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BCSV
ACCOUNTING 1
• Cash and Cash equivalents
I. THEORIES.
A. Multiple Choices. Choose the letter of the best answer.
1. Which of the following shall not be considered cash for

financial reporting purposes?
A. Petty cash fund and change funds
B. Money orders, certified checks and personal checks
C. Coins, currencies and available funds
D. IOUs
2. To be reported as cash and cash equivalents, the cash item

must be
A. Unrestricted in use for current operations
B. Available for the purchase of property, plant and
equipment
C. Set aside for the liquidation of long-term debt
D. Deposited in bank
3. A cash equivalent is a short-term, highly liquid investment

that is readily convertible into known amount of cash and
A. Is acceptable as a means to pay current liabilities
B. Has a current market value that is greater than its
original cost.
C. Bears an interest rate that is at least equal to the prime
rate of interest at the date of liquidation.
D. Is so near its maturity that it presents insignificant risk
of change in interest rate.
4. Which of the following statements is incorrect concerning

measurement of cash and cash equivalents?
A. Cash is measured at face value
B. Cash in foreign currency is measured at current
https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

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exchange rate
C. If a bank or financial institution holding the funds of the
entity is in bankruptcy or financial difficulty, cash shall
be written down to estimated realizable value.
D. Cash equivalents shall be measured at maturity value.
5. If material, deposits in foreign bank which are subject to

foreign exchange restriction shall be classified
A. Separately as current asset, with appropriate disclosure.
B. Separately as noncurrent asset with appropriate
disclosure.
C. Be written off as an extraordinary loss
D. As part of cash and cash equivalents.
6. A compensating balance
A. Must be included in cash and cash equivalent.
B. Which is legally restricted and related to a long term
loan is classified as current asset.
C. Which is legally restricted and related to a short-term
loan is classified separately as current asset
D. Which is not legally restricted as to withdrawal is
classified separately as current asset.
7. Under which classification is cash restricted for plant

expansion reported?
A. Current assets
B. Noncurrent assets
C. Current liabilities
D. Equity
8. The internal control feature that is specific to petty cash is

A. Separation of duties
B. Assignment of responsibility
C. Proper authorization
D. Imprest system
9. A cash over and short account

A. Is not generally accepted
B. Is debited when the petty cash fund proves out over

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C. Is debited when the petty cash fund proves out short
D. Is a contra account to cash
10. In which account are customers’ postdated checks

received classified?
A. Accounts receivable
B. Prepaid expenses
C. Cash
D. Accounts payable
11. Which is not considered as a cash equivalent?

A. A 3-year treasury note maturing on May 30 of the
current year purchased by the entity on April 15 of the
current year
B. A 3-year treasury note maturing on May 30 of the
current year purchased by the entity on Jan. 15 of the
current year.
C. A 90-day treasury bill
D. A 60-day money market placement
12. At the end of the current year, an entity had various

checks and papers in its safe. Which item should not be
included in its cash account in the current year-end
statement of financial position?
A. US $ 15,500 cash
B. Past due promissory note issued in favor of the entity by
its president
C. Another entity’s P 160,000 check payable to the entity
dated Dec. 15 of the current year
D. The entity’s undelivered check payable to a supplier
dated Dec. 31 of the current year.
13. A bank reconciliation is

A. A formal financial statement that lists all of the bank
account balances of an entity.
B. A merger of two banks that previously were competitors.
C. A statement sent by the bank to depositor on a monthly
basis.
D. A schedule that accounts for the differences between an

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entity’s cash balance as shown in its general ledger
14. Which of the following must be deducted from the bank

statement balance in preparing a bank reconciliation which
ends with adjusted cash balance?
A. Deposits in transit
B. Outstanding checks
C. Reduction of loan charged to the account of the
depositor
D. Certified check
15. When preparing a bank reconciliation, bank credits are

A. Added to the bank statement balance
B. Deducted from the bank statement balance
C. Added to the balance per book
D. Deducted from the balance per book
16. Which of the following statements is true regarding bank

overdraft?
a. Is reported as a current liability even though there is
another account in the same bank that reports a
positive balance and that the right of offset exists
b. Is netted against another account in the same bank
with positive balance (the right of offset exists) and
the net positive balance is reported as cash
c. Is netted against another cash in bank account in
another bank and the net positive balance is reported
as part of cash
d. All of the foregoing statements are true
17. Which of the following is cash for financial reporting

purposes?
a. Customer’s post-dated checks received on or before
reporting date
b. Company’s post-dated checks issued on or before
reporting date and recorded as disbursements at year-
end
c. Company’s undelivered checks at year-end but not
recorded as disbursements at year-end

