CASH AND CASH EQUIVALENTS

Summary of Generally Accepted Accounting Principles for Cash

cash items

*unrestricted and
immediately available for use other than for
for use in the current current operations
operation

"Cash" in the current

other non current
asset section

*for payment of operating expense, current liabilities and current assets

Definition of Cash

Cash includes money and other negotiable instrument that is payable in money and
acceptable by the bank for deposit and immediate credit. It includes cash on hand,
demand deposits and other items that are unrestricted for use in the current
operations.

a. Cash on hand
1. undeposited dated cutomer’s checks or customer’s checks awaiting
deposit
2. Traveler’s check
3. Cashier’s/ Treasurer’s and Manager’s checks
4. Postal money orders (a demand credit instrument issued and payable by
a post office)
5. Undeposited cash collections (currencies such as bills and coins)
6. Bank overdrafts ( a written order addressed to the bank to pay an amount
of money to the order of the maker)

b. Cash in bank
1. Demand deposit/commercial deposit/current account/checking account
* generally non-interest bearing
* withdrawable by checks against bank

2. Savings deposit (Savings Account-SA)

* Generally non-interest bearing
* Depositor is issued an ATM card or passbook
* Withdrawable in ATM station or within the bank.

c. Cash fund (current operations)

1. Change fund
2. Payroll fund
Purchasing fund (for purchasing of inventories)
3. Revolving fund (fund that is used for limited or specific purpose set by
management)
 4. Interest fund
5. Petty cash fund (for small and miscellaneous disbursements)
6. Dividend fund
7. Travel fund
8. Tax fund

Fund For Non Current Operations

1. Pension fund – if related liability is current, then pension fund is current,
thus part of cash.
2. Preferred redemption fund - non current investment (unless the preferred
share capital has a mandatory redemption and the redemption is
already within one year from the reporting period in which case this
fund is already part of ash equivalent)
3. Acquisition of Property, plant and equipment – always noncurrent even if
expected to be disbursed next year.
4. Contingent fund – non current investment
5. Insurance fund – Non current investment
6. Sinking fund – if the related bonds payable is current, then sinking fund is
current, thus part of cash.

Classification of cash fund as current or non current should parallel the

classification applied to the related liability. Thus, an entity should classify
such non current asset if the related liability becomes current.

Cash Equivalents

are short-term and highly liquid investments 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.

Examples:
1. Time deposit
- acquired within three months from maturity date
2. Money market instrument and commercial paper
3. Treasury bills
4. Redeemable preference shares with mandatory redemption period and
acquired three months before maturity.

 If an item cannot be included as cash equivalent because it did not qualify the
cut-off time period ( ie three months), it will always be classified as
investments (short term or long term) depending on the period up to
maturity.
 If the problem is silent with regard to:
1. Treasury note – assumed investment
2. Cash in money market account – cash and cash equivalent
3. Time deposit – cash and cash equivalent

Measurement Issues in Cash and Cash Equivalents

1. Cash - measured at face value

2. Cash in foreign currency - translated to Philippine Peso

3. Deposit in foreign bank - unrestricted (included as cash)

Restricted (if material, classified separately
among noncurrent assets as receivables

4. Cash in closed bank/banks

In bankruptcy - non current asset (estimated realizable value)
5. Bank overdraft - Different banks (current liabilities)
Same bank (netted against the account with
positive balance but cannot be offset
against restricted account.

6. Compensating balance - is the minimum checking or demand deposit

account balance that must be maintained in
connection with a borrowing agreement with a
bank
not legally restricted – part of cash
legally restricted
a. short term- presented as “cash held as
compensating balance”, current
(Receivable)

b. long term- presented as “cash held as

compensating balance” , non
current (Receivable)
*If the problem is silent with regard to
compensating balance, it is
assumed not legally restricted.

