Colegio de San Gabriel Arcangel

Area E, City of San Jose del Monte, Bulacan

Lesson Module

Course Title: CCA: Financial Accounting & Reporting Level: Fourth Year
Course Code: CCA1 Lesson No.: 1
Lesson Hours: 2

Objectives:

At the end of this Module, the student will be able to:

1. To determine that the cash balance shown per records is the same as cash
on hand or cash deposits in the company’s bank account at the end of the
period.
2. To determine that all cash receipts for the period was recorded properly.
3. To ascertain that all cash recorded during the period was properly accounted
and deposited in the company’s bank account.
4. To learn that cash balances are available without restrictions or with
restrictions.
5. To ascertain that all disbursements are authorized, legitimate and recorded
properly.
6. To determine that cash are presented and classified in the statement of
financial position properly

Subject Matter: Audit of Cash – Basic Concepts

Procedures:
A. Motivation

B. Lesson Presentation
Review of Concepts and Terminologies

DEFINITION
Cash simply means money
 Money – standard medium of exchange in business transactions
 Money - refers to the currency and coins which are in circulation and
legal tender

In accounting, cash includes money and other negotiable instrument that is

payable in money and acceptable by bank for deposit and immediate credit
(checks, bank drafts, money orders)
  To be reported as cash, an item must unrestricted in use.
 Unrestricted means the cash must be readily available in the payment of
current obligations and not be subject to any restrictions, contractual or
otherwise. (cash on hand, cash in bank, cash fund set aside for current
purposes)

Cash equivalents
 a short-term and highly liquid investment that are readily convertible
into cash and so near their maturity that they present insignificant risk of
changes in value because of changes in interest rates
 Only highly liquid investments that are acquired three months before
maturity can qualify as cash equivalents
 Examples are
 Three- month BSP Treasury bill
 Three-year BSP Treasury bill purchased three months before date of
maturity
 Three-month time deposit
 Three-month money market instrument
 Equity securities cannot qualify as cash equivalents because shares of
stocks do not have a maturity date. However, preferred shares with
specified redemption date and acquired three months before redemption
date can qualify as cash equivalents

VALUATION
 Cash is value at face value.
 Cash in foreign currency is valued at the current exchange rate.
 If a bank or financial institution holding the funds of the company is in
bankruptcy or financial difficulty, cash should be written down to
estimated realizable value if the amount recoverable is estimated to be
lower than the face value.

FINANCIAL STATEMENT PRESENTATION & CLASSIFICATION

 Should be shown as the first item among the current assets.
 The details comprising the cash and cash equivalents should be
disclosed in the notes to financial statements
 Investments in time deposit, money market instruments and treasury
bills should be classified as follows
 If the term is three months or less – such instruments are classified as
cash equivalents and therefore included in the caption cash and cash
equivalents
  If the term is more than three months but within one year – such
investments are classified as short-term or temporary investments and
presented separately as current assets
 If the term is more than one year – such investments are classified as
long-term investments. However, if such investments become due
within one year from the balance sheet date, they reclassified as
temporary investments
 If the cash fund is set aside for use in current operations – it is a
current asset. Examples – petty cash fund, payroll fund, dividend fund,
travel fund, interest fund, and tax fund
 If the cash fund is set aside for non-current purposes – it is shown as
long-term investment
Examples – sinking fund, preferred redemption fund, contingent fund,
insurance fund, and fund for acquisition or construction of property,
plant, and equipment
 The classification of a cash fund as current or non-current should
parallel the classification applied to the related liability
 Bank –overdraft - the credit balance in the cash in bank account, it is
classified as current liability and should not be offset against other
bank accounts with debit balances
However, when the company maintains two or more accounts in one
bank and one account results in an overdraft, such overdraft may be
offset against the other bank account with a debit balance.
Moreover, an overdraft may also be offset against the other bank
account if the amount is not material.
 Compensating balance – is the minimum checking or demand deposit
account balance that must be maintained in connection with a
borrowing arrangement with a bank. If the deposit is not legally
restricted as to withdrawal, the compensating balance is part of the
cash account. If the deposit is legally restricted, the compensating
balance is shown separately as “cash held as compensating balance”
under current assets if the related loan is short-term and long-term
investment if related loan is long-term.
In many instances, the compensating balance is not legally restricted
OTHER TERMINOLOGIES
 Undelivered check or unreleased check
 One that is merely drawn and recorded but not given to the payee
before the balance sheet date
 It should not be treated as outstanding check
 The original entry for the payment should be reversed so as to restore
the cash balance and the related liability account
 Postdated check delivered
  A check drawn, recorded and already given to the payee but it bears a
date subsequent to the balance sheet date
 The original entry recording a delivered postdated check should also
be reversed and therefore restored to the cash account
 Stale check
 A check not encashed by the payee within a relatively long period of
time
 A check becomes stale if not encashed within six months from the time
of issuance
 Company policy is applied
 Window dressing
 A practice of opening the books of accounts beyond the close of
the accounting period for the purpose of showing a better financial
position and performance
 By recording as of last day of the accounting period
collection made subsequent to the close of the period
 By recording as of last day of the accounting period
payments of accounts made subsequent to the close of the
period
 Lapping
 Consist of misappropriating a collection from one customer and
concealing this defalcation when collection is made from another
customer
 Kiting
 A transfer of cash from one bank to another bank. It is usually
employed at the end of the month. It occurs when a check is
drawn against a first bank and depositing the same check in the
second bank to cover the shortage in the latter bank
 Imprest System
 An internal control device for cash which requires that all cash
receipts should be deposited intact and all cash payments should
be made by means of check.
 Small disbursements are paid out of the petty cash fund
 Two systems of handling petty cash fund
 Imprest fund system – petty cash expenses are recorded
upon replenishment. The amount of the replenishment is
normally equal to the petty cash disbursement