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d. Customers’ no sufficient fund checks
18. Unadjusted book balance of cash is less than the correct

cash balance of cash due to the following except
a. Proceeds of note collected by the bank
b. A customer’s check for P540 was recorded by the
depositor in the cash receipts book as P450
c. A check issued to a supplier on account for P760 was
recorded in the cash disbursements book as P670
d. Interest earned
19. Unadjusted bank balance of cash is more than the correct

cash balance of cash due to the following except?
a. Deposit in transit
b. Outstanding checks
c. Erroneous bank credit
d. A customer’s deposit for P450 was recorded by the
bank as P540
20. Seldom does the book balance of cash is in agreement

with the bank balance of cash due to any of the following
except
a. Deposit in transit
b. Outstanding checks
c. Bank charges and credits recognized by the bank
during the month
d. Bank secrecy requirements
21. The person responsible, at all times, for the amount of the
petty cash fund is the
A. Chairman of the Board of Directors
B. President of the company
C. Petty cash custodian
D. General cashier
22. The following are appropriate procedures for controlling

the petty cash fund, except
A. To monitor variations in different types of expenditures,
the petty cash custodian files petty cash vouchers by

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category of expenditure after replenishing the fund
B. To replenish the fund, the general cashier issues a
company check to the petty cash custodian, rather than
cash.
C. To determine that the fund is being accounted for
satisfactorily, surprise counts of the fund are made from
time to time by the internal auditor or other responsible
official.
D. Each individual to whom petty cash is paid is required to
present signed receipts to the petty cash custodian
23. The objective of establishing a petty cash fund is to

A. Cash checks for employees
B. Account for all cash receipts and disbursements
C. Account for cash sales
D. Facilitate payment of small, miscellaneous items.
24. What is the effect of not replenishing the petty cash at

year-end and not making the appropriate adjusting entry?
A. A detailed audit is essential
B. The petty cash custodian should turn over the petty cash
to the general cashier
C. Cash will be overstated and expenses understated
D. Expenses will be overstated and cash will be understated
25. Bank overdraft

A. Is a debit balance in a cash in bank account
B. Is offset against demand deposit account in another bank
C. Which cannot be offset is classified as a current liability
D. Which cannot be offset is classified as non-current
liability
II. PROBLEM SOLVING.
A. Your audit of the December 31, 2013, financial statements

of Steel Corp. reveals the following:
Current Account at BPI P(30,000)

Current account at Maybank 135,000
Treasury bills (acquired 3 months before maturity) 300,000
Treasury bills (maturity date is 12/31/14) 1,500,000

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Payroll account 390,000
Foreign bank account – restricted 2,000,000
Postage stamps 1,250
Employee’s postdated check 4,500
IOU from vice president 8,000
Credit memo from a supplier for a purchase return 8,100
Money order 12,900
Petty cash fund (P3,000 in currency and expense receipts for P12,000) 15,000
1. What amount should be reported as cash and cash

equivalents in the Dec. 31,2013 statement of financial
position?
B. The cash account in the current asset section of the balance

sheet for AA Co. showed a balance of P555,000. It was
found to include the following items:
Petty cash fund (P1,000 is in the form of paid vouchers) P 5,000

Checking account balance, per bank statement (a P25,000 check is still 255,000
outstanding)
Undeposited receipts, including a postdated check for P5,000 120,000
Currencies and coins awaiting deposit 55,000
Bond sinking fund 100,000
Check drawn by manager, returned by bank marked NSF 20,000
2. What is the correct cash balance?
C. The chief accountant of Clock Dairy’s Co. is determining

the amount of cash and cash equivalents to be reported on
its December 31, 2013 statement of financial position. She
found out that the Cash and Cash Equivalents balance in
the general ledger was composed of the following items.
• Saving account of P900,000 and a commercial checking

account with balance of P1,400,000 are held at Chinabank.
• Petty cash fund of P15,000; composed of expense receipts
of P5,000; and bills and coins of P9,850 at Dec. 31.
• Cash fund in savings account with BPI, P1,500,000 held for
retirement of bonds payable, due Dec. 31, 2020.
• Money market fund account held at BDO which permits
Clock Dairy to write checks on this balance, P2,000,000

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• Three certificates of deposit with Metrobank, each totaling
P1,000,000, two of which have maturity of 120 days from
date of placement (November 30, 2013); one has a maturity
of 90 days (placed on Dec. 29, 2013).
• Payroll fund maintained with BDO, P6,000,000.
She also obtained the following information:
• A customer’s check on hand dated January 10, 2014 for