7. Undelivered/unreleased check - Reverted back to cash

8. Stale checks/Checks outstanding

for more than six months
from the date of check - Reverted back to cash

9. Postdated checks - checks dated after reporting period

Company’s check – reverted back to
cash
Customer’s check – not yet cash (A/R)

10. IOUs (I owe you) - Part of receivable

11. Equity securities - cannot be classified as cash equivalents

because shares do not have maturity a
date (except redeemable
preference shares)

12. Redeemable preference shares - specified redemption date and acquired

three months before maturity
date are classified as cash
equivalents

13. Callable preference shares - shareholder’s equity

14. NSF/DAUD/DAIF - Reverted back as part of receivables.

NSF – no sufficient funds
DAUD – drawn against uncleared
deposits
DAIF – drawn against insufficient funds

15. Expenses advances - Receivable or prepaid expenses

16. Temporary investments in

shares of stock - either FVTPL or FVTOCI
17. Unused credit line - Disclosed in the notes

18. Treasury warrants - a warrant for the payment of money into

or from public treasury. (included
as part of cash)

19. Escrow deposit - restricted amount held in trust for

another party, ie deposit required
by court of law for a pending case.
(other current or noncurrent)

20. Unrecorded cash disbursements - increase recording of disbursements

21. Unrecorded cash collections - increase recording of receipts

22. Certificate of deposits - Invested 3 months before maturity –

cash equivalents
Invested for more than three months –
investment (short or long
term)

23. Postage stamps on hand - office supplies

Problem 1

The following pertains to Pau Company on December 31, 2016:

Postage stamps Php 5,000
Credit memo from a vendor for a purchase
Return 100,000
Current account Kapamilya bank ( 500,000)
Current account at Kapuso bank 10,000,000
Employees postdated check 20,000
Foreign bank account-restricted (in equivalent peso) 5,000,000
IOU from Finance Manager’s brother in law 50,000
Trading securities 75,000
Payroll account 2,500,000
Petty cash fund (Php20,000 in currency and
expenses receipts for Php30,000) 50,000
Postal money order 150,000
Traveler’s check 250,000
Treasury bills, due 1/31/17 (purchased 1/31/16) 1,500,000
Treasury bills, due 3/31/17 (purchased 12/31/16) 1,000,000
Treasury warrants 1,500,000

Additional information:
a. Check of Php1,000,000 in payment of accounts payable was recorded on
December 31, 2016 but mailed to suppliers on January 5, 2017.
b. Check of Php500,000 dated January 15, 2017 in payment of accounts
payable was recorded and mailed on December 31, 2016.
c. Check of Php250,000 dated January 15, 2016 in payment of accounts
payable was recorded and mailed on January 15, 2016. As of the reporting
period, the same has not been encashed by the payee and still outstanding.

1. How much cash and cash equivalents should Pau Company report on the
December 31, 2016 statement of financial position?
a. Php15,650,000 c. Php17,170,000
b. Php17,000,000 d. Php18,650,000

10,000,000+2,500,000+20,000+150,000+250,000+1,000,000+1,500,000+1,000,000
+500,000 + 250,000 = 17,170,000

Problem 2

Total cash and cash equivalent of Php63,250,000 reported by Mari Company on

December 31, 2017 include the following information:
a. Two certificates of deposits, each totaling Php5,000,000, having a maturity of
120 days.
b. A check is dated January 12, 2018 in the amount of Php1,250,000.
c. A commercial paper of Php21,000,000 which due in 90 days.
d. Currency and coins on hand amounted to Php770,000.

Mari Company has agreed to maintain a cash balance of Php5,000,000 in one of its
banks at all times to ensure future credit availability (this amount is legally restricted as
to withdrawal and was included in the above balance)

2. How much is the correct amount of cash and cash equivalents that Mari
Company should report in its December 31, 2017 statement of financial
position?
a. Php57,000,000 c. Php47,000,000
b. Php31,000,000 d. Php62,000,000

63,250,000-10,000,000-1,250,000- 5,000,000 = 52,000,000

Problem 3

The cash account of Pau Company on December 31, 2016 has a balance of
Php4,620,000 and
it consists of the following:
Balance in savings account with a bank closed by the BSP Php 720,000
Bills and coins on hand 1,055,600
Checking account balance in Kapuso bank
440,000
Credit memo from supplier’s for purchase returns
130,000
Customer’s check dated January 15, 2016
160,000
Customer’s check dated January 16, 2017
600,000
Customer’s check returned on 12/31/16 for lack of
sufficient fund 1,000,000
IOU of an employee 8,000
Money order 16,000
Petty cash including paid cash vouchers of Php16,500 40,000
Postage stamps 2,400
Traveler’s checks 448,000
----------------------
Total Php 4,620,000
============

3. The correct cash and cash equivalents balance on December 31, 2016 is
_________.
a. Php1,959,600 c. Php1,966,400
b. Php1,966,600 d. Php1,983,100.

