Professional Documents
Culture Documents
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash includes money or its equivalent that is readily available for unrestricted use.
Coins and Currencies Payroll Fund
Demand Deposits Change Fund
Bank Drafts Dividend Fund
Money orders Tax Fund
Checks Travel Fund
Cash set aside for current operations Interest Fund
Revolving fund
Cash equivalents - short term highly liquid investments that are readily convertible to cash and are subject to an insignificant
risk of changes in value.
Internal Controls
Segregation of duties - authorization, execution, recording, custody
Imprest system - all cash receipts are deposited, all disbursements are through checks
Bank reconciliation - regularly upon receipt of bank statement
Cash counts - periodic and surprise
Minimum cash balance - payroll, interest, taxes
Lockbox accounts
Non-encashment of personal checks from petty cash fund
Voucher system
Bank Reconciliation
A bank reconciliation statement is a report that is prepared for the purpose of bringing the balances of cash per records and per
bank statement into agreement.
Books + CM -DM +/- errors = Adj. Bal Bank + DIT - OC +/- errors = Adj. Bal
CM - bank credits (collections, Interest income, proceeds from loan, unrolled matured time deposits)
DM - bank debits (service charge, NSF already recorded by the bank, automatic debits, payment of loans)
DIT - deposits made not yet credited by the bank
OC - checks drawn and released but not yet encashed, does not include certified checks, stale checks
Practical Accounting 1
1. Lipton Company shows the following account balances in their financial records as of December 31, 2018:
Q1: what is the correct cash balance to be reported in the statement of financial position of Lipton Company on December
31, 2018?
Q2: What is the correct cash balance to be reported in the statement of financial position of Lipton Company on December
31, 2018 assuming the bank overdraft is repayable on demand and it’s integral to the entity’s cash management?
2. The cash account in the current asset section of the balance sheet of Heater Company showed a balance of P555,000. It was
found to include the following items:
What is the correct cash balance for Heater Company’s statement of financial position?
3. On December 31, 2018, Agenda Company has the following information concerning its cash and cash equivalents and some
other items:
Coins and Currency 50,000.00
Checks received from customers 600,000.00
Certificated of deposit, term: 12 months 800,000.00
Petty cash fund 4,000.00
Postage Stamps 600.00
Bank A, checking account balance 2,100,000.00
Post-dated check, customer 10,000.00
Money order from customer 15,000.00
Cash in savings account 100,000.00
Bank draft from customer 40,000.00
Utility deposit to gas company, refundable 5,000.00
Cash advance received form customer 8,000.00
Cash advance to company executive, collectible upon demoand 200,000.00
NSF check, C Company 20,000.00
Bank B, checking account, overdraft 20,000.00
IOUs from employees 12,000.00
What amount of cash and cash equivalents should Agenda Company report in its Dec 31, 2018 statement of financial
position?
4. Delta Corporation has supplied you with the following list of its bank accounts and cash at December 31, 2018:
5. Angelic Corporation had the following account balances at December 31, 2018:
In the current assets section of Angelic’s December 31, 2018 statement of financial position, what is the total amount that
should be reported under the caption “cash and cash equivalents”?
6. The cash account in the current asset section of the December 31, 2018 balance sheet of King Company consists of:
Included in the cash in banks is a compensating balance of 750,000 against short-term borrowing arrangements at
December 31, 2018. The compensating balance is not legally limited as to withdrawal by King Company.
What is the correct cash balance of King Company at December 31, 2018?
7. Following were the account balances of Born Company at December 31, 2018:
Cash in current and savings accounts includes P900,000 as holdout against short-term loan arrangements. There are no
legal restrictions as to withdrawal by Born on these holdouts.
What is the total cash that should be reported in the current assets section of Born’s December 31, 2018 statement of
financial position?
8. On December 31, 2018, First Company had the following cash balances:
Cash in banks included a P600,000 in a separate bank where-in the company is required to maintain a minimum average of
P800,000 of P10 workings on a rolling basis.
In the current assets section of the company’s December 31, 2018 statement of financial position, what total amount
should be shown as cash?