P320,000. The check was recorded as collected in
December and was included in the savings account with
Chinabank.
• A check for P300,000 was issued to a supplier on December
29, 2013 and drawn from Chinabank account. The check
was dated Jan. 8, 2014 and was traced to have been entered
in the Dec. check register.
• Clock Dairy maintains a P5,000,000 cash balance at all time
at Allied Bank to ensure future credit availability.
• A check for P50,000 for adjustment in salaries of an
employee for the month of November was still on hand at
Dec. 31, 2013. The check was verified to have been
recorded in the cash disbursement journal in December.
3. Compute for the amount of cash and cash equivalents to

be reported on December 31, 2013 statement of financial
position.
D. Mars Company’s checkbook balance at Dec. 31, 2011 was

P50,000. In addition, Mars held the following items in its
safe on that date.
Check payable to Mars, dated Dec. 31 in

payment of a sale made in Dec. 2012 not
included in Dec. 31, checkbook balance
P 20,000
Check payable to Mars, deposited Dec. 15 but
returned by bank on Dec. 30 marked “NSF”. The
deposit and the return were both reflected in the
checkbook.
5,000
Check drawn on Mars Company’s account,

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payable to a vendor, dated Dec. 30 but not yet
mailed to payee as of Dec. 31. The check is not
yet recorded.
3,000
4. Compute for the amount to be shown as cash on Mars’

statement of financial position at Dec. 31, 2011.
E. The statement of financial position of Imation Company

shows cash of P860,000. The following items were found
to comprise the total amount:
Checking account balance in PNB per bank statement (outstanding

checks of P34,000; deposit in transit of P25,000; service charge, P1500;
NSF checks, P2,450)
P 225,000
Petty cash fund (currencies and coins, P2,510; expense receipts, P2,100;
IOUs, P380) 5,000
Undeposited collections (of which P5,000 is in money orders, P3,000 in

traveler’s check and postdated checks of customers for P3,500)
75,000
Bond sinking fund cash 125,000
Treasury bills with original maturity of 6 months and acquired 2 months

prior to maturity 50,000
Postdated checks received from customers at reporting date

25,000
Trust fund account, 30 days
term 100,000
Travel
advances 5,000

Savings account restricted for the payment of long term
obligations 250,000
Total: P860,000
5. Correct cash balance of the checking account with PNB

6. Correct petty cash fund balance
7. What amount of the undeposited collections is to be
reported as cash?
8. Correct cash and cash equivalents
F. Hai – Co is reviewing the cash accounting for Hei – Co.

Hai – Co’s review will focus on the petty cash fund account
and the bank reconciliation for the month ended June 30,
2013. She has collected the following information from Hei

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– Co’s bookkeeper for this task.
Petty cash fund
1. The petty cash fund was established on June 3, in the

amount of P 10,000
2. Expenditures from the fund by the custodian as of June 30,

2013, were evidenced by approved petty cash vouchers for
the following:
Office supplies P 3,920
IOUs from employees 1,200
Shipping charges 2,298
Other expenses 1,526
On June 30, the petty cash fund was replenished and increased
to P 12,000; currency and coins in the fund at that time totaled P
756.
Bank reconciliation
Debit Credit Balance

Balance, June 1 P 350, 760
Deposits P 1,120,000
Note payment direct from customer
(with interest of P 1,200)
37,200
Checks cleared during June 1,246,000
Bank service charges 1,080
Balance, June 30 ?
Hei – Co’s Cash account
Balance, June 1, 2013 P 354,000

Deposits during June 1,240,000
Checks written during June ?
Balance, June 30 320,600
Deposits in transit are determined to be P 120,000 and checks

outstanding at June 30 total P 34,000. Cash on hand (except
petty cash) at June 30 is P 9,840.
9. What is the amount of petty cash shortage?

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10. The journal entry to record the replenishment of and
increase in the petty cash fund includes a credit to cash of
?
11. Correct cash balance, June 30, 2013.
G. The auditor for Glaives Co. examined the petty cash fund
immediately after the close of business, July 31, 2013, the
end of company’s natural business year. The petty cash
custodian presented the following during the count:
Currency P 1,650
Petty cash voucher:
Postage 420
Office supplies 900
Transportation 340
Repairs & maintenance 800
Advances to office staff 1,500
A check drawn by Glaives, payable to the petty
cash custodian 7,200
Postage stamps 300
An employee check, returned by bank, marked
NSF 1,000
An envelope containing currency for a gift for a
retiring employee 1,890
The general ledger shows an imprest petty cash fund balance of

P 16,000.
12. How much is the petty cash shortage or overage?

