UNIVERSITY OF NUEVA CACERES

City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

CASH AND CASH EQUIVALENTS

CASH – In accounting, cash includes money in the form of currency and coins, negotiable instruments in the form of
checks and money orders acceptable by the bank for immediate credit and bank deposits whether in a savings or
current account.

CASH EQUIVALENTS – Under PAS 7, cash equivalents are short-term and highly liquid investment that are readily
convertible into cash and so near their maturity that they present insignificant risk in changes in value because of
changes in interest rates.

BANK RECONCILIATION - A statement that that settles the difference between the bank statement balance and the
cash balance per book which is the current balance in the checkbook of the depositor.

BOOK RECONCILING ITEMS – Includes credit memos, debit memos and errors that need to be corrected or adjusted
by the depositor in order for the balance per book to reconcile with the adjusted balance.

BANK RECONCILING ITEMS – Includes deposits in transit, outstanding checks and errors.

CERTIFIED CHECKS – Checks that have been accepted by the bank and where the drawer’s account has been
debited but the money has yet to be withdrawn by the payee. The funds are now held by the bank on behalf of the
payee and the check is no longer outstanding.

PETTY CASH FUND – Money set aside to pay small and recurring expenses where it will be inefficient to settle such
payments by issuing checks. Accounting for petty cash involves an Imprest Fund System that is more commonly used
due to its efficiency and convenience rather than the Fluctuating Fund System that requires each disbursement to be
recorded.

IMPREST CONTROL SYSTEM – Implemented as a control system where all cash receipts is including checks to be
deposited intact and all cash disbursements be made by the issuance of a check. Although a petty cash fund will also
be used to settle small expenses.

Cash includes the following items plus adjustments:

 Undeposited currency and coins

 Checks and money orders held unless the checks are post-dated, defective or stale. Such items shall still be
included as receivables.

 Unrestricted bank deposits, however checks that have been recorded as payments that have not been delivered
or post-dated must be restored back to the bank deposits’ balance with a corresponding liability for the payment
that was made.

 Funds on hand and deposits that are for current use and have been restricted for a liability that is classified as
“current”. This includes petty cash fund, payroll fund and funds for taxes and dividends as mentioned in PAS
1.

Special Items of Cash

A. Bank Overdraft – A credit or negative balance in the bank account of the depositor resulting from an issuance
of a check that exceeds the amount of the deposit.

 As a rule an overdraft shall be classified as a current liability and not offset against current accounts with
a positive or debit balance.
 As an exception, if the overdraft is in a bank where there are other accounts that have a positive balance
and those accounts are sufficient to cover the overdraft, the total cash shall be shown net of the
overdraft.

B. Compensating Balance Agreement – Part of or deposits that a bank can use to offset an existing loan.
However, compensating balances can also describe a minimum amount of the deposit that a depositor agrees
to maintain in order to guarantee future credit availability.

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

 In the case of deposits that a bank can use to offset a loan, the assumption is that this amount is legally
restricted to withdrawal and therefore excluded from cash, however in cases that it still remains to be
unrestricted, the compensating balance shall be part of cash. If the compensating balance is legally
restricted the following rules shall be followed:

a) The related loan is short-term: The compensating balance shall be part of current assets but
separately from cash.
b) The related loan is long-term: The compensating balance is part of noncurrent assets as an
investment.

 An informal agreement to maintain a minimum amount of deposit will not be legally restricted and
therefore included in cash.

C. Time Deposits – Bank savings account that earns interest but not subject to immediate withdrawal or check
issuance. A notice must be submitted by the depositor for the withdrawal of funds and interest earned shall be
forfeited.

 Time deposits are excluded from cash because of their restriction on availability as funds and are
classified as investments and shall follow these specific classifications:
a. Cash equivalents if the original term is 3 months or less.
b. Short term investments if the original term is more than 3 months to 1 year
c. Long-term investments if the original term is more than 1 year.

Cash Equivalents – The three important characteristics for cash equivalents as mentioned in PAS 7 are short-term,
highly liquid and near maturity. In other words, short-term debt instruments with low risk (also low yield) and acquired
3 months or less from maturity date shall be considered as cash equivalents.

Examples include Treasury Bills, Bonds and Notes, Time Deposits, Certificate of deposits and Bankers Acceptances
and Commercial Papers.

Example of Adjusted Balance Reconciliation

Bank Book
Unadjusted Balance X Unadjusted Balance X
Deposit in transit + Credit memo* +
Outstanding checks (-) Debit memo** (-)
Errors +/(-) Errors +/(-)
Adjusted balance X Adjusted balance X

*Credit memos include collections by the bank; interest credited by the bank and matured time deposits transferred to
the current account.

