COMPUTATION OF OC & DIT
On your examination of the financial statements of Tarlac Company for the year ended
December 31, 2019, you obtained the following information on the checking account of the
company:
The bank statement on November 30, 2019 showed a balance of P15,300. Among the bank
credits in November was a customer’s note for P5,000 collected for the account of the
company which the company recognized in December among its receipts. Included in the
bank debits were cost of checkbooks amounting to P60 and a P2,000 check which was charged
by the bank in error against Tarlac account. Also in November, you ascertained that there
were deposits in transit amounting to P4,000 and outstanding checks totaling P8,500.
The bank statement for the month of December showed total credits of P20,800 and total
charges of P10,200. Company books for December showed total receipts of P36,780 and
disbursements of P20,360. Bank debit memos for December were: No. 001 for service
charges, P80 and No. 002 on a customer’s returned checks marked “refer to drawer” for
P1,200.
The bank error of P2,000 in November was corrected by the bank in December.
On December 29, 2019, the company placed with the bank a customer’s promissory note with
a face value of P6,000 for collection. The company treated this note as part of its receipts
although the bank was able to collect on the note only in January, 2020.
A check for P198 was recorded in the company cash payments book in December 12 P1,980.
How much is the deposit in transit
Total receipts per books
Notes collected by bank in November
Notes with bank treated as receipt by client
Receipts for December per books
Receipts for December per bank:
Total receipts per bank
Deposits in transit
Check erroneously charged by
bank in November
Deposit in transit, December 31,
How much is the outstanding check
Total disbursements per books
Bank charges in November
Error in recording check (1,980 – 198)
Disbursements for December per books
Disbursements for December per bank:
Total bank debits
NSF check returned
Bank charge, December
Outstanding check, November 30
Outstanding check, December 31
P36,780
P5,000
6,000
(11,000)
P25,780
P20,800
( 4,000)
( 2,000) ( 14,800)
P10,980
P20,360
P 60
1,782
( 1,842)
P18,518
P10,200
( 1,200)
(
80)
( 8,500) ( 420)
P18,098
Taken from the records of Girly Co. are the following:
Balance per books, October 31
Total Credits per books, November
Balance per books, November 30
Balance per bank statement, October 31
Balance per bank statement, November 30
Total Debits per bank statement, November
Loan proceeds directly credited to Girly’s account in
October
Collection of receivable directly credited to Girly’s
account in November – not yet recorded in the books
NSF checks returned in
October
NSF checks returned in November - not yet recorded in
the books
Check received from a customer amounting to ₱1,800
was recorded in the books in October as
Overstatement in book debit in October
Overstatement in book credit in November
Understatement in bank debit in October
Overstatement in bank credit in October
Deposit amounting to ₱1,050 was recorded by
the bank in November as
4,440
8,320
2,400
5,520
4,560
2,800
Deposits in transit – October 31
Outstanding checks – October 31
4,500
3,800
1,200
600
900
300
180
800
300
290
370
150
1. How much are the deposits in transit on November 30?
a. 5,820
b. 6,190
c. 5,340
2. How much are the outstanding checks on November 30?
a. 7,620
b. 8,680
c. 9,120
3. How much is the adjusted balance of cash on November 30?
a. 3,000
b. 3,300
c. 2,400
d. 6,920
d. 8,280
d. 3,580
1. A (See solutions below)
2. D (See solutions below)
3. A (See solutions below)
Solutions:
Oct. 31
Book Dr.
(squeeze)
Per books
4,440
Per bank
5,520
6,280
8,320
2,400
Bank Dr.
2,800
Nov. 30
4,560
Book Cr.
Nov. 30
Oct. 31
1,840
Bank Cr. (squeeze)
Deposit in transit as of November 31 is computed as follows:
DIT, Oct. 31
Book debits
CM, Oct.
Understated
collections in Oct.
(1,800 - 180)
Deposits in transit
4,500
6,280
(1,200)
1,840
(600)
(1,620)
3,460
2,140
900
5,820
Bank credits
CM, Nov.
Understated
deposits in Nov.
(1,050 - 150)
DIT, Nov. 30
Outstanding checks as of November 31 is computed as follows:
Outstanding checks
3,800
Bank debits
DM, Nov.
Understated bank
debits in Oct.
Overstated bank
credit in Oct.
2,800
(300)
8,320
(900)
(290)
(800)
OC, Oct. 31
Book credits
DM, Oct.
Overstated book
debits in Oct.
(300)
Overstated book
credits in Nov.
(370)
1,840
6,320
OC, Nov. 30
8,280
The bank reconciliation is prepared as follows:
Bal. per books, Nov. 30
Add: Credit memos :
Proceeds from loan
Less: Debit memos:
NSF check
Add/Less: Book errors:
Overstatement of
Payments
2,400
Adjusted balance
3,000
600
(300)
Bal. per bank statement, Nov. 30
Add: Deposits in transit
Less: Outstanding checks
Add/Less: Bank errors:
Understatement of deposit
4,560
5,820
(8,280)
900
300
Adjusted balance
3,000