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Polytechnic University of the Philippines

Sta. Mesa Manila


Cash and cash equivalents are presented in the statement of financial position as one line item “CASH”. The
auditor’s objective is to ascertain the correct cash balance in the statement and provide reasonable conclusion about
the account balance.


Cash Balance
Existence: All cash on the statement of financial position is held by the entity or by others (e.g., a bank) for the
 Cash count (on hand, e.g. petty cash fund and cash in vault)
 Confirmation of bank balances (all bank accounts)
 Examination of interbank account transfers
 Perform analytical procedures

Completeness: All cash owned by the entity at the statement of financial position date is included on the statement
of financial position.
 Perform cash cut-off test
 Prepare proof of cash
 Examine the client's bank reconciliation as of year-end, including cash-in-transit accounts, (e.g., in sub
ledgers) to verify the proper reconciliation of bank statements and general ledger accounts. When appropriate
(e.g., to determine whether receipts or disbursements are recorded on a timely basis, or to verify the
appropriateness of reconciling items), obtain cutoff bank statements.

Rights and Obligation: The entity owns, or has a legal right to, all the cash on the statement of financial position at
the statement of financial position date. All cash is free of restrictions on use, liens, or other security interests or, if
not, such restrictions, liens, or other security interests are identified.
 Examine standard bank confirmations and read the minutes of the board of directors meetings to determine
whether any restrictions have been placed on cash.

Valuation and Allocation: Cash is correctly valued.

 Test appropriate valuation of cash and cash equivalents (including overdrafts) in foreign currencies.

Presentation and Disclosure: Cash is presented and disclosed properly.

 Review financial statements and perform analytical procedures to determine whether accounts are calcified and
disclosed in accordance with practicable reporting standards.

Cash Collections

Completeness: All receipts of cash and checks are recorded.

 Verify that all cash receipts are recorded by reconciling daily listing(s) of cash receipts and validated deposits
slips to cash receipts journal.

Occurrence: Record receipts represent actual collections of cash from customers.

 For sample of entries in cash receipts journal, trace to the prelisting of cash receipts and to remittance advice.
For sample of entries, reconcile daily deposit to validate deposit slips.

Classification: Cash receipts transactions have been recorded in the proper accounts.
 Review account coding for a sample of entries in the cash receipts journal.

Accuracy (Valuation): Examine remittance advice and verify that discounts taken were appropriate.
Cash Payments

Completeness: All cash payments made are recorded.

 Reconcile cash payments per books with cash payments per bank.
 Prepare or test bank reconciliation.

Occurrence: Recorded cash payments occurred.

 Examine paid checks for appropriate endorsements. Examine documents underlying payments.
Classification: Cash payments transaction has been recorded in the proper accounts.
 Check accuracy of accounts on invoices by reference to chart of accounts.

Accuracy (Valuation): Debits to various accounts and credits to cash are valued t proper amounts.
 Recalculate invoice paid.


The trial balance of Justine League Company includes the following: Cash on hand, P296,000; petty cash fund,
P56,150; Asian Development Bank – CA, P595,000; Land bank – CA No. 1, P780,000; Land Bank – CA No. 2,
(50,000); Metro Bank – SA, P380,000 and Metro Bank – Time deposit ( 2 – months), P300,000.

The cash on hand includes the following items:

Customers check for P60,000 returned by the bank on December 27, 2018 due to insufficient funds, but subsequently
re-deposited and cleared by the bank on January 12, 2019. Postal money orders received from customers, P28,000.
Customers check for P47,000 dated January 10, 2019 but received on December 27, 2018.

The petty cash fund consisted of the following items as of December 31, 2018:
Currency and coins, P1,090; Employee advances, P900; currency in an envelope marked “collection for charity” with
names attached, P800; Un-replenished petty cash vouchers, P500; personal check drawn by the pretty petty cash
custodian payable to “cash”, P3,100 and check drawn by the company payable to the pretty petty cash custodian,

Included in the checks drawn by the company against the Asian Development Bank account and recorded in
December 2018 are as follows:
Check number 133 written and dated December 27 but delivered to payee on January 3, 2019, P65,000. Check number
134 written on December 29, 2018 and dated January 15, 2018 but delivered to payee on December 30, 2018,

The credit balance in the Land Bank account represents check drawn in excess of the deposit balance. These checks
were still outstanding at December 31, 2018. There is an agreement between the bank and your client to offset any
overdraft in bank accounts.