To record transfer of funds to petty cash,

Petty Cash Fund 3,000
Cash 3,000
Petty Cash transactions are not recorded until the fund is
reimbursed
 To record replenishment
Office Supplies Expense 420
Postage Expense 530
Entertainment Expense 760
Cash 1,710

If it is decided that the amount in the fund is excessive

adjustment is necessary
Cash 500
Petty Cash Fund 500

Entries are made to the Petty Cash account only to increase

or decrease the size of the fund

 Fluctuating fund system – petty cash expenses are

immediately recorded. The amount of replenishment may
be equal to, more or less than, the petty cash disbursements

 The Cash Short and Over Account are used when the petty cash fund
fails to prove out. When this occurs, it s usually due to an error (failure
to provide correct change, overpayment of expenses, lost receipt, etc.)

If cash proves out short the shortage is debited to Cash short and over
account. If it proves out over, the overage is credited to Cash short and over
account. Generally it is shown as other expense or revenue account.

C. Application
 Activity 1
The controller for Clint Eastwood Co. is attempting to determine the amount of cash
to be reported on its December 31, 2010 balance sheet. The following information
is provided:

1. Commercial savings account of P600,000 and a commercial checking account

balance of P900,000 are held at First National Bank
2. Money market fund account held at Gilan Company that permits Eastwood to
write checks on this balance, P5,000,000
3. Travel advances of P180,000 for executive travel for the first quarter of the next
year (employee to reimburse through salary deduction)
4. A separate cash fund in the amount of P1,500,000 is restricted for the retirement
of long-term debt
5. Petty cash fund of P1,000
6. An I.O.U. from Jimbo Cox, a company officer, in the amount of P190,000
7. A bank overdraft of P10,000 has occurred at one of the banks the company uses
to deposit its cash receipts. At the present time, the company has no deposits at
this bank
8. The company has two certificate of deposits, each totaling P500,000. These
certificates of deposit have a maturity of 120 days
9. Eastwood has received a check that is dated January 12, 2011, in the amount of
P125,000
10. Eastwood has agreed to maintain a cash balance of P500,000 at all times at first
National Bank to ensure future credit availability
11. Eastwood has purchased P2,100,000 of commercial paper of Sergio Ybañez Co.
which is due in 60 days
12. Currency and coins on hand amounted to P7,700

Requirement:
a. Compute the amount of cash to be reported on Eastwood Co’s balance sheet at
December 31, 2010.

b. Indicate the proper reporting for items that are not reported as cash on the
December 31, 2010 balance sheet.
 Activity 2
Presented below are a number of independent situations. For each independent
situation, determine the amount that should be reported as cash. If the item(s) is not
reported as cash, explain the rationale.