1,055,600 + 440,000+16,000+23,500+448,000 = 1,983,100

Problem 4

In connection with your audit of Camil Company for the year ended December 31,
2016, you gathered the following:

Savings account at Kapatid Bank Php 4,000,000

Current account at Kapuso Bank ( 200,000)
Demand deposit, Kapamilya bank 2,000,000
Cash collection not yet deposited 700,000
Payroll account 1,000,000
Travel advances of Php720,000 for executive
travel for the first quarter of the next year
(employee to reimburse through salary deduction) 720,000
A separate cash fund in the amount of P6,000,000 is
restricted for the retirement of a long term debt 6,000,000
Camil Company has received a check dated
January 2, 2017 300,000
Camil Company has agreed to maintain a cash balance
at all times at Kapuso bank to ensure future
credit availability 400,000
A customer’s check returned by the bank for
insufficient fund 300,000
A check drawn by the Vice-President of the
Corporation dated January 15, 2017 140,000
A check dated May 31, 2016 drawn by the Corporation
 against the kapuso Bank in payment of custom
duties. Since the importation did not materialize ,

the check was returned by the customs broker. This

was an outstanding check in the reconciliation of
the Kapuso Bank account 820,000
Foreign bank account- restricted (in equivalent pesos) 2,000,000
Credit memo from a vendor for a purchase return 40,000
Traveler’s check 100,000
Money order 60,000
Petty cash fund (Php8,000 in currency and
expense receipts for Php11,900) 20,000
Treasury bills, due 2/28/17 (purchased 12/15/2016) 400,000

Additional information related to Demand deposit at Kapamilya Bank:

a. Check of Php200,000 in payment of accounts payable was recorded on
December 31, 2016 but mailed to suppliers on January 5, 2017.
b. Check of Php100,000 dated January 5, 2017 in payment of accounts
payable was recorded and mailed on December 31, 2016.
c. The company uses the calendar year. The cash receipts journal was held
open until January 15, 2017, during which time Php400,000 was
collected and recorded on December 31, 2016.

Based on the above information and the result of your audit. Compute for the cash and
cash equivalents that will be reported on the December 31, 2016 statement of financial
position, ______________.

Current account at Kapatid bank Php 4,000,000

Undeposited collection 700,000
Payroll account 1,000,000
Traveler’s check 100,000
Petty cash fund 8,000
Treasury bills, due 2/28/17 400,000
Demand deposit account as adjusted:
Demand deposit account per books Php2,000,000
Undelivered check 200,000
Postdated check issued 100,000
Window dressing of collection ( 400,000)
-------------------- 1,900,000
---------------------
8,108,000
============

Problem 5

The cash account in the ledger of Pau Company had a balance of Php1,689,600 at
December 31, 2016. An examination of the account, however, disclosed the following:
a. The sales book was left open up to January 5, 2017, and cash sales totaling
Php240,000 were considered as sales in December.
b. Checks of Php148,800 in payment of liabilities were prepared before December
31, 2016, recorded in the books , but not mailed or delivered to payees.
c. Post-dated checks totaling Php124,800 are being held by the cashier as part of
cash. The company’s experience shows that post-dated checks are eventually
realized.
d. Customer’s check for Php24,000 deposited with but returned by bank, “NSF” on
December 27, 2016.
e. The cash account includes Php640,000 earmarked for the purchase of personal
computers which will be soon delivered.

The cash balance to be shown on the statement of financial position at December 31,
2016 should be ____________.
 Unadjusted cash balance Php 1,689,600
Add(Deduct) Adjustments:
January receipts recorded
as December receipts ( 240,000)
Undelivered check 148,800
Post dated checks received ( 124,800)
NSF check ( 24,000)
Cash earmarked for personal computers ( 640,000)
-------------------------
Adjusted cash balance Php 404,800
==============

Problem 6

You were able to gather the following from the December 31, 2016 trial balance of Mari
Corporation in connection with your audit of the company:
Cash on hand Php 1,000,000
Petty cash fund 20,000
Kapuso bank current account 2,000,000
Kapatid bank current account No. 1 2,160,000
Kapatid bank current account No. 2 ( 160,000)
Kapamilya savings account 2,400,000
Kapamilya time deposit 1,000,000

Cash on hand includes the following items:

a. Customer’s check for Php80,000 returned by bank on December 26, 2016 due to
insufficient fund but subsequently redeposited and cleared by the bank on
January 8, 2017.
b. Customer’s check for Php40,000 dated January 2, 2017, received on December
29, 2016.
c. Postal money orders received from customers, Php60,000.