The savings account deposit in Metro Bank has been set aside by the board of directors for the acquisition of new
equipment. This amount is expected to be disbursed in the next three years from the balance sheet date.

1. How much is the balance of petty cash fund as of December 31, 2018?

2. What is the correct cash balance of Justine League Company in the statement of financial position as of
December 31, 2018?


In connection with the audit of the financial statement of Star Bucks Company for the year ended December 31, 2018,
you performed a surprise count of the petty cash fund and un-deposited collections under the custody of Ms. Jewel at
exactly 10:15 in the morning of January 7, 2019. Your count disclosed the following:

Bills and coins

P100 60 pieces P1.00 2,950 pieces
50 450 pieces 0.50 2,400 pieces
20 480 pieces 0.25 380 pieces

Unused postage stamps – P450

Date Payee Drawer Amount
Dec 30 Cash Star Buck Company (Custodian) P10,000
Dec 30 Star Bucks Company Baldo 142,000
Dec 31 Star Bucks Company Alyssa, sales manager 4,600
Dec 31 Star Bucks Company Clariza 200,000
Dec 31 Star Bucks Company Ching 106,000
Dec 31 Biboy Corp Star Bucks Company 380,000
Expense Vouchers
Date Payee Description Amount
Dec 20 Fitness First Zumba fee P10,000
Dec 20 MikDonalds Foods Meals during meeting 4,000
Dec 22 Kailan Gen. Merchandise Bond paper and scissors 800
Dec 23 Alyssa, sales manager Cash advance for trip to Davao 40,000
Dec 27 Post office Postage stamps 2,500
Dec 29 Messengers Transportation 1,500
Dec 29 Mac express Machinery repair 3,500
Jan. 2, ‘19 Today Merchandise Air fresher 1,000
Jan. 4, ‘19 Trexy Taxi Transportation 1,900

Other items found in the cash box

a. Two pay envelope with note outside “unclaimed salaries” of P35,000 which had been opened and the contents
aggregating P28,000 had been found inside the envelope.

b. Sales manager liquidation report for her Davao trip.

Cash advance received P40,000
Less: Hotel accommodation P30,000
Air fare 2,000
Cash given to Dos, salesman 3,000 35,000
Balance P5,000

Accounted for as follows:

Cash returned by Dos to the sales manager P400
Personal check of sales manager 4,600
Total P5,000

Additional information:
1. The custodian is not authorized to encash checks.

2. The last official receipt included in the deposit on December 30 is No. 3051 and the last official receipt issued for
the current year is No. 3055. The following official receipts are all dated December 31, 2018.

O.R. No. Amount Form of payment

3052 P91,000 Cash
3053 142,000 Check
3054 70,000 Cash
3055 200,000 Check

3. The petty cash balance per general ledger is P60,000. The last replenishment of the fund was made on December
20, 2018.

1. Determine the amount of cash shortage or overage, if any.

2. Adjusting entries required as of December 31, 2018?

3. How much is the adjusted balance of petty cash fund?

4. Determine the amount of cash presented in the statement of financial position at year end.


You are conducting an audit of Kita – Kita Corporation for the year ended December 31, 2018. The internal control
procedures surrounding cash transactions were not adequate. The bookkeeper-cashier handles cash receipts, maintains
accounting records and prepares monthly bank reconciliations. The bookkeeper-cashier prepared the following
reconciliation at the end of the year.