**Debit memos include NSF checks, bank service charges and authorized bank debits.

END

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

EXERCISES

1. The following information was used to prepare the March 2002, bank reconciliation for Knorr Machine Works. Identify
the items that require adjustment to the cash balance per books and prepare the appropriate adjusting entries.
1. Included with the bank statement materials was a check from Joe Terrell for P70 stamped "NSF."
2. A personal deposit by Tim Knorr to his personal account in the amount of P300 for dividends on his General
Electric common stock was credited to the company account. (bank error, No entry)
3. The bank statement included a debit memorandum for P30.00 for four books of blank checks for Knorr Machine
Works.
4. The bank statement contains a credit memorandum for P42.75 interest on the average checking account balance.
5. The daily deposits of March 30 and March 31, for P3,362 and P3,125 respectively, were not included in the bank
statement postings. (DIT, No entry)
6. Two checks totaling P316.86, which were outstanding at the end of February, cleared in March and were returned
with the March statement. (OS, No entry)
7. The bank statement included a credit memorandum dated March 28, 2002, for P75.00 for the monthly interest on
a 6-month P15,000 certificate of deposit that the company owns.
8. Four checks, #8712, #8716, #8718, #8719, totaling P5,369.65, did not clear the bank during March. (OS, No
entry)
9. On March 24, 2002, Knorr Machine Works delivered to the bank for collection a P4,500, 3-month note from Tom
Jacobs. A credit memorandum dated March 29, 2002, indicated the collection of the note and P135.00 of interest.
10. The bank statement included a debit memorandum for P25.00 for the collection service on the above note and
interest.

Item #1 Accounts Receivable ......................................................... 70.00

Cash ......................................................................... 70.00

Item #3 Miscellaneous Expense ..................................................... 30.00

Cash ......................................................................... 30.00

Item #4 Cash .................................................................................. 42.75

Interest Revenue ....................................................... 42.75

Item #7 Cash .................................................................................. 75.00

Interest Revenue ....................................................... 75.00

Item #9 Cash .................................................................................. 4,635

Note Receivable ........................................................ 4,500
Interest Revenue ....................................................... 135

Item #10 Miscellaneous Expense ..................................................... 25.00

Cash ......................................................................... 25.00

2. In preparing a bank reconciliation, outstanding checks are

a. added to the balance per bank.
b. deducted from the balance per books.
c. added to the balance per books.
d. deducted from the balance per bank.

3. If a check correctly written and paid by the bank for P448 is incorrectly recorded on the company's books for P484, the
appropriate treatment on the bank reconciliation would be to
a. add P36 to the bank's balance.
b. add P36 to the book's balance.
c. deduct P36 from the bank's balance.
d. deduct P448 from the book's balance.

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

4. Notification by the bank that a deposited customer check was returned NSF requires that the company make the
following adjusting entry:
a. Accounts Receivable
Cash
b. Cash
Accounts Receivable
c. Miscellaneous Expense
Accounts Receivable
d. No adjusting entry is necessary.

5. Elkins Company had checks outstanding totaling P5,400 on its June bank reconciliation. In July, Elkins Company
issued checks totaling P38,900. The July bank statement shows that P26,300 in checks cleared the bank in
July. A check from one of Elkins Company's customers in the amount of P300 was also returned marked "NSF."
The amount of outstanding checks on Elkins Company's July bank reconciliation should be
a. P12,600.
b. P18,000.
c. P17,700.
d. P7,200.

*5,400 + 38,900 – 26,300 = 18,000 (NSF checks are ignored)

6. Grant Company gathered the following reconciling information in preparing its July bank reconciliation:
Cash balance per books, 7/31 P4,500
Deposits-in-transit 150
Notes receivable and interest collected by bank 850
Bank charge for check printing 20
Outstanding checks 2,000
NSF check 170
The adjusted cash balance per books on July 31 is
a. P5,160.
b. P5,010.
c. P3,310.
d. P3,460.

*4,500 +850 -20 -170

7. Yenn Company developed the following reconciling information in preparing its September bank reconciliation:
Cash balance per bank, 9/30 P11,000
Note receivable collected by bank 4,000
Outstanding checks 6,000
Deposits-in-transit 3,000
Bank service charge 50
NSF check 800
Determine the cash balance per books (before adjustments) for Yenn Company.
a. P8,850.
b. P14,000.
c. P4,850.
d. P11,000.