________ 1. Checking account balance P925,000; certificate of deposit

P1,400,000; cash advance to subsidiary of P980,000; utility
deposit paid to gas company P1,800
________ 2. Checking account balance P600,000; an overdraft in special
checking account at same bank as normal checking account of
P17,000; cash held in a bond sinking fund P200,000; petty cash
fund P300; coins and currency on hand P1,350
________ 3. Checking account balance P590,000; postdated check from
customer P11,000; cash restricted due to maintaining
compensating balance requirement P100,000; certified check from
customer P9,800; postage stamps on hand P620
________ 4. Checking account balance at bank P37,000; money market
balance at mutual fund (has checking privileges) P48,000; NSF
check received from customer P800
________ 5. Checking account balance P700,000; cash restricted for future
plant expansionP500,000; short-term treasury bills P180,000; cash
advance received from customer P900 (not included in checking
account balance); cash advance of P7,000 to company executive,
payable on demand; refundable deposit of P26,000 paid to
government to guarantee performance on construction contract

Activity 3
The financial statement of Dongyi Company reveals the following on Dec. 31, 2010:
Current account at Primary Bank (60,000)
Current account at Secondary Bank 270,000
Treasury Bills (acquired 3 months before maturity) 600,000
Treasury Bills (maturity date is December 31, 2011 3,000,000
Payroll account 780,000
Foreign Bank Account – restricted (translated using the December 31, 4,000,000
2010 exchange rate)
Postage stamps 2,500
Employee’s Post-dated Checks 9,000
IOU from the President 16,000
Credit memo from a supplier for a purchase return 16,200
Traveler’s check 42,000
Money order 25,800
Petty cash fund (P6,000 in currency and receipts for P24,000) 30,000

What amount would be reported as “cash and cash equivalents” on the statement of
financial position on December 31, 2010?
Activity 4
The cash account of SUK JUNG Company as of December 31, 2010 composed of the
following:

On deposit in current account with the Bank of East

1,800,000
Cash collection not yet deposited to the bank 700,000
A customer’s check returned by the bank for insufficient fund
300,000
A check drawn by the Vice President of the company dated
January 15, 2011 140,000
A check drawn by the supplier dated December 28, 2010 for
goods returned by the company 120,000
A check dated May 31, 2010 drawn by the Bank of South in
payment of customs duties. Since the importation did not
materialize, the check was returned by the customer broker.
This check was an outstanding check in the reconciliation of
the Bank of South
820,000
Petty cash fund of which 20,000 is in currency, P14,400 in form
of IOU’s and 5,600 is supported by approved petty cash
vouchers for expenses all dated prior to closing of the books
on December 31, 2010
40,000
Total 3,920,000
Less overdraft with the bank of South secured by a chattel (600,000)
mortgage on the inventories
Cash per ledger 3,320,000

What amount of cash is to be reported on the December 31, 2010 statement of financial
position of SUK JUNG Company?
Solution:
Activity 5
Carol Inc. decided to establish a petty cash fund to help insure internal control over its
small cash expenditures. The following information is available for the month of April.
Prepare the journal entries to record transactions related to petty cash for the month of
April
TRANSACTIONS JOURNAL ENTRY:
1. On April 1, it established a
petty cash fund in the amount
of P20,000

2. A summary of the petty cash

expenditures made by the
petty cash custodian as of
April 10 is as follows:

Delivery charges P6,000

paid to
merchandise
purchased
Supplies purchased 2,500
and used
Postage expense 3,300
IOU from 1,700
employees
Miscellaneous 3,600
expenses

The petty cash fund was

replenished on April 10. The
balance in the fund is P2,700

3. The petty cash fund balance

was increased to P30,000 on
April 20
Activity 6
The petty cash fund of Fuentebella Auto Repair Shop, a sole proprietorship, contains
the following:
Coins and currency P 1,520
Postage stamps 290
An IOU from employee for cash advance 4,000
Check payable to Fuentebella from 3,400
employee, marked NSF
Vouchers for the following
 Stamps P 2,000
 Two rose bowl tickets for 17,000
Fuentebella 1,435 20,435
 Printer cartridge
P29,645
The general ledger account petty cash has a balance of P30,000
Instruction:
1. Prepare the journal entry to record the reimbursement of the petty cash fund
Date Description PR Debit Credit

Activity 7
A count of the Petty Cash Fund of Cornelli Company showed its composition
Coins and currency P3,300
Paid Vouchers
 Transportation P 600
 Gasoline 400
 Office Supplies 500
 Postage stamps 300
 Due from employee 1,200 3,000
Manager’s check returned by bank 1,000
marked NSF
Check drawn by company to the order of 2,700
petty cash custodian

What is the amount of petty cash fund for balance sheet purposes?