13. What is the adjusted balance of petty cash fund at July
31, 2013?
H. The following information is included in Wisdom Corp.’s

bank statement for the month of April:
A customer’s check has been marked “NSF”

P 13,000
Bank service charge for April 1,200
In comparing the bank statement to the company’s cash records,

you found:
Outstanding checks on April 30 P 184,000

Deposits made but are not yet shown in the April
bank statement 14,000

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The deposits in transit and outstanding checks have been
correctly taken up in the company’s books. You also found a
customer’s check for P 17,400 that had not yet been deposited
and had not been recorded in Wisdom’s books. Your client’s
book show a cash balance of P 36,420.
14. What is Wisdom’s correct cash balance?
I. A company is reconciling its bank statement with internal

records. The cash balance per the company’s books is P
45,000. There are P 5,000 of bank charges not yet recorded,
P 7,500 of outstanding checks, P12,500 of deposits in
transit, and P15,000 of bank credits and collections not yet
taken up in the company’s books.
15. What is the cash balance per bank?
J. The following information is shown in the accounting

records of Bonus Inc.,:
Dec. 31 Jan. 1
Cash ? P 186,000
Accounts receivable 273,000 201,000
Merchandise inventory 234,000 258,000
Accounts payable 144,000 159,000
Total sales and cost of sales for 2013 were P 2,394,000 and P
1,749,000, respectively. All sales and purchases were made on
credit. Various operating expenses of P 321,000 were paid in
cash. Assume that there were no other pertinent transactions.
Compute for the…
16. Collections from accounts receivables

17. Payment of accounts payable
18. Cash balance on Dec. 31, 2013
K. Yohoy Co., keeps all its cash in checking account. An

examination of the company’s accounting records and bank
statement for the month ended Dec. 31, 2014 revealed the

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following information:
The cash balance as of Dec. 31 represents:
Bank statement balance P 84,690

Book balance 85,240
A deposit of P 9,500 through the bank’s night depository box on

Dec. 29 did not appear on the bank statement. The bank
statement shows that on Dec. 28, 2014, the bank collected a note
for Yohoy and credited the proceeds of P 9,350 to the company’s
account. The proceeds include P350 interest, all of which Yohoy
earned during the current accounting period. Yohoy has not yet
recorded the collection.
Checks outstanding on Dec. 31, 2014:

Check # 143 P 1,500
Check # 144 480
Check # 121 720
• Yohoy discovered that check # 230, written in Dec. 2014 for

P 1,830 in payment to a supplier, had been recorded in the
company’s records as P 1,380.
• Included with the Dec. 31, 2014 bank statement was an NSF
check for P 2,500 that Yohoy had received from Cu Co. on
account on Dec. 19. Yohoy has not yet recorded the
returned check. The bank statement shows a P 150 service
charge for December.
19. Adjusted cash balance

20. Net adjustment to cash
L. Judith Mae Borda Corp. misplaced all the bank statements

for the past years. You reviewed the accounting records and
discovered that the following journal entries were made to
reconcile the June 30, 2012 bank records and accounting
records.
Accounts receivable 76,012

Miscellaneous expense 625

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Notes receivable 10,000
Interest revenue 500
Cash 66,137
Pre-adjustment cash balance in the accounting records was P

371,023.50, outstanding checks were P 10,375 and no other
adjustments were required.
21. What is the balance of the cash account per bank

statement as of June 30, 2012?
M. The following data pertaining to the cash transactions and

bank accounts of O’rayt Co. for July 2011 are as follows:
Cash balance per accounting records, July 31, 2011, P 17,194.
Cash balance per bank statement, July 31, 2011, P31,848.
Bank service charge for July, P 109.
Debit memo for printed checks delivered by the bank; the charge
has not been recorded in the accounting records, P 225.
Outstanding checks, July 31, 2011, P 6,728.
Deposit of July 31 not recorded by the bank until Aug. 1, P

4,880.
Proceeds of a bank loan on July 31 not recorded in the

accounting records, net of P 300 interest, P5,700.
Proceeds from customer’s promissory note, principal amount,

P8,000, collected by the bank, not taken up in the books, with
P100 interest, P8,100.
Check # 2000 payable to a supplier entered in the accounting

records as P 2,100 deducted in the bank statement the erroneous
amount of P 1,200.
Stolen check lacking an authorized signature deducted from

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O’rayt’s account by the bank in error, P800.
Customers check returned by the bank marked DAIF, indicating

that the customer’s balance was not adequate to cover the check.
No entry has been made in the accounting records to record the
returned check, P760.
22. Adjusted cash balance as of July 31, 2011.
N. In comparing the balance per books of Maguindanao