The petty cash fund considered of the following items as of December 31, 2016.
Currency and coins Php 4,000
Employees’ vales 3,200
Currency in an envelope marked “collections
for charity” with names attached 2,400
Unreplenished petty cash vouchers 2,600
Check drawn by Mari Corporation, payable
to the petty cashier 8,000
-------------------
20,200
===========

Included among the checks drawn by Mari Corporation against the Kapuso bank
current account and recorded in December 2016 are the following:
 Check written and dated December 29, 2016 and delivered to payee on
January 2, 2017, Php160,000.
 Check written on December 27, 2016, dated January 2, 2017, delivered to
payee on December 29, 2016, Php80,000.

The credit balance in the Kapatid bank current account no. 2 represents checks drawn
in excess of the deposit balance. These checks were still outstanding at December 31,
2016.

The savings account deposit in Kapamilya Bank has been set aside by the board of
directors for acquisition of new equipment. This account is expected to be disbursed in
the next 3 months after the end of the reporting period.
Based on the above and the result of your audit, determine the adjusted balances of the
following:
1. Cash on hand
a. Php820,000 c. Php940,000
b. Php1,060,000 d. Php880,000
e. answer not given

2. Petty cash fund

a. Php12,000 c. Php4,000
b. Php14,400 d. Php9,800
e. answer not given

3. Kapuso bank current account

a. Php2,000,000 c. Php2,160,000
b. Php2,240,000 d. Php2,080,000
e. answer not given

4. Cash and cash equivalents

a. Php5,834,400 c. Php6,104,000
b. Php6,149,800 d. Php6,132,000
e. answer not given

1. Unadjusted cash on hand Php 1,000,000

NSF check ( 80,000)
Post dated check received ( 20,000)
------------------------
880,000
==============

2. Currency and coins Php 4,000

Checks drawn by Mari Corporation,
payable to the petty cashier 8,000
-------------------
Php 12,000
===========
Or
Total Petty Cash per counts Php 20,200
Employees’ vales ( 3,200)
Currency in an envelope marked
“collections for charity” with
names attached ( 2,400)
Unreplenished PC vouchers ( 2,600)
--------------------
Php 12,000
============

3. Kapauso bank Php 2,000,000

Unreleased check 160,000
Post dated check 80,000
-----------------------
Php 2,240,000
=============

4. Cash on hand (No.1) Php 880,000

Petty cash fund (No.2) 12,000
Kapuso bank ( No. 3) 2,240,000
Kapatid bank (net of overdraft of
Php160,000) 2,000,000
Kapamilya Time deposit 1,000,000
-----------------------
 Php 6,132,000
=============

Problem 7

Shown below is the bank reconciliation for Mari Company for May 2016:
Balance per bank, May 31, 2016 Php 300,000
Add: Deposits in transit 48,000
----------------------
Total Php 348,000
Less: Outstanding checks Php 56,000
Bank credit recorded
in error 20,000
-------------------- 76,000
----------------------
Cash balance per books, May 31, 2016 Php 272,000
============

The bank statement for June 2016 contains the following data:

Total deposits Php 220,000

Total charges, including an NSF check
of Php16,000 and a service charge
of Php800 192,000

All outstanding checks on May 31, 2016, including the bank credit, were cleared in the
bank in June 30, 2016.

There were outstanding checks of Php60,000 and deposits in transit of Php76,000 on

June 30, 2016.

Based on the above and the result of your audit, answer the following:

1. How much is the cash balance per bank on June 30, 2016?
a. Php308,000 c. Php328,000
b. Php300,000 d. Php344,800
e. answer not given

2. How much is the June receipts per books?

a. Php248,000 c. Php220,000
b. Php192,000 d. Php296,000
e. answer not given

3. How much is the June disbursements per books?

a. Php192,000 c. Php179,200
b. Php159,200 d. Php196,000
e. answer not given

4. How much is the cash balance per books on June 30, 2016?
a. Php300,000 c. Php360,800
b. Php340,800 d. Php324,000
e. answer not given

5. The adjusted cash in bank balance as of June 30, 2016 is

a. Php283,200 c. Php344,000
b. Php324,000 d. Php392,000
e. answer not given
1. Balance per bank statement, May 31 Php 300,000
Add: Total deposits per bank statement 220,000
---------------------
Total 520,000
Less Total charges per bank statement 192,000
----------------------
Balance per bank statement, June 30 Php 328,000
============