Activity 8
 The auditor for VERMICELLI, INC examined the petty cash immediately after the close
of the business, July 31,2011, the end of the company’s natural business year. The
petty cash custodian presented the following during the count:

Currency P1,650.00
Petty cash vouchers
 Postage 420.00
 Office supplies expense 900.00
 Transportation expense 340.00
 Computer repairs 800.00
 Advances to office staff 1,500.00 3,960.00
A check drawn by VERMICILLI payable
to the petty cash custodian 7,200.00
Postage stamps 300.00
An employee’s check, returned by bank 1,000.00
marked NSF
An envelope containing currency for a
gift for a retiring employee 1,890.00
P16,000.00

The general ledger balance shows an imprest petty cash fund balance of P16,000.00.

Required:
a. How much is the petty cash shortage or overage?
b. What is the adjusted balance of the petty cash fund at July 31, 2011?

Activity 9 - PART 1 - MULTIPLE CHOICE – THEORIES

1. As contemplated in accounting, cash includes
 a. Money only
b. Money and any negotiable instrument
c. Any negotiable instrument
d. Money and any negotiable instrument that is payable in money and acceptable by the
bank for deposit and immediate credit
2. To be reported as cash and cash equivalent, the cash and cash equivalent 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. Cash equivalents are
a. Short-term and highly liquid investments that are readily convertible into cash
b. Short-term and highly liquid investments that are readily convertible into cash with
remaining maturity of three months
c. Short-term and highly liquid investments that are readily convertible into cash and
acquired three months before maturity
d. Short-term and highly liquid marketable equity securities
4. Which is false concerning measurement of cash and cash equivalents?
a. Cash is measured at face value
b. Cash in foreign currency is measured at the current exchange rate
c. If a bank or financial institution holding the funds of the company is in bankruptcy or
financial difficulty, cash should be written down to estimated realizable value
d. Cash equivalents should be measured at maturity value
5. If material, deposits in foreign bank which are subject to foreign exchange restrictions should
be classified
a. Separately as current asset, with appropriate disclosure
b. Separately as noncurrent asset with appropriate disclosure
c. Be written off as extraordinary loss
d. As part of cash and cash equivalents
6. 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 current liability
d. Which cannot be offset is classified as noncurrent liability
7 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 as current asset
d. Which s not legally restricted as to withdrawal is classified separately as current asset
8. Unreleased check
a. Should be treated as outstanding check
b. Should be restored to the cash balance
c. Should be treated as outstanding checks if the date is shortly after the balance sheet
date
d. Should be treated as outstanding checks if they are ultimately encashed.

9. Which of the following should not be considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
 c. Coin, currency and available funds
d. Post-dated checks
10 Which of the following is usually considered cash?
. a. Certificates of deposit
b. Checking accounts
c. Money market savings certificates
d. Postdated checks
11 The following statements relate to cash. Which statement is true?
. a. The term cash equivalent refers to demand credit instruments such as money order and
bank drafts
b. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover
all normal operating expenses for a period of time
c. Classification of a restricted cash balance as current or noncurrent should parallel the
classification of the related obligation for which the cash was restricted
d. Compensating balance required by a bank should always be excluded from cash and
cash equivalent
12 Which is not considered as a cash equivalent?
. a. A three-year treasury note maturing on May 30 of the current year purchased by the
entity on April 15 of the current year
b. A three-year treasury note maturing on May 30 of the current year purchased by the
entity on January 15 of the current year
c. A 90-day treasury bill
d. A 60-day money market placement
13 As of December 31 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 balance sheet?
a. US $20,000 cash
b. Past due promissory note issued in favor of the entity by its president
c. Another entity’s P150,000 check payable to the entity dated December 15 of the current
year
d. The entity’s undelivered check payable to a supplier dated December 31 of the current
year
14 Which item should be excluded from cash and cash equivalent on the current year-end
. balance sheet of an entity?
a. The minimum cash balance in the entity’s current account which is maintained to avoid
service charge
b. A check issued by the entity on December 27 of the current year but dated January 15
of next year
c. Time deposit which matures in one year
d. A customer’s check denominated in a foreign currency

