P2,169,450
 DATE DEBITS CREDITS
9. How much is the adjusted cash balance as of
26 8,913 6,885
December 31?
29 5,152 5,913
a. P317,300 c. P307,800
30 2,238
b. P330,400 d. P326,800
31 5,857
10. Which of the following would normally be discovered as TOTALS P 75,304 P 77,150
part of the audit of the bank reconciliation?
a. Failure to bill a customer Additional information:
b. Failure to include a deposit in transit on the bank 1. Hangover makes a journal entry for service charges,
reconciliation direct deposits, and interest earned in the month
c. Duplicate payment of a vendor's invoice subsequent to the month the items are reflected on
d. Payment to an employee for more hours than she the bank statement.
worked 2. Barek Co. makes a direct deposit of P675 to
Hangover’s account at the bank on the 30 th of every
month. This payment, which is rent revenue to
PROBLEM NO. 3 Hangover, is not recorded by Hangover until the bank
Hangover Company received the following bank statement is received.
statement on August 1: 3. On the 23rd of July, an NSF check for P472 was
returned by the bank. The check was redeposited on
DATE DEBITS CREDITS BALANCE July 27th, and no entry was made by Hangover.
July 1 66,405 4. Check no. 1145 dated July 29 was written for P1,492
2 2,502 63,903 of wages, but recorded by Hangover on its books as
3 2,240 1,050 62,713 P1,000.
5 2,106 64,819 5. On July 16, the bank recorded a withdrawal of P386 for
6 5,535 70,354 Hangover that should have been for Handover
8 5,817 76,171 Company.
9 8,181 67,990 6. The bank service charge for June was P165 and for
10 4,317 72,307 July was P175.
11 6,819 4,926 65,488 7. The interest earned on June was P3,054 and in July
12 7,425 62,989 was P3,160.
13 62,989 8. During June, Hangover wrote check no. 1095 for
15 3,509 66,498 P9,850 for rent expense but recorded the check on its
16 9,777 56,721 books as P8,955. Hangover discovered the mistake in
17 6,221 7,702 58,202 July, when the cancelled checks were returned with the
18 6,484 51,718 June bank statement but neglected to correct the error
19 3,418 55,136 on the books at that time.
20 5,310 60,446 9. At the end of June, Hangover had P3,156 of deposits in
22 6,492 66,938 transit, and checks totaling P4,742 that had not
23 5,546 61,392 cleared the bank. In addition, all of Hangover’s
24 61,392 transactions with the bank after July 29 have not
25 8,735 52,657 cleared the bank.
26 8,246 60,903
27 9,385 70,288 QUESTIONS:
29 7,060 63,228
30 63,228 11. How much is the adjusted cash balance as of June 30
31 6,405 8,987 65,810 a. P74,303 c. P64,819
b. P58,507 d. P67,991
TOTALS P77,395 P76,800
12. How much is the adjusted bank receipts for July?
Hangover’s cash account shows the following information a. P75,410 c. P76,354
for the month of July: b. P75,024 d. P75,882
13. How much is the adjusted book disbursements for
The June 30 balance was P62,150.
July?
DATE DEBITS CREDITS a. P78,124 c. P78,596
July 1 3,729 165 b. P78,038 d. P77,652
2 5,535
14. How much is the adjusted cash balance as of July 31
3 8,181
a. P62,577 c. P74,291
5 5,817
b. P69,815 d. P61,805
6 4,317
8 6,819 15. Which of the following represents a normal substantive
9 4,926 7,425 audit procedure for cash balances?
12 3,509 a. Review cash received by the client from the bank.
13 9,391 b. Verify material deposits-in-transit to subsequent
15 7,702 statements.
16 6,221 c. Foot cutoff bank statements provided by the
17 3,418 6,484 financial institutions.
18 5,310 d. Perform kiting techniques to transfer cash between
19 6,492 two client accounts.
20 5,074
22 8,735  - end of AP.2904 - 
23 8,246