2. Total deposits per bank statement Php 220,000

Less: Deposits in transit, May 31 48,000
----------------------
June Receipts cleared through the bank 172,000
Add: Deposits in transit, June 30 76,000
----------------------
December receipts per books Php 248,000
============

3. Total charges per bank statement Php 192,000

---------------------
Less: Outstanding checks, May 31 56,000
Correction of erroneous bank credit 20,000
June NSF Check 16,000
June bank service charge 800
---------------------
92,800
---------------------
June Disbursements cleared through the bank 99,200
Add: Outstanding checks, June 30 60,000
----------------------
December disbursements per books Php 159,200
============

4. Balance per books, May 31 Php 272,000

Add: June receipts per books 248,000
----------------------
Total 520,000
Less: June disbursements per books 159,200
---------------------
Balance per books, June 30, 2016 Php 360,800
============

5. Balance per bank statement, 06/30/16 Php 328,000

Deposits in transit 76,000
Outstanding checks ( 60,000)
---------------------
Adjusted bank balance, 06/30/16 Php 344,000
============
Balance per books, 06/30/16 Php 360,800
NSF check ( 16,000)
Bank service charge ( 800)
----------------------
Adjusted book balance, 06/30/16 Php 344,000
============
Problem 8

In the audit of Pau Company’s cash account, you obtained the following information:

The company’s bookkeeper prepared the following bank reconciliation as of August 31,
2016:

Bank balance, Aug 31, 2016 Php 181,600

Undeposited collections 10,000
Bank charges 200
Bank collection of customer’s note ( 16,000)
Outstanding checks:
Number Amount
2059 Php 6,000
2067 10,000
2915 4,000
-------------------- ( 20,000)
----------------------
Book Balance-August 31, 2016 Php 155,800
============
Additional data are given as follows:
1. Company recordings for September:
Total collections from customers Php 330,000
Total checks drawn 196,000

2. Bank statement totals for september:

Charges 247,600
Credits 338,000

3. Check2059 dated August 25, 2016, was entered as Php6,000 in payment

of a voucher for Php60,000. Upon examination of the checks
returned by the bank, the actual amount of the check was Php60,000.

4. Check No. 3010 dated September 22, 2016 was issued to replace a
mutilated check (No.2067), which was returned by the payee. Both
checks were recorded in the amount drawn, Php10,000 but
no entry was made to cancel check No. 2067.

5. The September bank statement included a check drawn by Mike

Company for Php3,000.

6. Undeposited collections on June 30, 2016 – Php16,000.

7. The service charge for September was Php300 which was charged by
the bank to another client.

8. The bank collected a note receivable of Php14,000 on September 27,

2016, but the collection was not received on time to be recorded
by Pau Company.

9. The outstanding checks on September 30, 2016 were:

Check No. Amount Check No. Amount
2067 Php 10,000 3015 Php 4,600
3056 2,600 3043 8,200

Based on the above and the result of your audit, determine the following:

1. Unadjusted cash balance per books as of September 30, 2016

a. Php305,600 c. Php289,800
 b. Php305,500 d. Php331,400
e. answer not given

2. Adjusted cash balance as of August 31, 2016

a. Php171,600 c. Php127,600
b. Php117,600 d. Php181,600
e. answer not given

3. Adjusted book receipts for September 2016

a. Php341,000 c. Php344,000
b. Php364,000 d. Php346,000
e. answer not given

4. Adjusted bank disbursement for September 2016

a. Php240,300 c. Php250,300
b. Php152,300 d. Php196,300
e. answer not given

5. Adjusted cash balance as of September 30, 2016

a. Php265,300 c. Php275,600
b. Php275,300 d. Php269,300

Unadjusted book balance, Aug 31, 2016 Php 155,800

Add: Unadjusted book receipts:
Collection from customers Php 330,000
Note collected by bank in Aug
presumed recorded in Sept 16,000
---------------------- 346,000
---------------------
Total 501,800
Less: Unadjusted book disbursements:
Checks drawn Php 196,000
BSC for Aug presumed
Recorded in September 200
--------------------- 196,200
---------------------
Unadjusted book balance, Sept 30, 2016 Php 305,600
============