*Bank Balance 11,000

DIT 3,000
OC (6,000)
Ending Bank Bal. 8,000

Book Bal. ?
Notes Receivable 4,000
Bank Service Charge (50)
NSF Check (800)
Ending Book Bal. 8,000

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

8. The “CASH” account of Don Corporation’s ledger on December 31, 2006 showed the following:

a. Petty cash fund (including P7,500 unreplenished

voucher of which P2,400 is dated January 3, 2007) P 15,000

a. Operating expenses 5,100

Cash 5,100

b. Redemption Fund Account – PNB 500,000

b. Investment 500,000
Cash 500,000

c. Traveler’s check 100,000

d. Money order 10,000
e. Treasury bill, purchased December 1, 2006 (due on Feb. 1, 2007) 50,000
f. Time deposit due on March 31, 2007 50,000
g. 180-day Treasury bill, due March 15, 2007 120,000

Short-term investment 120,000

Cash 120,000

h. Note receivable in the possession of a collecting agency 20,000

Notes receivable 20,000
Cash 20,000

i. PNB – Checking Account #211-009-091 325,900

j. Cash on hand, including customer postdated check of P15,000 23,000
Accounts receivable 15,000
Cash 15,000

k. Savings deposit, earmarked for acquisition of equipment 210,000

Cash – restricted 210,000
Cash 210,000

l. A check payable to San Ignacio Incorporated, dated January 5, 2007,

that was included in the December 31 PNB Checking Account
#211-009-091 50,000

m. Bond Sinking Fund (used to finance the maturing long-term obligation

on March 31, 2007) 150,000
Investment – current 150,000
Cash 150,000

n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)

o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2006
not mailed until January 5, 2007 20,000

p. Advances to Officers/Employees for Seminars (no liquidation is

required) 80,000
Operating expenses 80,000
Cash 80,000

q. Money market placement (due June 30, 2007) 600,000

Operating expenses 80,000
Cash 80,000

r. Listed stock held as temporary investment 100,000

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

Short-term investment 100,000

Cash 100,000

s. Check #789 in payment to Suppliers, dated January 5, 2007 and

recorded December 31, 2006. 35,000
t. Customers’ certified checks 10,000
u. Pension Fund 150,000
Investment 150,000
Cash 150,000

TOTAL 2,568,900
Identify items that needs adjustment and Prepare the necessary Adjusting Entries.

9. The following items are found in the cash account of Ivie Company at December 31, 2006. The company’s controller
asks your opinion whether the items listed below should be considered as part of cash account and come up with
adjusting entry to adjust the cash account.

1. Customers’ check dated December 25, 2006, P25,000.

2. Company’s check (P30,000) dated December 26, 2006 which was drawn in payment for merchandise purchased
on that date but not delivered until January 3, 2007. This check was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount. The company records the
transaction as credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2007 to redeem the bonds payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2007 in payment of account, P50,000. This was recorded in the company’s
disbursement ledger at December 31, 2006.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2006), P100,000
14. Treasury Bills that matures on February 1, 2007, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for December).

Identify the treatment of each item in your financial statement

Solution

Item 1 - Cash
Item 2 - Cash
Item 3 - Cash
Item 4 - Other Assets
Item 5 - Investment
Item 6 - Investment – current
Item 7 - Cash
Item 8 - Cash
Item 9 - Current liability
Item 10 – cash
Item 11 – Offset to Cash
Item 12 – Unused supplies
Item 13 – Cash as cash equivalents
Item 14 – Short-term investment
Item 15 – Cash
Item 16 – Cash
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

Item 17 – property recorded as disbursement

10. During the year the following items were noted:

1. Current account at PBCom P (35,000)

2. Current account at PNB 65,000
3. Treasury bills (acquired 3 months before maturity) 200,000
4. Treasury bills (maturity date is 12/31/07) 500,000
5. Payroll account 175,000
6. Foreign bank account - restricted (translated using the
12/31/06 exchange rate) 900,000
7. Postage stamps 600
8. Employees’ checks marked “NSF” 10,000
9. IOU from the vice-president 50,000
10. Credit memo from a supplier for a purchase returns 25,000
11. Traveler’s check 60,000
12. Money order 10,000
13. Company’s check dated 12/30/06 but not mailed at year-end 30,000
14. Petty cash fund (P4,000 in currency and expense receipts for
(P6,000) 10,000

MATO CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2006 is:
a. P 560,000 b. P 544,000 c. P 514,000 d. P 509,000