15 At December 31 of the current year, an entity had cash accounts at three different banks. One
. account balance is segregated solely for payment into a bond sinking fund. A second account,
used for branch operations, is overdrawn. The third account, used for regular corporate
operations has a positive balance. How should these accounts be reported in the December
31 classified balance sheet?
a. The segregated account should be reported as a noncurrent asset, the regular account
should be reported as current asset, and the overdraft should be reported as a current
liability
b. The segregated and regular accounts should be reported as current assets, and the
overdraft should be reported as a current liability
 c. The segregated account should be reported as a noncurrent asset, and the regular
account should be reported as current asset net of the overdraft
d. The segregated and regular accounts should be reported as current assets net of the
overdraft
16 Petty cash fund is
. a. Separately classified as current asset
b. Money kept on hand for making minor disbursement of coin and currency rather than by
writing checks
c. Set aside for the payment of payroll
d. Restricted cash
17 The petty cash fund under the imprest fund system is debited
. a. Only when the fund is created
b. When the fund is created and every time it is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is created and when the fund is decreased
18 The internal control feature that is specific to petty cash is
. a. Separation of duties c. Proper authorization
b. Assignment of d. Imprest system
responsibility
19 What is the major purpose of an imprest petty cash fund?
. a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements
20 What happens when a petty cash is in use?
. a. Expenses paid with petty cash are recorded when the fund is replenished
b. Most small amounts are paid from cash receipts before they are deposited
c. Petty cash is debited when the fund is replenished
d. Petty cash is credited when the fund is replenished
21 When a petty cash fund is in used, which of the following is true?
. a. The balance of the petty cash fund should be reported on the balance sheet as a long-
term investment
b. The petty cashier’s summary of petty cash payments serves as a journal entry that is
posted to the appropriate general ledger account
c. The reimbursement of the petty cash fund should be credited to the cash account
d. Entries that include a credit to the cash account should be recorded at the time the
payments from the petty cash fund are made
22 In reimbursing the petty cash fund, which of the following is true?
. a. Cash is debited c. Petty cash is credited
b. Petty cash is debited d. Expense accounts are debited
23 A cash over and short account
. a. Is not generally accepted
b. Is debited when the petty cash fund proves out over
c. Is debited when the petty cash fund proves out short
d. Is a contra account to cash
24 The following statements pertain to accounting for petty cash fund. Which statement is false?
. a. Each disbursement from petty cash should be supported by a petty cash voucher
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund
out of the general cash account
c. At anytime, the sum of the cash in the petty cash fund and the total of the petty cash
 vouchers should equal the amount for which the imprest petty cash fund was
established
d. With the establishment of an imprest petty cash fund, one person is given the authority
and responsibility for issuing checks to cover minor disbursements
25 The following statements pertain to the cash short or over account. Which statement is true?
. a. It would be impossible to have cash shortage or overage if employees were paid in
cash rather than by check
b. The entry to account for daily cash sales for which a small amount of cash shortage
existed would include a debit to cash short or over account
c. If the cash short or over account has a debit balance at the end of the period it must be
debited to an expense account
d. A credit balance in a cash short or over account should be considered a liability
because the short changed customer will demand return of this amount

Activity 10 - PART 2 – MULTIPLE CHOICE -PROBLEM SOLVING

1. Abiso Company had the following account balances on December 31, 2010

Cash in bank – current account 5,000,000

Cash in bank – payroll account 1,000,000
Cash on hand 500,000
Cash in bank – restricted account for building construction expected
to be reimbursed in 2011 3,000,000
Time deposit, purchased December 15, 2010 and due March 15, 2,000,000
2011

The cash on hand includes P200,000 check payable to Abiso dated January 15, 2011. What
should be reported as cash and cash equivalents on December 31, 2010
a. 6,300,000 c. 8,300,000
b. 6,500,000 d. 8,700,000

2. The following data pertain to Advincula Trading on December 31, 2010

Check book balance 4,000,000

Bank statement balance 5,000,000
Check drawn on Advincula’s account, payable to supplier dated and
recorded on December 31, 2010 but not mailed until January 15, 500,000
2011
Cash in sinking fund 2,000,000

On December 31, 2010, how much should be reported as cash?