9. PCU Corporation’s check book balance on December 31, 2018 was P160,000. On the same date, PCU held the following in
its safe:
A P5,000 check payable to PCU, dated January 2, 2019, was not included in the December 31 check book balance
A P3,500 check payable to PCU which was deposited December 19 and included in the December 31 check book
balance, was returned by the bank on December 30 marked NSF. The check was re-deposited on January 2, 2019
and cleared on January 9.
A P25,000 check payable to a supplier and drawn on PCU’s account, was dated and recorded on December 31, but
was not mailed until January 19, 2019.
In its December 31, 2018 statement of financial position, how much should PCU report as cash?
10. Volume Company had the following cash balance at December 31, 2018:
In exchange for a guaranteed line of credit, volume has agreed to maintain a minimum balance of P150,000 in its restricted
demand deposits account. What is the amount of cash to be reported in its December 31, 2018 statement of financial
position?
11. Western Company reported a total cash and cash equivalent of P6,325,000 on December31, 2018, which includes the
following information:
Two certificates of deposits, each totalling P500,000. These certificates of deposit have a maturity of 120 days
A check that is dated January 12, 2019 in the amount of P125,000
A commercial paper of P2,100.000 which is due in 120 days.
Currency and coins on hand amounted to P7,700.
Western Company agreed to maintain a cash balance of P500,000 in one of its banks at all times and it is not available for
withdrawal and to ensure future credit availability (this amount was included in the above balance).
How much is the correct amount of cash and cash equivalents that Western Company should report in its December 31,
2018 statement of financial position?
12. Eastern Co. provided the following information about the composition of its cash on December 31, 2018
Commercial savings account of P600,000 and a commercial checking account balance of P900,000 are held at BPI.
Money market fund account held by Citibank that permits Eastern to write checks in this balance, P5,000,000
Travel advances of P180,000 for executive travel for the first quarter of next year (employee to pay through salary
deduction)
A separate cash fund in that amount of P1,500,000 is restricted for the retirement of long term assets.
Petty cash fund, P10,000
What is the correct amount of cash and cash equivalents Eastern Company should report in its December 31, 2018
statement of financial position?
13. Real Company had the following transactions all throughout the year 2018 which is its first year of operations:
Sales (90% collected in the first year) 1,500,000.00
Bad debts written-off 60,000.00
Disbursements for cost and expenses 1,200,000.00
Disbursements for income taxes 90,000.00
Purchases of fised assets 400,000.00
Depreciation on fixed assets 80,000.00
Proceeds from issuance of ordinary shares 500,000.00
Proceeds from short-term borrowings 100,000.00
Payments on short-term borrowings 50,000.00
What is the cash balance at December 31, 2018?
15. In preparing its bank reconciliation at December 31, 2018, Smiley Company has the following available data:
16. While checking the cash accounts of Ruler Company on December 31, 2018, you find the following information:
Balance per books 67,760.00
Balance in checking account (outstanding checks
per books of P9,876) 65,323.00
Deposit in bank closed by BSP 16,000.00
Deposit in transit 12,345.00
Currency and coins counted 9,500.00
Petty cash fund (of which P450 is in the form of
paid vouchers) 1,000.00
Bank charges not yet taken up in the books 58.00
Bond sinking fund- cash 10,000.00
Receivables from employees 700.00
Book error in recording a check, the correct
amount as paid by the bank is P890 instead of
P980 as recorded in the books, a difference of 90.00
Q1: What is the correct cash in bank balance for Ruler Company on December 31, 2018?
Q2: What is the correct cash on hand balance for Ruler Company on December 31, 2018?
17. Shown below is the bank reconciliation for LENT Company for May 2014:
The bank statement for June 2018 contains the following data:
Total deposits 55,000.00
Total charges, including NSF check of P4,000 and
a service charge of P200 48,000.00
All outstanding checks on May 31, 2018, including the bank credit, were cleared in the bank in June 2018. There were
outstanding checks of P15,000 and deposits in transit of P19000 on June 30, 2018.
Q1: What is the cash balance per bank on June 30, 2018?
Q2: What is the cash balance per books on June 30, 2018?
18. As of June 30, 2018, the bank statement of Marine Trading had an ending balance of P373,612. The following data were
assembles in the course of reconciling the bank balance:
The bank erroneously credited Marine Trading for P2,150 on June 19
During the month, the bank charged NSF checks amounting to P2,340 of which P800 had been redeposited on the
24th of June.