Company with the bank statement obtained from the bank,
together with the canceled checks and other memoranda at
Dec. 31, 2013, you observed the following:
a) Balance per bank statement, P 892,346.30
b) Balance per books, P 590,884.60
c) Outstanding checks, 12/31/2013, P 333,788.20
d) Receipts of 12/31/13 deposited on 1/2/14, P 53,172.00
e) Service charge for Dec. 2013, P 225.00
f) Proceeds of bank loan, 12/15/13 omitted from company’s

records, net of P 3,000 charge, P 97,000
g) Deposit of 12/23/13 omitted from the bank statement, P
28,924.10
h) Check of Italy products charged back on 12/22/13 for lack

of counter signature, redeposited on 1/5/14. No entry was
made for the charge back or the redeposit. P 8,737.40
i) Error on bank statement in entering deposit of 12/16/13:

Correct amount P 31,824.00
Entered in statement P 31,814.00
j) Check #6970 of Maguinbanao co. charged in error to the

company’s account, P 26,900

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k) Proceeds of note of B. Christian & Co. collected by bank
on 12/1/13 not entered on books, inclusive of P 400 interest
and net of service charge of P50. P 20,350.
l) Erroneous debit memo of 12/23/13 to charge company’s

account with settlement of bank loan which was paid by
check # 3115 on same date, P50,000.
m) Error on bank statement in entering deposit of 12/4/13:

Entered as P 48,171.00
Correct amount, 48,071.00
n) Deposit of Maguinbanao co. on 12/7/13 credited in error in

the company’s account, P 18,192.00
23. Determine the correct cash balance of Maguindanao Co.

at Dec. 31, 2013.
O. Insatiable Company’s general ledger showed a balance of

P1,602,500 in its Cash account on December 31, 2012
which consisted of the following items: (The company
adopts the policy of classifying as cash equivalents
investment instruments with maturity of not more than 90
days)
Checking account with Security Bank, General

Account P475,000
Checking account with Security Bank, Payroll
Account (25,000)
Certificate of deposit with BPI, term 180 days
placed on December 1, 2012
125,000
Checking account with BPI
350,000
Sinking fund cash 250,000
Savings account with May Bank (closed)
120,000
Petty cash fund

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25,000
Two year treasury bonds issued on March 1, 2011
but acquired on March 1, 2012 and maturing
on February 28, 2013
75,000
Cash surrender value of life insurance
contracts 22,500
Travel advances of salesmen
20,000
Undeposited receipts
45,000
Customers checks dated January 20, 2013
15,000
Customers checks dated December 12, 2012 but returned
due to insufficiency of fund
5,000
Savings deposit with BDO earmarked for the
acquisition of equipment which is expected
To be disbursed in March, 2013
100,000
Total P1,602,500
The following information were gathered at year-end that

pertains to the above:
a. Included among the checks drawn against Security Bank
general account during December and recorded also in
December are:
• Check # 3144 written for P12,500 payable to ABC
Trading was delivered on January 5, 2013
• Check # 4220 written for P24,000 payable to Dac
Trading was certified by the bank but this check
remained outstanding at reporting date.
• Check # 8603 written for p7,500 payable to Roshan
Trading dated January 26, 2013
Included among the December receipts recorded in the
Security Bank general account are as follows:
• Customers checks for P15,000 dated January 30, 2013
• Customers check for P25,000 dated December 14,

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2012 but returned by the bank due to insufficiency of
fund
• Money orders for P1,000
• Travelers’ check for $2,000 converted to peso value of
P84,000
b. The company has an overdraft line with Security Bank
hence the right of offset exists.
c. Included in the checking account with BPI is compensating
balances amounting to P150,000 against long-term
borrowing. The compensating balances are not legally
restricted.
d. Petty cash fund consists of currencies and coins of P11,350;
unreplenished vouchers for expenses, P10,200; cash
advances of employees, P3,450.
24. Correct cash balance of the checking account with

Security Bank at December 31, 2012
25. Correct cash balance of the checking account with BPI
at December 31, 2012
26. Correct petty cash fund balance at December 31, 2012
27. Correct cash balance at December 31, 2012
28. Correct cash and cash equivalents at December 31, 2012
P. The trial balance of Reyes Co. at Dec. 31, 2013 includes the
following accounts:
Petty cash fund P 5,000

Cash on hand 19,700
Metrobank, Current Account 110,200
Allied bank, General Account 162,000
Allied bank, Payroll Account (4,000)
Security bank, Savings account 65,000
a. The petty cash fund consisted the following items as of

Dec. 31, 2013:
• Currency and coins, P 1,490
• Employees’ advances, with no supporting vouchers,
P880
• Currency in an envelope marked “collections for