a. 3,500,000 c. 5,500,000
b. 4,500,000 d. 6,500,000

3. Agustin Corp. reported the following information as of the end of the current year

 Investments securities of P1,000,000. These securities are share investment in

securities that are traded in the Philippine Stock Exchange. As a result, the shares
are very actively traded in the market
  Investment securities of P2,000,000. These securities are government treasury bills.
The treasury bills have a 10-year term and purchased on December 31 at which time
they had two months to go until they mature
 Cash of P3,400,000 in the form of coin, currency, savings account and checking
account
 Investment securities of P1,500,000. These securities are commercial papers. The
term of the papers is nine months and they were purchased on December 31 at which
time they had three months to go until they mature

How much should be reported as cash and cash equivalents at the end of the current year?
a. 7,900,000 c. 6,400,000
b. 6,900,000 d. 5,400,000

4. Aquino Company had the following account balances as at December 31, 2010

Cash in bank 2,250,000

Cash on hand 125,000
Cash restricted for addition to plant (expected to be disbursed in 1,600,000
2011

Cash in bank includes P600,000 of compensating balance against short term borrowing
arrangement. The compensating balance is not legally restricted as withdrawal by Aquino.
In the current asset section of Aquino’s December 31, 2010 statement of financial position,
total cash should be reported as
a. 1,775,000 c. 2,375,000
b. 2,250,000 d. 3,975,000

5. On December 31, 2010, Bacudo Company had the following cash balances:

Cash in bank 1,800,000

Petty cash fund (all funds were reimbursed on 12/31/2010) 50,000
Time deposit (due February 1, 2011) 250,000

Cash in bank includes P600,000 of compensating balance against short term borrowing
arrangement at December 31, 2010. The compensating balance is legally restricted as
withdrawal by Bacudo. In the current asset section of Bacudos December 31, 2010
statement of financial position, total cash and cash equivalents should be reported as
a. 1,250,000 c. 1,850,000
b. 1,500,000 d. 2,100,000

6. Bautista Company had the following account balances on December 31, 2010:

Petty cash fund 50,000

Cash in bank – current account 4,000,000
Cash in bank – sinking fund 2,000,000
 Cash on hand 500,000
Cash in bank – restricted account for plant addition expected to
be disbursed in 2011 1,500,000
Treasury bills 1,000,000

The petty cash fund includes unreplenished December 2010 petty cash expense vouchers of
P10,000 and employee IOU of P5,000. The cash on hand includes a P100,000 check
payable to Bautista dated January 15, 2011. In exchange for a guaranteed line of credit,
Bautista has agreed to maintain a minimum balance of P200,000 in its unrestricted current
account. The sinking fund is set aside to settle a bond payable that is due on June 30, 2011.
What should be reported as cash and cash equivalents on December 31, 2010?
a. 7,435,000 c. 5,435,000
b. 5,535,000 d. 4,435,000

7. The cash account in Beltran Company’s ledger showed a balance at December 31, 2010 of
P4,415,000 which consisted of the following:

Petty cash fund 24,000

Undeposited receipts, including postdated customers check for P70,000
1,220,000
Cash in Allied Bank, per bank statement, with a check for P40,000 still
outstanding 2,245,000
Bond sinking fund - cash 850,000
Vouchers paid out of collections, not yet recorded 43,000
IOU’s signed by employees, taken from collections 33,000

At what amount should cash be reported in December 31, 2010 statement of financial
position?
a. 3,379,000 c. 3,449,000
b. 3,419,000 d. 3,489,000

8. The cash account in the current assets section of the statement of financial position of
Cañete Company consisted of the following:

Bond sinking fund cash 1,500,000

Checking account in FEBTC ( a P320,000 check is still
outstanding per bank statement) 3,155,000
Currency and coins awaiting deposit 1,135,000
Deposit in bank closed by BSP 500,000
Petty cash fund (of which P10,000 is in the form of paid 50,000
vouchers)
Receivables from officers and employees 175,000

The correct cash balance should be

a. 4,330,000 c. 4,830,000
b. 4,440,000 d. 5,830,000
e.
9. Capa Company provided the following information with respect to its cash and cash
equivalents on December 31, 2010

Checking account at First Bank (200,000)

Checking account at Second Bank 3,500,000
Treasury bonds 1,000,000
 Payroll account 500,000
Value added tax account 400,000
Foreign bank account – restricted – in equivalent pesos 2,000,000
Postage stamps 50,000
Employee’s postdated check 300,000
IOU’s from president’s brother 750,000
Credit memo from a vendor for a purchase return 80,000
Traveler’s check 300,000
Non-sufficient fund check 150,000
Petty cash fund (P20,000 in currency and expense receipts for P30,000) 50,000
Money order 180,000