Balance per bank P700,000

Add: Deposit in transit P350,500
Notes collected by bank 30,000 380,500
Total P1,080,500
Less: Outstanding checks 493,500
Balance per book P587,000

In the process of your audit, you gathered the following:

a. At December 31, 2018, the bank statement and general ledger showed balances of P700,000 and P587,000,
b. The cut-off bank statement showed a bank charge on January 2, 2019 for P60,000 representing correction of an
erroneous bank credit.
c. Included in the list of outstanding checks were the following:
 A check payable to a supplier, dated December 29, 2018, in the amount of P29,500, released on January 5,
 A check representing advance payment to a supplier in the amount of P74,420, the date of which is January 4,
2019, and released in December, 2018.
d. On December 31, 2018, the company received and recorded customer’s postdated check amounting P100,000.
Included in the above balance of deposit in transit.

Compute the following as of December 31, 2018:

1. Adjusted deposit in transit:

2. Adjusted outstanding checks:

3. Adjusted cash in bank:

4. Cash shortage:


In the course of the audit of Blue Whale Company’s cash in bank for the year ended December 31, 2018, you
ascertained the following information:
Nov. 30 Dec. 31
Cash per books P60,350 P?
Cash per bank statements 535,410 689,085
Undeposited collections 41,005 64,400
Outstanding checks 138,590 150,560
Bank service charges 3,600 3,000
Insufficient fund check – 41,250
Company's notes receivable collected by bank 359,075 404,500

The bank statement and the company’s cash records show the following totals:
Checks and debit memos per bank statement P1,091,865
Cash receipts per cash record ?
Cash disbursements per cash records ?
Deposits and credit memos per bank statement 1,245,540

Additional information:
a. The insufficient fund check was re-deposited in the same month. No entries were made to take up the return and

b. A P50,000 bank charge error in November was corrected by the bank in December, while a P20,000 deposit of
Blue Sea Corp. was erroneously credited by the bank to the company’s account in December.

c. A P19,000 disbursement check was recorded in November as P91,000. The error was discovered and corrected
in December.

d. A P20,000 customer collection was recorded in the books in December as P200,000, the error was detected and
corrected in December.

1. What is the unadjusted book receipt in December?

2. What is the unadjusted book disbursement in December?

3. What is the correct cash balance as of November 30?

4. What is the unadjusted cash balance per books as of December 31?

5. What is the correct cash balance as of December 31?


Your client, Sapporo Incorporated, engaged in selling summer outfits was under your audit for the year ended
December 31, 2018. You obtained bank statements for November 30 and December 31, 2018 and reconciled the
balances. You obtained directly the statements as of January 12, 2019 and performed the necessary confirmation.
The following information was noted:

11/30/18 12/31/18
Balance, bank statement 688,840 550,040
Balance, company records 542,520 452,020
Deposit in transit 70,000 ?
Outstanding checks 176,480 ?

12/1-31/18 1/1-12/19
Receipts, per books 1,926,460 585,000
Credits, bank statement 1,882,020 642,980
Disbursements, per book 2,016,960 355,140
Charges, bank statement 2,020,820 460,360

Additional information:
a. Check # 900 for P1,500 cleared by bank in December as P3,500. This was found in proving the bank statement.
The bank made the correction on January 5, 2019.

b. A note of P40,000, was presented by a customer to the bank for collection on November 20, 2018 and was
credited in the company’s account on November 25, net of bank charge of P160. The note was recorded in the
cash receipts on December 18, 2018, at which date the bank charge was entered in the disbursement.

c. The following were checks retuned by bank as NSF:

Amount Deposited Returned Recorded Redeposit
Customer Tonyo 6,540 12/08/18 12/15/18 No entry 12/18/18
Customer Lea 13,460 12/27/18 12/30/18 1/14/19 1/8/19

d. Two pay checks for employees vacations totaling P11,000 were drawn on January 5, 2019, and cleared by bank
on January 10, 2019. These checks were not entered in the client’s records because semi-monthly payroll
summaries are entered only on the 15th and last day of each month.

Compute the following:

1. Deposit in transit as of December 31?

2. Outstanding checks as of December 31?

3. Adjusted cash as of December 31 is?

4. Adjusted cash receipts in December?

5. Adjusted cash disbursement in December?

6. Deposit in transit for January is?

7. Outstanding checks in January?

8. Adjusted cash balance as of January?

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