Solution

Current account at PNB 65,000

Treasury bills acquired 3 mos. Before maturity 200,000
Payroll account 175,000
Traveler’s check 60,000
Money order 10,000
Company’s undelivered check 30,000
Petty cash fund 4,000
TOTAL 544,000

11. The controller of Pacatang Company is attempting to determine the amount of cash to be reported on its December
31, 2006 balance sheet. The following information is provided:

a. Commercial savings account of P1,000,000 and a commercial checking account balance of P900,000 are held at
Phil. Banking Corporation.
b. Money market fund account held at Allied Bank, P600,000
c. Travel advance of P180,000 for executive travel for the first quarter of next year (employee to reimburse through
salary reduction)
d. A separate fund in the amount of P1,500,000 is restricted for the retirement of long-term debt.
e. Petty cash fund, P5,000
f. An IOU from David Santos, a company officer, in the amount of P10,000.
g. A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At
the present time, the company has no other deposits at this bank.
h. The company has two certificates of deposit, each totaling P500,000. These certificates of deposit have a maturity
of 120 days.
i. Pacatang Company has received a check that is dated January 12, 2007 in the amount of P125,000.
j. Currency and coins on hand amounted to P5,300.

PACATANG COMPANY’S adjusted cash and cash equivalents balance at December 31, 2006 is:
a. P 1,910,300 b. P 2,400,300 c. P 2,510,300 d. P 3,510,300

Solution
Commercial savings account P1,000,000
Commercial checking account 900,000
Petty cash fund 5,000
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

Currency and coin on hand 5,300

Amount of cash to be reported on balance sheet at 12.31.03 P1,910,300

(2) Money market fund acct. M/S or Temp. Investments

(3) Travel advance for executive travel (employee to
reimburse through salary deduction) Advances to Employees
(4) Bond Retirement Fund Long-term Investment
(6) IOU from company officer Advance to officers
(7) Bank overdraft (the co. has no other deposits at
this bank) Current Liabilities
(8) Certificates of deposit (maturity of 120 days Marketable securities
(9) Postdated check January 12, 2004 Receivable

12. The balance sheet at December 31 of Love Company showed a cash balance of P200,000. An examination of the
books disclosed the following:
a. Cash sales of P15,000 from January 1 to 7, were predated as of December 28 to 31, and charged to the cash
account.
b. Customer’s checks totaling P5,000 deposited with and returned by the bank, NSF, on December 27, were not
recorded in the books.
c. Checks of P6,500 in payment of liabilities were prepared before December 31, and recorded in the books, but
withheld by the treasurer.
d. Customer’s postdated checks totaling P4,300 are being held by the cashier as part of cash. The company’s
experience shows that postdated checks are eventually realized.
e. The cash account includes P30,000 being reserved for the purchase of a mini-computer which will be delivered
soon.
How much cash balance is to be shown on the December 31 balance sheet?
a P152,200 b P166,500 c P192,200 d P200,000 A

Cash balance, per book P200,000

Cash sales for January 1 to 7 ( 15,000)
NSF checks ( 5,000)
Undelivered check 6,500
Customer’s postdated checks ( 4,300)
Cash for purchase of a computer ( 30,000)
Adjusted cash balance P152,200

13. The balance sheet at December 31,2004 of Lore Company showed a cash balance of P105,600. An examination
of the books disclosed the following:
a. The sales book was left open up to January 5, 2005 and cash sales totaling P15,000 were considered as sales
in December 2004.
b. Checks of P9,300 in payment of liabilities were prepared before December 31, 2004, recorded in the books, but
not mailed or delivered to payees.
c. Customer’s postdated checks totaling P7,800 deposited with but returned by bank, NSF, on December 27,
2004. Return was not recorded in the books, P1,500.
d. The cash account includes P40,000 earmarked for the purchase of an office equipment which will be delivered
soon.
How much cash balance is to be shown on the December 31, 2004 balance sheet?
a P105,600 b P60,500 c P58,400 d P50,600 D

Cash balance, per book P105,600

Cash sales for January ( 15,000)
NSF checks ( 1,500)
Undelivered check 9,300
Customer’s postdated checks ( 7,800)
Cash for purchase of office equipment ( 40,000)
Adjusted cash balance P 50,600