Aug 31 Receipts Disbursements Sept 30

Balance per bank 181,600 338,000 247,600 272,000
Deposits in transit
Aug 31 10,000 ( 10,000)
Sept 30 16,000 16,000
Outstanding checks
Aug 31 ( 64,000) ( 64,000)
Sept 30 15,400 ( 15,400)
Bank errors-Sept
Check of Mike Co. ( 3,000) 3,000
BSC charged to
another client 300 ( 300)
----------------------------------------------------------------------------
127,600 344,000 196,300 275,300
===========================================
Balance per books 155,800 346,000 196,200 305,600
Customer’s note
collected by bank:
August 31 16,000 ( 16,000)
Sept 30 14,000 14,000
BSC
August 31 ( 200) ( 200)
Sept 30 300 ( 300)
Book errors:
Check No. 2059
(60,000-6,000) ( 54,000) ( 54,000)
Check No. 2067
(Mutilated check) 10,000 10,000
----------------------------------------------------------------------------
Adjusted Book Bal 127,600 344,000 196,300 275,300
============================================

Problem 9

You obtained the following information on the current account of Pau Company during
your examination of its financial statements for the year ended December 31, 2017.

The bank statement on November 30, 2017 showed a balance of Php306,000. Among
the bank credits in November was customer’s note for Php100,000 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 Php1,200
and a Php40,000 check which was charged by the bank in error against Pau
Company account. Also in November you ascertained that there were deposits in
transit amounting to Php80,000 and outstanding checks totaling Php170,000.

The bank statement for the month of December showed total credits of Php416,000
and total charges of Php204,000. The company’s books for December showed total
debits of Php735,600, total credits of Php407,200, and a balance of Php485,600. Bank
debit memos for December were: No. 008 for service charges and No. 009 on a
customer’s returned checks marked “ no sufficient fund” for Php24,000.

On December 31, 2017, the company placed with the bank a customer’s promissory
note with a face value of Php120,000 for collection. The company treated this note as
part of its receipts although the bank was able to collect on the note only in February
2018.

A check for Php3,960 was recorded in the company cash payments books in
December as Php39,600.

Based on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answer to the following:

1. How much is the undeposited collections as of December 31, 2017?

a. Php339,600 c. Php219,600
b. Php179,600 d. Php139,600
e. answer not given

2. How much is the outstanding checks as of December 31, 2017?

a. Php191,600 c. Php361,960
b. Php397,600 d. Php363,160
e. answer not given

3. How much is the adjusted cash balance as f November 30, 2017?

a. Php216,000 c. Php176,000
b. Php256,000 d. Php157,200
e. answer not given

4. How much is the adjusted bank receipts for December?

a. Php635,600 c. Php475,600
b. Php515,600 d. Php435,600
e. answer not given
 5. How much is the adjusted book disbursements for December?
a. Php395,600 c. Php225,960
b. Php431,600 d. Php397,160
e. answer not given

6. How much is the adjusted cash balance as of December 31, 2017?

a. Php625,640 c. Php220,000
b. Php195,640 d. Php375,640
e. answer not give

Nov 30 Receipts Disbursements December 31

Balance per bank 306,000 416,000 294,000 518,000
Deposits in transit
Nov 80,000 ( 80,000)
Dec 219,600 219,600
Outstanding checks
Nov ( 170,000) ( 170,000)
Dec 361,960 (361,960)
Erroneous bank
Debit-Nov 40,000 ( 40,000)
----------------------------------------------------------------------------
Adjusted bank
Balance 256,000 515,600 395,960 375,640
===========================================
Balance per books 157,200 735,600 407,200 485,600
Customer’s note
Collected by
Bank-Nov 100,000 ( 100,000)
Bank Service Charge
Nov ( 1,200) ( 1,200)
Dec 1,600 ( 1,600)
NSF Check
Dec 24,000 ( 24,000)
Book errors
December
Uncollected
Customer’s note ( 120,000) ( 120,000)
Error in recording
a check (should
be Php3,960,
recorded as
Php39,600) ( 35,640) 35,640
---------------------------------------------------------------------------
256,000 515,600 395,960 375,640
===========================================

Problem 10

You were able to obtain the following information in connections with your audit of the
cash account of the Pau Company as of December 31, 2017:

November 30 December 31
Balances per bank Php 480,000 Php 420,000
Balances per books 504,000 539,000
Undeposited collections 244,000 300,000
Outstanding checks 150,000 120,000

 The bank statement for the month of December showed a total credits of
Php240,000 while the debits per books totaled Php735,000.
 NSF Checks are recorde
Problem 4

The cashier misplaced all the bank statements for the past year. You reviewed the
accounting records and discovered that the following journal entry was made to
reconcile the June 30, 2016 bank records and accounting records:

Accounts receivable 152,024

Miscellaneous expense 1,250
Notes receivable 20,000
Interest revenue 1,000
Cash 132,274

Pre adjustment cash balance in the accounting records was Php768,370, outstanding
checks were Php20,750 and no other adjustments were required.