What amount would be reported as unrestricted cash on December 31, 2010?

a. 4,600,000 c. 5,900,000
b. 4,900,000 d. 6,900,000
10 Carvajal Company’s checkbook balance on December 31, 2010 was P5,000,000. In
. addition, Carvajal held the following items in its safe on that date:

 Check payable to Carvajal, dated January 2, 2011 in payment of a sale made in December 2010, not
included in December 31 checkbook balance, P2,000,000
 Check payable to Carvajal, deposited December 15 and included in December 31 checkbook balance,
but returned by bank on December 30 stamped NSF. The check was redeposited on January 2, 2011
and cleared on January 9, 2011, P500,000
 Check drawn on Carvajal’s account, payable to a vendor, dated and recorded in Carvajal’s books on
December 31, 2010 but not mailed until January 10, 2011, P300,000

The proper amount to be shown as cash on December 31, 2010 should be

a. 4,800,000 c. 6,500,000
b. 5,300,000 d. 6,800,000

11 The checkbook balance of Clarin Company on December 31, 2010 was P4,000,000. Data
. about certain cash items follow:

 A customer check amounting to P200,000 dated January 2, 2011 was included in December 31, 2010
checkbook balance
 Another customer check for P500,000 deposited on December 22, 2010 was included in its checkbook
balance but returned by bank for insufficiency of fund. This check was redeposited on December 26,
2010 and cleared two days later
 A P400,000 check payable to supplier dated and recorded on December 30, 2010 was mailed on
January 16, 2011
 A petty cash fund of P50,000 with the following summary on December 31, 2010

 Coins and currencies 5,000

 Petty cash vouchers 43,000
 Return value of 20 cases of soft drinks 2,000
50,000

 A check of P43,000 was drawn on December 31, 2010 payable to pettyc ash custodian

What is the cash balance on December 31, 2010?

a. 4,248,000 c. 4,200,000
b. 4,205,000 d. 3,748,000

12 Account of petty cash fund of Dejucos Company showed its composition as follows:
.
 Coins and currency 3,300.00
Paid vouchers
 Transportation 600.00
 Gasoline 400.00
 Office supplies 500.00
 Postage stamps 300.00
 Due from employees 1,200.00 3,000.00
Manager’s check returned by bank marked NSF 1,000.00
Check drawn by the entity to the order of petty cash 2,700.00
custodian

What is the correct amount of the petty cash fund for statement presentation purposes?
a. 10,000 c. 7,000
b. 9,000 d. 6,000
13 The petty cash fund of Delacruz Company on December 31, 2010, the end of the entity’s
. reporting period is composed of the following:

Currencies and coins 22,000

Petty cash vouchers
 Gasoline payment for delivery equipment 3,000
 Medical supplies for employees 1,000
 Repairs of office equipment 1,500
 Loans to employees 3,500
A check drawn by the entity payable to the order of Grace Dela Paz,
petty cash custodian, representing her salary 15,000
A sheet of paper with names of several employees together with
contribution for a birthday gift of a co-employee. Attached to a sheet
of paper is a currency of 5,000
An employees check returned by bank for insufficiency of funds 3,000

The petty cash general ledger account has an imprest balance of P50,000. What is the
amount of petty cash fund that should be shown in the statement of financial position on
December 31, 2010?
a. 42,000 c. 27,000
b. 37,000 d. 22,000

14 The December 31, 2010 trial balance of Domingo Company includes the following accounts:
.
Petty cash fund 50,000
Current account – First Bank 4,000,000
Current account – Second Bank (overdraft) (250,000)
Money market placement – Third Bank 1,000,000
Time deposit – Fourth Bank 2,000,000

 The petty cash fund includes unreplenished December 2010 petty cash expense
vouchers for P15,000 and an employee check for P5,000 dated January 31, 2011
 A check for P100,000 was drawn against First Bank current account dated and
recorded December 29, 2010 but delivered to payee on January 15, 2011
 The Fourth Bank time deposit is set aside for land acquisition in early January 2011

The December 31, 2010 statement of financial position should report cash and cash
equivalents at
a. 5,150,000 c. 4,880,000
b. 5,130,000 d. 4,130,000