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PROBLEM NO. 5 - Bank Reconciliation and Amount of Shortage Computation

The bookkeeper-cashier at Swerte Company inappropriately handled cash transactions and reconciliations. An audit revealed discrepancies including deposits in transit that were postdated checks, outstanding checks that were not released, and an erroneous bank credit. To determine the accurate cash balance and any shortage, adjustments were made for these discrepancies, resulting in an adjusted deposit in transit of P125,250, adjusted outstanding checks of P194,790, and an identified cash shortage of P60,000.

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347 views2 pages

PROBLEM NO. 5 - Bank Reconciliation and Amount of Shortage Computation

The bookkeeper-cashier at Swerte Company inappropriately handled cash transactions and reconciliations. An audit revealed discrepancies including deposits in transit that were postdated checks, outstanding checks that were not released, and an erroneous bank credit. To determine the accurate cash balance and any shortage, adjustments were made for these discrepancies, resulting in an adjusted deposit in transit of P125,250, adjusted outstanding checks of P194,790, and an identified cash shortage of P60,000.

Uploaded by

elsana philip
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PROBLEM NO.

5 - Bank reconciliation and amount of shortage computation

You are conducting an audit of the Swerte Company for the year ended December 31,
2015. The internal control procedures surrounding cash transactions were not
adequate. The bookkeeper-cashier handles cash receipts, maintains accounting
records, and prepares the monthly bank reconciliations.

The bookkeeper-cashier prepared the following reconciliation at the end of the year:

Balance per bank statement P 350,000


Add: Deposit in transit P 175,250
Note collected by bank 15,000 190,250
Total
540,250
Less outstanding checks 246,750
Balance per general ledger P 293,500

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


• At December 31, 2015, the bank statement and general ledger showed balances of
P 350,000 and P293,500, respectively.
• The cut-off bank statement showed a bank charge on January 2, 2016 for P 30,000
representing correction of an erroneous bank credit.
• Included in the list of outstanding checks were the following:
a. A check payable to a supplier, dated December 29, 2015, in the amount of P
14,750, released on January 5, 2016.
b. A check representing advance payment to a supplier in the amount of P
37,210, the date of which is January 4, 2016, and released in December, 2015.
• On December 31, 2015, the company received and recorded customer's postdated
check amounting to P 50,000.

REQUIRED:
1. Compute for the following as at December 31, 2015:
a. Adjusted deposit in transit c. Adjusted cash in bank
b. Adjusted outstanding check d. Cash shortage

2. Adjusting entries as of December 31, 2015

SOLUTIONS:
a. DIT, beg. P 175,250
Less: postdated checks (50,000)
Adjusted deposit in transit P 125,250
b. Unadjusted outstanding checks P 246,750
Unreleased check (14,750)

Postdated check delivered (37,210)


Adjusted outstanding checks P 194,790

Book balance P 293,500 Bank balance P 350,000


Add: Add: DIT 125,250
Unreleased check 14,750 Total 475,250
Postdated check 37,210 Less: OC (194,790)
Credit memo 15,000 Erroneous bank
Total 360,460 credit ( 30,000)
Less: Adjusted bank bal. P 250,460
Postdated check received (50,000)
Cash Shortage (60,000)
Adjusted book balance P 250,460

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