Collection for June 30 totalling P10,330 was deposited the following month
Checks outstanding as of June 30 were P30,205
Notes collected by the bank for Marine Trading were P8,150 and the corresponding bank charges were P50
19. Rich Company had the following bank reconciliation at March 30, 2018:
20. Everlasting Company is preparing its March 31 bank reconciliation. The following data are available:
21. Thesaurus Inc. reported a balance of P43,000 in its cash account at the end of the month. There were P20,000 deposits in
transit and p15,000 outstanding checks. The bank statement showed a balance of P50,000, including a note with face value
of P15,000 and a P6,000 service charge.
Bank Book
Checks recorded 115,000.00 118,000.00
Deposits recorded 81,000.00 90,000.00
Service charges recorded 120.00
Collection by bank (P20,000 note plus interest) 21,000.00
NSF check returned with June 30 statement
(for redeposit, assumed to be good) 500.00
Balances, June 30 91,380.00 90,500.00
24. The cashier of Fraud Company misplaced all the bank statements for the past years. You reviewed the accounting records
and discovered that the following journal entries were made to reconcile the June 30, 2014 bank records and accounting
records.
Pre-adjustment cash balance in the accounting records was P371,023.50, outstanding checks were P10,375 and no other
adjustments were required.
What is the balance if the cash account per bank statement as of June 30, 2014?
25. Abacus Company prepares a 4-column bank reconciliation. Check No. 143 was written for P66,700 in the books but the
check cleared the bank for the correct amount of P75,700. What would be the correct treatment in the reconciliation?
26. Cocoon Corporation keeps all its cash in checking account. An examination of the Company’s accounting records and bank
statement for the month ended December 31, 2018 revealed the following information:
No.504 1,500.00
No.509 480.00
No.519 720.00
Cocoon discovered that check no.523 written in December 2018 for P1,830 in payment to a supplier, had been
recorded in the company’s records at P1,380.
Included with the December 31, 2018 bank statement was an NSF check for P2,500 that Cocoon had received from
Riverside Company on account on December 19. Cocoon has not yet recorded the returned check. The bank
statement shows a P150 service charge for December.
What should be the journal entry to adjust the cash balance as of December 31, 2018?
27. Shown below is the bank reconciliation for Central Company for May 2018:
The bank statement for June 2018 contains the following data:
Total deposits 220,000.00
Total charges, including an NSF of P16,000 192,000.00
and service charge of P800
All outstanding checks on April 30, including the bank credit, were cleared in the bank on May 31. There were outstanding
checks of P60,000 and deposits in transit of P76,000 on May 31, 2018.
28. In reconciling the Cash in Bank of Inner Company with the bank statement balance for the month of November 2018, the
following data were summarized:
Book debits for November, including October CM for note collected, P60,000 P800,000
Book credits for November, including NSF of P20,000 and service charge of P800 for October P620,000
Bank credits for November, including CM for November for bank loan of P100,000 and
October deposit in transit for P80,000 P700,000
Bank debits for November including October outstanding checks of P170,800 and November
service charge of P200 P600,000
29. The following information was included in the bank reconciliation for Internet Company for June:
Checks and charges recorded by bank in June (including a June service charge of P300), P172,100
Service charge made by bank in May and recorded on the books in June, P200
Total credits to cash in all journals during June, P198,020
Customer’s NSF check returned as a bank charge in June (no entry made on books), P1,000
Customer’s NSF check returned in May and redeposited in June (no entry made on books in either May or June), P2,500
Outstanding checks at June, P80,600
Deposit in transit in June, P6,000
30. The following information was included in the bank reconciliation for Roman Company for July 2018:
Checks and charges recorded by bank in July (including a July service charge of P2,800), P932,600
Service charge made by bank in June and recorded on the books in July, P1,200
Customer’s NSF check returned as a bank charge in July (no entry made on books), P6,000
Customer’s NSF check returned in June and recorded by the company in July P15,000
Outstanding checks at July 31, P300,000
Outstanding checks for June, P255,000
Checks issued in July for P20,000 recorded by the company as P2,000
Erroneous bank charge in July, P20,000
Erroneous bank credit in June corrected in July, P30,000
Erroneous book receipt in June corrected in July P5,000
Audit Problems
Problem 1
In connection with your audit of BIG Brother Corp for the year ended December 31, 2014, you gathered the following information:
What is the total cash and cash equivalent to be reported by the company in its December 31, 2014 balance sheet?