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charity” with employees’ name attached, P 160
• Unreplenished petty cash vouchers, P 740
• Replenishment check drawn by Reyes payable to the
petty cashier, P1,830
b. Cash on hand includes the following items:

• Customer’s check for P5,000 returned by bank on Dec.
26, 2013 due to insufficient funds, but subsequently
redeposited and cleared by the bank on Jan. 10, 2014.
• Postal money orders received from customers, P2,800.
• Customer’s check for P1,500 dated Jan. 10,2014
received Dec. 23, 2013.
c. Included among the checks drawn by Reyes against the
Metrobank current account and recorded in Dec. 2013 are
the following:
• Check #2911 written and dated Dec. 23, 2013 and
delivered to payee on Jan. 3, 2014, P2,500
• Check #2186 written Dec. 25, 2013, dated Jan. 30,
2014, delivered to payee on Dec. 28, 2013, P4,300.
d. The credit balance in Allied bank payroll account
represents checks drawn in excess of the deposit balance.
The checks are still outstanding at Dec. 31, 2013. A right of
offset exists in the agreement between Allied bank and its
depositors.
e. The savings account deposit in Security bank was a fund set

aside by the Board of directors for the acquisition of new
machine. The company expects to disburse this amount on
Jan. 2, 2014.
29. Amount of petty cash (shortage) or overage

30. Correct amount of cash
Q. The bank statement of Appetite Corp. for April, 2013

showed an ending balance of P169,263. Deposit in transit
on Apr. 30 was P18,200. Outstanding checks as of Apr. 30
were P59,435. During the month of April, the bank charged
back NSF checks in the amount of P3,435 of which P 1,835

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had been redeposited by Apr. 30. The company made no
entry for the return and for the redeposit of the checks.
On Apr. 23, the bank charged Appetite Corp.’s account for

a P2,200 item which should have been charged against the
account of Ammetite Corp.; the error was not detected by
the bank. During April, the proceeds from notes collected
by the bank for Appetite Corp. were P7,548 and bank
charges for this service were P180.
31. Unadjusted cash balance per books at April 30, 2013.
R. On July 5, 2013, Smee Corp. received its bank statement

for the month ending June 30. The statement showed a
P209,500 balance while the cash account balance on June
30 was P35,000. In reconciling the balances, the auditor
discovered that:
1. The June 30 collections of P176,000 were recorded on
the books but were not deposited until July.
2. The bank service charges for the month of June totaled
P3,000
3. A paid check for P24,300 was entered incorrectly in the
cash payments journal as P34,200.
32. What is the total outstanding checks at June 30, 2013?
S. The bank statement for the current account of sir George

James Corp. showed a Dec. 31, 2013, balance of P585,284.
Information that might be useful in preparing a bank
reconciliation is as follows:
a) Outstanding checks were P52,810.
b) The Dec. 31, 2013, cash receipts of P23,000 were not

deposited in the bank until Jan. 4, 2014.
c) One check written in payment of rent P8,940 was correctly

recorded by the bank but was recorded by sir George as a
P9,840 disbursement.

Page 20 of 27
d) In accordance with prior authorization, the bank withdrew
P18,000 directly from the current account as payment on a
mortgage note payable. The interest portion of that
payment was P14,000. Sir George has made no entry to
record the automatic payment.
e) Bank service charges of P740 were listed on the bank

statement.
f) A deposit of P35,000 was recorded by the bank on Dec. 13,

but it did not belong to sir George James.
g) The bank statement included a charge of P3,400 for an

NSF check. The company will seek payment from the
customer.
h) Sir George maintains an P8,000 petty cash fund that was

appropriately reimbursed at the end of December.
i) According to instructions from sir George on Dec. 29, the

bank withdrew P400,000 from the account and purchased
treasury bills for sir George. The company recorded the
transaction in its books on Dec. 31 when it received notice
from the bank. Half of the treasury bills mature in three
months and the other half in four months.
Compute for:
33. The cash in bank balance per books on Dec. 31, 2013.
34. The adjusted cash in bank balance on Dec. 31, 2013.
35. The amount to be reported as cash and cash equivalents
on its Dec. 31, 2013 statement of financial position.
T. EMA Co. was organized on Jan. 13, 2011. The following

items are from the company’s trial balance on December
31, 2011.
Ordinary share capital P 1,500,000

Share premium 150,000
M. Inventory 69,000

Page 21 of 27
Land 1,000,000
Building 1,400,000
Furniture and fixtures 367,000
Accounts receivable 165,400
Accounts payable 389,650
Notes payable 500,000
Sales 6,235,200
Operating expenses 1,005,150 *
*including depreciation of P 400,000.
Additional information is as follows:

1. Deposits in transit, Dec. 31 P 384,660
2. Service charge for Dec. 2,000
3. Outstanding checks, Dec. 31 475,000
4. Bank balance, Dec. 31 892,000
5. EMA’s mark up on sales is 30%
Compute for
36. The total collections from sales
37. The total payments for merchandise purchases
38. The total cash receipts per books
39. The total cash disbursements per books
40. The cash balance per books on Dec. 31
41. The adjusted cash balance on Dec. 31
U. Your audit of the cash account of CG corp. disclosed the

following information:
1. Cash in bank balance per books, Dec. 31, 2013 P 35,000

2. Bank statement balance, Dec. 31, 2013 60,000
3. Note collected by bank in Dec. (principal plus P800 interest, 27,600
less P200 collection fee)
4. Debit memo for a checkbook ?
5. Deposits in transit, Dec. 31, 2013 15,200
6. Transposition error made by bank in recording deposit of Dec.
25:
Correct amount: 45,000 ?
Recorded as 54,000
7. Erroneous bank debit 26,700
8. Included in the cash in bank account is petty cash fund of
P10,000. Your count on Dec. 31, 2013 revealed the following
fund items:
Currency and coins P 3,000
Supplies 2,400
Transportation 100
IOUs 4,000 ?

Page 22 of 27
9. Erroneous bank credit 11,000
10. Outstanding checks 39,400*
* including a certified check of P10,000
Compute for
42. The principal amount of the note collected by bank in
December.
43. The adjusted cash in bank balance at Dec. 31, 2013.
44. The cost of checkbook
45. The amount of petty cash shortage at Dec. 31, 2013
46. The adjusted petty cash balance
V. HJE Co, organized on Apr. 3, 2013, has a very poor

internal control system. The company’s cashier is also its
accountant. After 8 months of operations, the company’s
manager suspects that the cashier-accountant has been
misappropriating company collections. You have been
engaged to audit the company’s accounts to determine the
extent of fraud, if any.
You started the audit on Nov. 15. On that date, the cash on
hand per surprise count was P5,140. Also on that date, the
bank confirmed that the balance of the company’s current
account was P26,328. You also obtained the information
that the cashier’s accountability is P151,228. Your
examination of the records reveals that a check for P1,852
was outstanding on Nov. 15, the company’s mark up is 40%
of sales.
Further examination of the company’s records reveals the

following balances at Nov. 15, 2013:
Ordinary share capital P300,000
Share premium 20,000
Real property purchased for cash 200,000
Mortgage payable 80,000
Furniture and fixtures (of the acquisition cost, P6,000
remains unpaid as of Nov. 15) 29,000
Notes payable – BPI 32,000
Accounts payable – trade 46,284
Expenses paid (excluding purchases) 60,756
M. inventory at cost 93,920
Accounts receivable – trade 85,380

Page 23 of 27
Total sales 340,000
Compute for
47. The amount paid for inventory purchases
48. The collections from customers
49. The adjusted bank balance as of Nov. 15, 2013
50. The cash shortage as of Nov. 15, 2013
W. In auditing the VO Co., you obtained the bank statement,

canceled checks and other memoranda which relate to the
company’s bank account for December 2013. In reconciling
the bank balance with that shown on the company’s books,
you observed the facts set forth below:
1. Balance per bank statement, 12/31/13 P 47,174
2. Balance per books, 12/31/13 P19,289
3. Outstanding checks 12/31/13 P63,000
4. Receipts of 12/31/13, deposited 1/3/14 P 6,260
5. Service charge for November, per bank memo of

12/17/13 P1,000
6. Proceeds of bank loan, 12/6/13, discounted for 3 months

at 18% per annum, omitted from company books
P47,750
7. Deposit of 12/22/13, omitted from bank statement

P9,170
8. Check of Co Co., returned on 12/22/13, for absence of

counter-signature and redeposited with complete
signature on 1/2/13 no entry on the books having been
made for the return or redeposit P 77,320
9. Error on bank statement in entering deposit of 12/19/13:

Correct amount P1,600

Page 24 of 27
Entered in statement 160
10. Check # 13221 of XY Co, charged by bank in error to

company’s account P13,600
11. Proceeds of note of QR Co, collected by bank,

12/14/13, not entered in cash book (principal amount of
P25,000 plus interest of P1,125, less collection fee)
P25,625
12. Erroneous debit memo of 12/30/12, to charge

company’s account with settlement of bank loan which
was paid by check # 11002 on same date P5,000
13. Error on bank statement in entering deposit of 12/2/13:

