Genevieve O. Vargas LYCEUM OF ALABANG Prof.

Arlyn Pasion
BSA 42E1- Irregular AUDITING CONCEPTS AND APPLICATION 1
BSA32E1
QUIZ 1

Straight Problem
The cash in bank account of Dollar Company disclosed a balance of P203,000 as of December
31. The bank statement as of December 31 showed a balance of P106,000. Upon comparing
the bank statement with cash records, the following facts were developed:

a. The company’s account was charged on December 26 for a customer’s uncollectible check
amounting to P30,000.
b. A two months, 17% P60,000 customer’s note dated October 25, discounted on November
25, was dishonored on December 25, and the bank charged the company P62,000, which
included a protest fee of P2,000
c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and the bank
but was later corrected by the bank. + 900
d. Check no. 142 for P12,425 was entered in the cash disbursements journal at P12,245 and
check no. 156 for P3,290 was entered as P32,900 -180 +29,610
e. Bank service charges of P1,830 for December were not recorded on the books -1830
f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had been
collected on December 28; and the bank charge P500. (No entry was made on the book
when the note was sent to the bank for collection). + 26,000 -500
g. Receipts on December 31 for P24,000 were deposited on January 2. DIT 24,000
h. The following checks were outstanding on Dec. 31:

No. 123 P3,000 No. 154 P4,000

143 2,000 157 6,000
144 7,000 159 7,000
147 3,000 169 5,000
*Certified by the bank in December

i. A deposit of 20,000 was recorded by the bank on December 5, but it should have been
recorded for Dolor company rather than Dollar company -20,000
j. Petty cash of P10,000 was included in the Cash in Bank balance -10,000
k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company expects to
recover this amount from the insurance company. The cash receipts were recorded in the
books, but no entry was made for the loss. -60,000
l. The December 21 deposit included a check for P20,000 that had been returned on
December 15 marked NSF. Dollar company had made no entry upon return of the check.
The redeposit of the check on December 21 was recorded in the cash journal of Dollar
company as a collection on account -20,000

Required:
1. Prepare a bank reconciliation using:
a) Bank to book method
b) Book to bank method
c) Adjusted balance method
A. Solution (Bank to Book)

Dollar Company
Bank Reconciliation – Bank to Book Method
December 31
Balance per bank 12/31 ₱106,000
a) DM – Customer’s uncoll. Check (NSF) 30,000
b) DM – Dishonored disc. Note Receivable
(Including ₱2,000 protest fee) 62,000
c) Error – Understated collections
Book error in recording
collection (₱15,400-₱14,500) (900)
d) Error – Overstated payments
Book errors in recording
Disbursements
(Check No. 142 (₱12,425-₱12,245) – under 180
(Check No. 156 (₱3,920-₱32,900)- over (29,610)

e) DM – service charge
December bank service charges 1,830
f) CM – Note collected, net
Note Collected by bank (including interest
income of ₱1,000 and net service charge of (25,500)
₱500)
g) Deposits in transit 24,000
h) Outstanding checks (35,000)
i) Erroneous bank credit (Bank error in recording
deposit (20,000)
j) Petty cash fund 10,000
k) Stolen receipts 60,000
l) Doubled counted deposit 20,000
Balance per books 12/31 ₱203,000
B. Solution (Book to Bank)

Dollar Company
Bank Reconciliation – Book to Bank Method
December 31

Balance per books 12/31 ₱203,000

a) DM – Customer’s uncollectible Check (NSF) (30,000)
b) DM – Dishonored disc. Note Receivable
(Including ₱2,000 protest fee) (62,000)
c) Error – Understated collections
Book error in recording
collection (₱15,400-₱14,500) 900
d) Error – Overstated payments
Book errors in recording
Disbursements
(Check No. 142 (₱12,425-₱12,245) – under (180)
(Check No. 156 (₱3,920-₱32,900)- over 29,610
e) DM – service charge
December bank service charges (1,830)
f) CM – Note collected, net
Note Collected by bank (including interest
income of ₱1,000 and net service charge of
₱500) 25,500
g) Deposits in transit (24,000)
h) Outstanding checks 35,000
i) Erroneous bank credit (Bank error in recording
deposit) 20,000
j) Petty cash fund (10,000)
k) Stolen receipts (60,000)
l) Doubled counted deposit (20,000)
Balance per bank 12/31 ₱106,000
 C. Solution (Adjusted Balance Method)

Dollar Company
Bank Reconciliation – Adjusted Balance Method
December 31
Bank Books
Unadjusted balances, December 31 ₱106,000 ₱203,000
a) DM – Customer’s uncollectible Check (NSF) (30,000)
b) DM – Dishonored disc. Note Receivable
(Including ₱2,000 protest fee) (62,000)
c) Error – Understated collections
Book error in recording
collection (₱15,400-₱14,500) 900
d) Error – Overstated payments
Book errors in recording
Disbursements
(Check No. 142 (₱12,425-₱12,245) – under (180)
(Check No. 156 (₱3,920-₱32,900)- over 29,610
e) DM – service charge
December bank service charges (1,830)
f) CM – Note collected, net
Note Collected by bank (including interest
income of ₱1,000 and net service charge of
₱500) 25,500
g) Deposits in transit 24,000
h) Outstanding checks (35,000)
i) Erroneous bank credit (Bank error in recording
deposit) (20,000)
j) Petty cash fund (10,000)
k) Stolen receipts (60,000)
l) Doubled counted deposit (20,000)
Adjusted balances, December 31 ₱75,000 ₱75,000
Adjusting Journal Entries:
Debit Credit
1.) Accounts receivable 30,000
Cash in bank 30,000
2.) Notes receivable – dishonored 62,000
Cash in bank 62,000
Notes receivable – discounted 60,000
Notes receivable 60,000
3.) Cash in bank 900
Accounts receivable 900
4.) Accounts Payable 180
Cash in bank 180
5.) Cash in bank 29,610
Accounts Payable 29,610
6.) Bank Service Charge 1,830
Cash in bank 1,830
7.) Cash in bank 25,500
Bank Service Charge 500
Note receivable 25,000
Interest Income 1,000
8.) Petty Cash Fund 10,000
Cash in bank 10,000
9.) Claims from insurance co. 60,000
Cash in bank 60,000
10.) Accounts receivable 20,000
Cash in bank 20,000