4. What is the bank statement balance at June 30, 2016?

a. Php615,346 c. Php656,846
b. Php636,096 d. Php768,370

768,370 – 132,274 + 20,750 = 656,846

Problem 5

Assume the following data of Pau Company of its cash and short-term, highly liquid
investments for December 31, 2017:

Cash on hand Php 800,000

Checking account No. 421, Kapuso bank 2,000,000
Checking account No. 724, Kapuso bank ( 300,000)

Date Maturity
Securities Acquired Date Amount
120-day certificate of deposit 12/10/17 1/31/18 Php 6,000,000
BSP-Treasury bills (No. 1) 11/30/17 4/30/18 50,000,000
BSP-Treasury bills (No. 2) 10/31/17 1/20/18 10,000,000
180 days commercial paper 12/1/17 6/20/18 14,000,000
Money market funds 11/21/17 2/10/18 20,000,000

5. The correct cash and cash equivalents balance on December 31, 2017 is
a. Php38,500,000 c. Php52,500,000
 b. Php38,800,000 d. Php52,800,000

800,000+2,000,000-300,000+6,000,000+10,000,000+20,000,000 = 38,500,000

Problem 6

The December 31, 2016 trial balance of Mari Company includes the following accounts:
Petty cash fund Php 700,000
Current account-Kapuso bank 40,000,000
Current account-Kapamilya bank (overdraft) ( 2,500,000)
120-day money market placement-K bank 10,000,000
Time deposit-KB bank 20,000,000
Additional information:
a. The petty cash fund includes unreplenished December 2016 petty cash
expense vouchers for Php150,000 and an employee check for Php50,000
dated January 31, 2017.
b. A check for Php1,000,000 was drawn against Kapuso bank current account
dated and recorded December 27, 2106 but delivered to payee on January
10, 2017.
c. The KB bank time deposit is set aside for land acquisition in early January
2017.

6. What should be reported as “cash and cash equivalents” on December 31,

2016?
a. Php51,300,000 c. Php41,500,000
b. Php51,500,000 d. Php48,800,000

(700,000-150,000-50,000=500,000) + (40,000,000+1,000,000=41,000,000)
=41,500,000

Problem 7

Camil Company’s ledger showed a balance in its cash account at December 31, 2016
of Php1,364,500, which was determined to consist of the following:
Petty cash fund Php 7,200
Checking account in Kapamilya bank ( check
of Php12,000 is still outstanding) 673,500
Notes receivable in the possession of a
collecting agency 50,000

Undeposited receipts, including a postdated

check for Php10,500 and traveller’s check
for Php10,000 356,000
Bond sinking fund cash 255,000
IOUs signed by employees 9,900
Paid vouchers, not yet recorded 12,900
---------------------
Total Php 1,364,500
============

7. At what amount should “cash on hand and in bank” be reported on Camil

Company’s statement of financial position?
a. Php1,003,700 c. Php1,258,700
b. Php1,014,200 d. Php1,324,500

7,200 + (673,500 – 12,000) + (356,000-10,500) = 1,014,200

Problem 8
The petty cash fund of Pau Company at the end of the fiscal year ended June 30, 2016,
is composed of the following:
Currencies Php 7,600
Coins 2,400
Paid vouchers:
Office supplies 3,500
Postage stamps 4,000
Loans to employees 12,000
Check drawn by the manager, returned by bank
marked “NSF”. 5,500
Check drawn by the company, payable to the
order of the petty cash custodian , representing
her salary 25,000

8. The amount of petty cash fund that would be shown on the statement of
financial position at June 30, 2016 of Pau Company is __________.
a. Php10,000 c. Php40,500
b. Php35,000 d. Php60,000

7,600 + 2,400 + 25,000 = 35,000

Problem 9

Upon examination of the petty cash fund of Kapuso Company on June 3, 2017, the
following
items were found:
Total bills and coins Php 18,250
Certified check of general manager
dated December 15, 2016 15,000
Petty cash vouchers (PCVs) not yet
replenished:
PCV No.0021 Postage stamps 2,800
PCV No.0022 Supplies 6,500
PCV No.0023 IOU employee 5,000
Company check representing replenishment
of petty cash fund 51,500
Unused stamps 1,200
An envelope containing contributions of
employees for the death of a fellow
employee (contents intact) 30,000

The petty cash fund was established for an amount of Php100,000.