Entered as 14,200.62
Correct amount P12,400.62
14. Deposit of BV Co. of 12/1/13, credited in error to this

co. P3,500
Compute for
51. The principal amount of the loan obtained from bank in
December
52. The amount of collection fee
53. The adjusted cash in bank balance as of Dec. 31, 2013
54. The net adjustment in cash in bank per ledger as of Dec.
31, 2013
~END OF ACC 1A&B~
“For the things we have to learn before we can do them, we learn by
doing them.”
~ Aristotle

Page 25 of 27
*Suggested Key answers*
I. THEORIES
1. D 13.D
2. A 14. B
3. D 15. C
4. D 16. B
5. B 17. B
6. C 18. C
7. B 19. A

Page 26 of 27
8. D 20. D
9. C 21. C
10. A 22. A
11. B 23. D
12. B 24. C
25. C
II. PROBLEM SOLVING
1. P840,900 26. P11,350
2. P404,000 27. P836,350
3. P16,339,850 28. P836,350
4. P70,000 29. P(60)
5. P216,000 30. P291,520
6. P2,510 31. P124,460
7. P71,500 32. P343,600
8. P440,010 33. P541,514
9. P(300) 34. P520,474
10. P11,244 35. P728,474
11. P368,720 36. P6,069,800
12. P(2,190) 37. P4,043,990
13. P8,850 38. P8,219,800
14. P39,620 39. P7,416,140
15. P50,000 40. P803,660
16. P2,322,000 41. P801.660
17. P1,740,000 42. P27,000
18. P447,000 43. P52,500
19. P91,490 44. P 100
20. P6,250 45. P(500)
21. P315,261.50 46. P3,000
22. P29,900 47. P251,636
23. P699,272.20 48. P254,620
24. P430,000 49. P29,616
25. P350,000 50. 121,612
51. P50,000
52. P500
53. P14,344
54. P (4,945)
19

Page 27 of 27

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BCSV

1. Which of the following shall not be considered cash for

2. To be reported as cash and cash equivalents, the cash item

3. A cash equivalent is a short-term, highly liquid investment

4. Which of the following statements is incorrect concerning

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

5. If material, deposits in foreign bank which are subject to

7. Under which classification is cash restricted for plant

8. The internal control feature that is specific to petty cash is

9. A cash over and short account

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10. In which account are customers’ postdated checks

11. Which is not considered as a cash equivalent?

12. At the end of the current year, an entity had various

13. A bank reconciliation is

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

14. Which of the following must be deducted from the bank

15. When preparing a bank reconciliation, bank credits are

16. Which of the following statements is true regarding bank

17. Which of the following is cash for financial reporting

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

18. Unadjusted book balance of cash is less than the correct

19. Unadjusted bank balance of cash is more than the correct

20. Seldom does the book balance of cash is in agreement

22. The following are appropriate procedures for controlling

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

23. The objective of establishing a petty cash fund is to

24. What is the effect of not replenishing the petty cash at

25. Bank overdraft

A. Your audit of the December 31, 2013, financial statements

Current Account at BPI P(30,000)

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

1. What amount should be reported as cash and cash

B. The cash account in the current asset section of the balance

Petty cash fund (P1,000 is in the form of paid vouchers) P 5,000

2. What is the correct cash balance?

C. The chief accountant of Clock Dairy’s Co. is determining

• Saving account of P900,000 and a commercial checking

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She also obtained the following information:

• A customer’s check on hand dated January 10, 2014 for

3. Compute for the amount of cash and cash equivalents to

D. Mars Company’s checkbook balance at Dec. 31, 2011 was

Check payable to Mars, dated Dec. 31 in

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4. Compute for the amount to be shown as cash on Mars’

E. The statement of financial position of Imation Company

Checking account balance in PNB per bank statement (outstanding

Undeposited collections (of which P5,000 is in money orders, P3,000 in

Treasury bills with original maturity of 6 months and acquired 2 months

Postdated checks received from customers at reporting date

5. Correct cash balance of the checking account with PNB

F. Hai – Co is reviewing the cash accounting for Hei – Co.

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

Petty cash fund

1. The petty cash fund was established on June 3, in the

2. Expenditures from the fund by the custodian as of June 30,

Debit Credit Balance

Hei – Co’s Cash account

Balance, June 1, 2013 P 354,000

Deposits in transit are determined to be P 120,000 and checks

9. What is the amount of petty cash shortage?

https://doc-14-8c-docs.googleusercontent.com/docs/secures…398353458859023&hash=f047hs9i1t0gv7ak0tdh2eo44tss2slv 28/02/2019, 6G15 PM

The general ledger shows an imprest petty cash fund balance of