How much from the list above should be presented as part of NCA?
Problem 2
Uhawsaiyo Company
General and petty cash count
Audit year: 2014
Date of count - January 5, 2015, 9:10AM
Checks
Maker Payee Date Amount
T. Otis - customer Uhawsaiyo 12/30/14 11,920
R. Eyes - customer Uhawsaiyo 12/26/14 12,505
O. Liever - customer Uhawsaiyo 1/2/15 5,707
F. Rancisco - customer Uhawsaiyo 12/21/14 13,350
Uhawsaiyo ABC. Co 12/27/14 14,500
M. Doza Cash 1/5/15 310
N. Campo* Cash 12/29/15 260
*amount is for a return of travel advance made to the employee in an earlier period
Others
1. Cash sales invoices, P100,500
2. Official receipts
Number Amount Form of Collection
31250 560 Cash
31251 12,505 Check
31252 1,202 Cash
31253 11,920 Check
31254 13,350 Check
Problem 3
The Silver Company’s internal control over its cash transaction is very weak. The company’s cash position at December 31, 2014
were as follows:
The cash book showed a balance of P15,000, which included cash on hand. A credit of P150 on the bank’s records did not appear on
the company’s books. The bank statement showed a balance of P12,300; and the outstanding checks were: 0100 - P120, 0201 -
P100; 0300 - P230; 1501 - P110; 1510 - P140; and 151 - P150.
The cashier removed all of the cash on hand in excess of P3,000 and then prepared the following reconciliation:
Balance per books, Dec 31, 2014 15,000
Add: Outstanding Checks 1501 110
1510 140
1515 150 300
15,300
Deduct: Cash on Hand 3,000
Balance per bank, Dec 31, 2014 12,300
Deduct: Unrecorded credit 150
True cash, Dec 31, 2014 12,150
Problem 4
You are auditing the cash account of Carrera Inc for the fiscal year ended July 31, 2014. the client has not prepared the July 31 bank
reconciliation. The following information were made available:
Audit notes:
a. Bank reconciliation in June included the following information: bank statement balance June2: P172,590; Deposits
in transit: P18,000; Outstanding checks: P52,260; and balance per general ledger June: P140,330.
b. Checks clearing the bank in July outstanding by the end of June was at P50,760.
c. Checks clearing the bank in July and were recorded in the July cash disbursement journal was at P614,010.
d. A check for P31,800 cleared the bank but had not been recorded in the cash disbursement journal. It was for a
payment of an accounts payable.
e. A check for P11,880 was erroneously charged by the bank to Carrera Inc
f. Deposits included P18,000 from June and P733,680 from July
g. The bank charged Carrera Inc’s account for a NSF check totaling P9,330. the credit manager concluded that the
customer intentionally closed its account and the owner left the city. The check was turned over to a collection
agency.
h. A note for P174,000 plus interest was paid directly by the bank under an agreement signed four months ago. The
note payable was recorded at P174,000 on Carrera Inc’s books.
Problem 5
In the course of our audit of Edilberto Inc’s cash in bank for the year ended December 31, 2014, you ascertained the following
information:
November 30 December 31
Cash per books 82,350 201,425
Cash per bank statement 535,410 689,085
Undeposited Collections 41,005 64,400
Outstanding Checks 138,590 150,560
Bank service charges 3,600 3,000
Insufficient fund check 41,250
Company’s notes receivable
Collected by the bank 359,075 404,500
The insufficient fund check was redeposited in the same month. No entries are made to take up the return and redeposit.
Problem 6
Shown below is the May 31, 2014 bank reconciliation prepared by Halalan Corp’s staff:
The check register reveals that the last check issued in June is No. 659 for P5,000 and that check no. 656 is for P2,600. cash received
for the period June22 through June30 of P70,000 was deposited in the bank on July1. the bank erroneously charged the company
P1,000 on Juune29 but immediately corrected the error on the same date.
