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AUDITING PROBLEMS
Proof of Cash (Bank to Book Method)

In your audit of the cash account of Cebu Company, you 5. Auditors are likely to prepare a proof of cash when the
were requested by the client to prepare a four-column client has:
reconciliation of receipts, disbursements, and balances to a. Material control weaknesses in cash receipts and
reconstruct the balances per books. cash disbursements.
b. Material control weaknesses in accounts receivable
Nov. 30 Dec. 31
and revenue.
a) Balances per bank P14,010 P19,630
c. Material control weaknesses in accounts payable
b) Deposits in transit 2,740 3,110
and inventory.
c) Outstanding checks 4,260 3,870
d. Material control weaknesses in payroll.
d) Bank collections not in
books 1,200 1,600 6. A proof of cash represents:
e) Bank charges not in a. A test of controls and substantive test of
books 950 640 transactions.
f. Of the checks outstanding on December 31, one check b. A substantive test of transactions.
for P700 was certified at the request of the payee. c. A substantive test of transactions and test of
g. Receipts for December, per bank statement – details of balances.
P281,070. d. A test of details of balances.
h. DAIF check from customer was charged by the bank on
December 28, and has not been recorded – P800.
i. DAIF check returned in November and recorded in SOLUTION GUIDE (Questions 1 to 4):
December, P1,050.
j. DAIF check returned and recorded in December, P900. (B) (R) (D) (E)
11/30 Dec. Dec. 12/31
k. Check of Cibo Company charged by the bank in error,
P2,010. Unadj. bank bal.
l. Receipt on December 6 paid out in cash for travel DIT – 11/30
expenses, P750. Recorded as receipts and - 12/31
disbursements per books. OC – 11/30
m. Error in recording customer’s check on December 20, - 12/31
P165 instead of P465. CM-coll.– 11/30
n. Error in disbursements journal for December, P3,250 - 12/31
instead of P325. DM-BSC – 11/30
- 12/31
You noted in your audit that the DAIF checks returned by DAIF checks: (h)
the bank are recorded as a reduction on the cash receipts (i)
journal instead of recording it at cash disbursements (j)
journal; redeposits are recorded as regular cash receipts. Bank error, Dr.
Receipts used for
QUESTIONS: payments
Based on the above and the result of your audit, answer Book errors: (m)
the following: (n)
Unadj. book bal.
1. How much is the unadjusted cash balance per books as
of November 30?
a. P13,290 c. P11,690
b. P12,490 d. P11,190
2. How much is the unadjusted book receipts for
December?
a. P284,840 c. P279,540
b. P281,640 d. P282,190
3. How much is the unadjusted book disbursements for
December?
a. P273,100 c. P275,335
b. P271,565 d. P274,635
4. How much is the unadjusted cash balance as of
December 31?
a. P18,195 c. P21,580
b. P17,495 d. P24,965 - end -

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