14. The balance sheet at December 31 of Live Company showed a cash balance of P91,750. An examination of the
books disclosed the following:
a. Cash sales of P12,000 from January 1 to 5, 2005 were predated as of December 28 to 31, 2004 and charged
to the cash account.
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

b. Customer’s checks totaling P4,500 deposited with and returned by the bank, NSF, on December 27, 2004 were
not recorded in the books.
c. Checks of P5,600 in payment of liabilities were prepared before December 31, 2004 and recorded in the books,
but withheld by the treasurer.
d. Personal checks of officers, P2,700, were “redeemed” on December 31, 2004, but returned to cashier on
January 2, 2005.
e. The cash account includes P20,000 being reserved for the purchase of an office machine which will be delivered
soon.
How much cash balance is to be shown on the December 31 balance sheet?
a P91,750 b P69,150 c P54,750 d P90,350 C
Cash balance, per book P 91,750
Cash sales for January ( 12,000)
NSF checks ( 4,500)
Undelivered check 5,600
Personal checks of officers ( 2,700)
Cash for purchase of a computer ( 20,000)
Adjusted cash balance P 58,150

Items 15 to 19:

On October 7, 2004, the cash book of Davao Company showed the following entries:
Receipts Checks
September 30 (overdraft) P 0 P5,000
October 1 Tuesday 1,200 1,600
2 Wednesday 3,000 2,400
3 Thursday 800 1,000
4 Friday 6,000 3,400
5 Saturday 4,000 2,500
Cash receipts are deposited at the beginning of every Monday, Wednesday and Friday and in each case includes
the receipts of the preceding two working days. The bank statement at the close of October 5 showed:
Balance, September 30 – overdraft P6,500
Deposits 7,000
Checks (includes all checks issued prior to October 4
and also a check for P300 belonging to Cebu
Co., erroneously charged to Davao account 5,800
A check for P256 issued on October 5 had been canceled
by the company but the bookkeeper has not made
any entry for this.
Additional information: undeposited collections – October 31, P10,000; outstanding checks – October 31, P5,644.

15. The book balance as at October 5, 2004 should be:

a (P900) b (P3,900) c P1,100 d P1,200 A

Balance per book, September 30 (P5,000)

Receipts (October 1 to 5) 15,000
Checks (October 1 to 5) (10,900)
Balance per book, October 5 (P 900)

16. The bank balance as at October 5, 2004 should be:

a (P3,900) b (P5,300) c P1,200 d P1,100 B

Balance per bank, September 30 (P6,500)

Deposits 7,000
Checks ( 5,800)
Balance per bank, October 5 (P5,300)

17. The undeposited collections as at September 30, 2004 should be:

a P4,000 b P3,000 c P2,000 d P1,000 C

Undeposited collections – October 31 P10,000

Bank receipts 7,000
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

Book receipts (15,000)

Undeposited collections – September 30 P 2,000

OR

Undeposited collection @ Sept 30 ?

Add: Book Receipts 15,000
Less: Bank Receipts (7,000)
Undeposited collection @ Oct. 5 2,000

18. The outstanding checks as at September 30, 2004 should be:

a P200 b P300 c P400 d P500 D

Outstanding checks – October 31 P 5,644

Bank disbursements (5,800 – 300) 5,500
Book disbursements (10,900 – 256) (10,644)
Outstanding checks – September 30 P 500

OR

Outstanding Checks @ Sept 30 ?

Add: Book Disbrs. 10,900
Book Error (256) 10,644

Less : Bank Disbrs 5,800

Bank Error (300) (5,500)

Outstanding Checks @ Oct. 31 5,644

19. The adjusted book and bank balances as at October 5, 2004 should be:
a P5,644 b P644 c P1,144 d P344 B

Unadjusted balance per bank, Oct.5 (P5,300)

Undeposited collections 10,000
Outstanding checks ( 5,644)
Bank error ( 300)
Adjusted balance per bank, Oct. 5 (P 644)

20. The balance sheet of Happy Company as of December 31, 2004 showed a cash balance of P68,225, which was
determined to consist of the following:
Petty cash fund P 360
Cash in Metro, per bank statement, with a
check for P600 still outstanding 33,675
Notes receivable in the possession of a
collecting agency 2,500
Undeposited receipts, including a postdated
check for P1,050 and a traveler’s
check for P1,000 17,800
Bond sinking fund – cash 12,750
IOUs signed by employees 495
Paid vouchers, not yet recorded 645
Total P68,225
At what amount should cash on bank and in bank be reported on Happy’s balance sheet?
a P50,185 b P53,475 c P62,935 d P66,225 A

Petty cash fund P 360

Cash in Metro (33,675 – 600) 33,075
Undeposited receipts (17,800 – 1,050) 16,750
Total P50,185