The debit memos in June13 and June30 represent customers’ NSF checks returned by the bank. The June13 NSF check was
immediately redeposited without entry. The June30 NSF check was redeposited on July1 without entry.
Problem 7
You are auditing the cash of Saluyot Corp for the fiscal year ended September 30, 2014.
The bank reconciliation prepared by the accountant of Saluyot Corp for the month:
Bank balance, per bank statement 156,000
Add: Deposit in transit, August 31 2,700
Total 158,700
Less: Outstanding checks
No. 547 600
561 5,400
562 4,200
565 1,800 12,000
Adjusted balance 146,700
There was no available bank reconciliation for the month of September, instead the accountant provided you a copy of the
September bank statement to aid you in your audit.
The September bank statement included the following bank debits and credits
Date Particulars Debits Credits
Aug31
Sept1 Chk#561 5,400 2,700
Sept6 Chk#562 4,200
Sept9 Chk#565 1,800 30,000
Sept12 420 DebitMemo 420
Sept15 Chk#566 3,000
Sept17 600
Sept20 Chk#567 2,100 42,000
Sept27 Chk#569 4,320
Sept29 300 ErrorCorrected 300 ErrorCorrected
Sept30 1,320 ServiceCharges
Sept30 900 DebitMemo
Sept30 Chk#570 5,460 DebitMemo
Problem 8
The following information was obtained in connection with the audit of Wise Company’s cash account as of December 31, 2014:
Outstanding checks, 11/30/2014 16,250
Outstanding checks, 12/31/2014 12,500
Deposit in transit, 11/30/2014 12,500
Cash balance per general ledger 12/31/2014 37,500
Actual company collections from its customers
During December 152,500
Company checks paid by bank in December 130,000
Bank service charges recorded on the company
Books in December 2,500
Bank service charge 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on
company books in December 1,500
The bank erroneously charged the company’s account for a P3,750 check of another depositor. This bank error was corrected in
January 2015.
Problem 9
In your audit of I-Bot Inc’s cash account as of December 31, 2014, you ascertained the following information:
The cash receipts journal shows a total receipts for December of P371,766. The check register reflects total checks issued in
December 31 of P377,632. a collection of P5,912 was recorded on company books on December 31 but was not deposited until
January 2, 2015.
The balance per bank statement at December 31, 2014 is P17,516. this statement shows total receipts of P373,502 and checks
and other charges paid of P380,284.
a) Check no. 3413 dated November 24, 2014, was entered in the check register as P300. Your examination of the
paid returned with the December bank statement reveals that the amount of the check is P30.
b) Check no. 3417 was mutilated and returned by the payee. A replacement check (no. 3453) was issued. Both
checks were entered in the check register but no entry was made to cancel check no. 3417.
c) The December bank statement includes an erroneous bank charge of P480
d) On January 3, 2015, the bank informed your client that a December bank charge of P42 was omitted from the
statement
e) Your examination of the bank credit memo accompanying the December bank statement discloses that it
represents proceeds from the note collection in December for P4,000
f) The outstanding checks at December 31, 2014, are as follows:
No. 3408 P440
3417 800
3418 2,814
3419 5,788
Problem 10
Halal Corp has a current account in PNB. Your audit of the company’s cash account reveals the following:
c) Outstanding checks, November 30, 2014 (26,140 was paid by the bank in December), P64,140
d) Checks written and recorded in December; not included in the checks returned with the December bank
statement, P36,080
e) Deposit in transit, November 30, 2014, P15,260
f) Deposit in transit, December 31, 2014, P16,140
g) A bank credit memo was issued in December to correct an erroneous charge made in November, P1,500
h) Note collected by bank in December (company was not informed of the collection) P2,060
i) A check for P2,020 (payable to a supplier) was recorded in the check register in December as P3,000
j) A check for P2,240 was charged by the bank as P2,420
k) Halal Co issued a stop payment order to bank in December. This pertains to a check written in December which
was not received received by the payee. A new check was written and recorded in the check register in
December. The old check was written off by a journal entry also in December, P780
l) Bank service charge, November 30, 2014, P60