9. What is the correct amount of petty cash fund at December, 2016?

a. Php99,050 c Php69,750
b. Php84,750 d. Php18,250.

18,250 + 15,000 + 51,500 = 84,750

10. What is the amount of cash shortage or overage?

a. Php950 shortage c. Php2,150 shortage
b. Php250 overage d. canot be determined

100,000 – (18,250+15,000+2,800+6,500+5,000 +51,500 = 99,050) = 950

Problem 10

The following account balances are shown in the accounting records of Camil
Company:
 January 1, 2016 December 31, 2016
Cash Php 124,000
Accounts receivable 134,000 Php 182,000
Merchandise inventory 172,000 156,000
Accounts payable 106,000 96,000

Sales for 2016 amounted to Php1,596,000 while cost of goods sold was Php1,166,000.
Cash operating expenses amounted to Php214,000. All sales and purchases were
made on credit.

11. Assuming that there were no other relevant transactions , what is the cash
balance at December 31, 2016?
a. Php216,000 c. Php512,000
b. Php298,000 d. Php610,000

Collections = 134,000 + 1,596,000 – 182,000 = Php 1,548,000

Purchases = 1,166,000 + 156,000 – 172,000 = 1,150,000
Payment = 1,150,000 + 106,000 – 96,000 =
1,160,000
Cash balance end = 124,000 + 1,548,000 – 1,160,000 – 214,000 = 298,000

Problem 11

Camila Company is making a four column bank reconciliation at December 31 from the
following data. The amounts per bank statement were:
Balance November 30, Php650,000; December Receipts, Php1,300,000; December
Disbursements, Php1,100,000. The amounts per books were: Balance November 30,
Php763,500; December Receipts, Php1,154,800; December Disbursements,
Php 1,123,500; Balance, December 30, Php794,800.

November 30 December 31
Deposits in transit ? Php 150,000
Outstanding checks ? 84,000
The bank overlooked a check for Php7,500
when recording a deposit on Dec 10
Note collected by bank, recorded after
receiving the bank statement 180,000
Service charge, recorded after
receiving the bank statement 4,500 6,000

NSF checks, recorded after

receiving the bank statement 56,000 48,000
Camila recorded a Php37,400 check
received from a customer in December
as Php34,700.

12. The corrected cash balance on December 31 is _____________.

a. Php908,500 c. Php923,500
b. Php916,000 d. Php1,007,500.

13. The corrected December receipts is

a. Php1,157,500 c. Php1,334,800
b. Php1,330,000 d. Php1,337,500

14. The corrected amount of December disbursements is

a. Php1,083,000 c. Php1,125,000
d. Php1,117,000 d. Php1,130,000

15. Deposits in transit, November 30

a. Php120,000 c. Php127,500
 b. Php240,000 d. answer not given

16. Outstanding checks , November 30

a. Php67,000 c. Php120,000
b. Php70,000 d. answer not given

November Receipts Disbursements December

Bank 650,000 1,300,000 1,100,000 850,000
Deposits in transit
Nov 120,000 ( 120,000)
December 150,000 150,000
‘ Outstanding checks
Nov ( 67,000) ( 67,000)
Dec 84,000 ( 84,000)
Check overlooked 7,500 7,500
------------------------------------------------------------------------------
Adjusted Balances 703,000 1,337,500 1,117,000 923.500
============================================

Book 763,500 1,154,800 1,123,500 794,800

Note collected
Dec 180,000 180,000
Service charge
Nov ( 4,500) ( 4,500)
Dec 6,000 ( 6,000)
NSF checks
Nov ( 56,000) ( 56,000)
Dec 48,000 ( 48,000)
Book error 2,700 2,700
---------------------------------------------------------------------------------
Adjusted Balances 703,000 1,337,500 1,117,000 923,500
===========================================