21. The accountant for the Eastern Company assembled the following data:
June 30 July 31
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

Cash account balance P 15,822 P 39,745

Bank statement balance 107,082 137,817
Deposit in transit 8,201 12,800
Outstanding checks 27,718 30,112
Bank service charge * 72 60
Customer’s check deposited July 10,
returned by bank on July 16 marked
NSF, and redeposited immediately;
no entry made on books for return
or redeposit 8,250
Collection by bank of company’s notes
receivables 71,815 80,900
* recorded on books in months following charge or collection.
The bank statements and the company’s cash records show these totals:
Disbursements in July per bank statement P218,373
Cash receipts in July per Eastern’s books 236,452
Checks written in July per Eastern’s books 212,529
Receipts in July per bank statement 249,108
What is the correct cash balance to be shown on Eastern Company’s balance sheet at December July 31, 2008?
a P128,835 b P112,335 c P120,585 d P115,906 C

Balance per bank P137,817

Deposit in transit 12,800
Outstanding checks ( 30,112)
Adjusted cash balance P120,585

22. The following information is shown in the accounting records of Manolito Company for the year 2008:
Balances as of January 1:
Cash P620,000
Accounts receivable 670,000
Merchandise inventory 860,000
Accounts payable 530,000

Balances as of December 31:

Accounts receivable 910,000
Merchandise inventory 780,000
Accounts payable 480,000

Total sales and cost of goods sold for 2008 were P7,980,000 and P5,830,000, respectively. All sales and all
merchandise purchases were made on credit. Various operating expenses of P1,070,000 were paid in cash.
Assume that there were no other pertinent transactions. The cash balances on December 31, 2008 would be:
a P1,080,000 b P1,490,000 c P2,560,000 d P3,050,000 B

Cash balance, January 1 P620,000

Collections of accounts (670,000 + 7,980,000
- 910,000) 7,740,000
Payments of accounts (530,000 + 5,750,000 *
- 480,000) (5,800,000)
Payment of various operating expenses (1,070,000)
Cash balance, December 31 P1,490,000
* 7,980,000 + 780,000 – 860,000

Items 23 and 24:

On your examination of the financial statements of Heroes Company for the year ended December 31, 2008, you
obtained the following information on the checking account of the company:
The bank statement on November 30, 2008 showed a balance of P15,300. Among the bank credits in
November was a customer’s note for P5,000(1) collected for the account of the company which the company
recognized in December among its receipts. Included in the bank debits were cost of checkbooks amounting to
P60(4) and a P2,000(3) check which was charged by the bank in error against Heroes account. Also in November,
you ascertained that there were deposits in transit amounting to P4,000 and outstanding checks totaling P8,500.
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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING JSD

The bank statement for the month of December showed total credits of P20,800 and total charges of P10,200.
Company books for December showed total receipts of P36,780 and disbursements of P20,360. Bank debit memos
for December were: No. 001 for service charges, P80(7) and No. 002 on a customer’s returned checks marked
“refer to drawer” for P1,200(6).
The bank error of P2,000 in November was corrected by the bank in December.
On December 29, 2008, the company placed with the bank a customer’s promissory note with a face value of
P6,000(2) for collection. The company treated this note as part of its receipts although the bank was able to collect
on the note only in January, 2009.
A check for P198 was recorded in the company cash payments book in December 12 P1,980(5).

23. How much is the deposit in transit in December 31, 2008?

a P0 b P4,000 c P5,620 d P10,980 D

Deposit in Transit (November) 4,000

Total receipts per books (DECEMBER) P36,780

(1) Notes collected by bank in November P5,000
(2) Notes with bank treated as receipt by client 6,000 (11,000)
Receipts for December per books P25,780

Receipts for December per bank:(DECEMBER)

Total receipts per bank P20,800
(3) Check erroneously charged by
bank in November ( 2,000) ( 18,800)

Deposit in transit, December 31, 2008 P10,980

24. How much is the outstanding check in December 31, 2008?

a P0 b P8,500 c P10,220 d P18,098 D

Outstanding check, November 30 8,500

Total disbursements per books P20,360

(4) Bank charges in November P 60
(5) Error in recording check (1,980 – 198) 1,782 ( 1,842)
Disbursements for December per books P18,518

Disbursements for December per bank:

Total bank debits P10,200
(6) NSF check returned ( 1,200)
(7) Bank charge, December ( 80) (8,920)

Outstanding check, December 31, 2008 P18,098

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