Professional Documents
Culture Documents
SCHOOL OF ACCOUNTANCY
MODULE 1
CONCEPTUAL FRAMEWORK
OVERVIEW:
This module will serve as an introduction to the accounting standards and the application of different
underlying assumptions, a review of the accountancy profession and financial statements.
KNOWLEDGE REQUIRED:
This module requires knowledge in the fundamentals of accounting and basic accounting concepts.
LEARNING OBJECTIVES:
After studying this module, you should be able to:
1. Familiarize yourself with the Accountancy profession
2. Know the underlying assumptions to be applied in accounting
3. Review different ideas regarding the financial statements
INTRODUCTION:
As you continue to study Accountancy you need to know different opportunities for you in the future. Not
only that. You also need to be familiar with the “foundations” of accounting, including underlying
assumptions. You need to inculcate these ideas from today until the rest of your life (of course, when you
continue to work as an accountant in the future).
Moreover, accountants may also be employed by the government, may it be accounting or auditing
departments. Some accountants are employed by a not-for-profit organizations like schools and
foundations.
Today, accountants are very much in demand in the field of technology, like business process
outsourcing, or even those that create new accounting systems. Given this fact, we are rest assured that
accountants will be part of every organization worldwide.
To better understand our profession, here is an excerpt from the Republic Act No. 9298:
edu.ph
Republic of the Philippines
Congress of the Philippines
Metro Manila
Twelfth Congress
Third Regular Session
Begun and held in Metro Manila, on Monday, the twenty-eight day of July, two thousand three.
Republic Act No. 9298 May 13, 2004
AN ACT REGULATING THE PRACTICE OF ACCOUNTANCY IN THE PHILIPPINES, REPEALING FOR THE
PURPOSE PRESIDENTIAL DECREE NO. 692, OTHERWISE KNOWN AS THE REVISED ACCOUNTANCY LAW,
APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:
Section 1. Shorts Title. - This act shall be known as the "Philippine Accountancy Act of 2004"
Section 2. Declaration of Policy. - The State recognizes the importance of accountants in nation building and
development. Hence, it shall develop and nurture competent, virtuous, productive and well rounded professional
accountants whose standard of practice and service shall be excellent, qualitative, world class and globally competitive
though inviolable, honest, effective, and credible licensure examinations and though regulatory measures, programs
and activities that foster their professional growth and development.
Section 3. Objectives. - This Act shall provide and govern:
The standardization and regulation of accounting education;
The examination of registration of certified public accountants; and
The supervision, control, and regulation of the practice of accountancy in the Philippines.
Section 4. Scope of Practice. - The practice of accountancy shall include, but not limited to, the following:
(a) Practice of Public Accountancy - shall constitute a person, be it his/her individual capacity, or as a staff
member in an accounting or auditing firm, holding out himself/herself as one skilled in the knowledge, science
and practice of accounting, and as a qualified person to render professional services as a certified public
accountant; or offering or rendering, or both or more than one client on a fee basis or otherwise, services as
such as the audit or verification of financial transaction and accounting records; or the preparation, signing, or
certification for clients of reports of audit, balance sheet, and other financial, accounting and related schedules,
exhibits, statement of reports which are to be used for publication or for credit purposes, or to be filed with a
court or government agency, or to be used for any other purposes; or to design, installation, and revision of
accounting system; or the preparation of income tax returns when related to accounting procedures; or when
he/she represent clients before government agencies on tax and other matters relating to accounting or render
professional assistance in matters relating to accounting procedures and the recording and presentation of
financial facts or data.
(b) Practice in Commerce and Industry - shall constitute in a person involved in decision making requiring
professional knowledge in the science of accounting, or when such employment or position requires that the
holder thereof must be a certified public accountant.
(c) Practice in Education/Academe - shall constitute in a person in an educational institution which involve
teaching of accounting, auditing, management advisory services, fiancé, business law, taxation and other
technically related subject: Provided, That members of the Integrated Bar of the Philippines may be allowed to
teach business law and taxation subjects.
(d) Practice in Government - shall constitute in a person who holds, or is appointed to, a position in an
accounting professional group in government or in an government-owned and/or controlled corporation,
including those performing proprietary functions, where decision making requires professional knowledge in the
science of accounting, or where a civil service eligibility as a certified public accountant is a prerequisite.
LESSON 2: CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
The FRSC Framework for the Preparation and Presentation of Financial Statements describes the basic
concepts by which financial statements are prepared. The Framework serves as a guide to the Board in
developing accounting standards and as a guide to resolving accounting issues that are not addressed
directly in Philippine Accounting Standards or Philippine Financial Reporting Standards or
Interpretations. The purpose of the framework as outlined is to:
a. Assist the Financial Reporting Standards Council (FRSC) in developing accounting standards
that represent generally accepted accounting principle;
b. Assist the FRSC in its review and adoption of existing International Accounting Standards;
c. Assist preparers of the financial statements in applying FRSC Statements of Financial
Accounting Standards and in dealing with topics that have yet to form the subject of an FRSC statement;
d. Assist auditors in forming an opinion as to whether financial statements conform with Philippine GAAP;
e. Assist users of financial statements in interpreting information contained in the financial statements
prepared in conformity with Philippine GAAP;
f. Provide those who are interested in the work of the FRSC with information about its approach to the
formulation of Statements of Financial Accounting Standards
Framework is not a Standard. Meaning, when you encounter a transaction, you must not refer to the
framework only, but you must find the accounting standard related to the accounts in the transaction, in
order to follow strictly the financial reporting regulations. In case of contrary between framework and a
standard, the standard prevails.
2.3.4 Statement of cash flows - financial statement that summarizes the amount of cash
and cash equivalents entering and leaving a company. The cash flow statement measures
how well a company manages its cash position, meaning how well the company generates
cash to pay its debt obligations and fund its operating expenses.
2.3.4 Notes to financial statements - also referred to as footnotes. These provide additional
information pertaining to a company's operations and financial position and are
considered to be an integral part of the financial statements. The notes are required by the
full disclosure principle. These give detailed explanation of the different accounts seen in
the other financial statements.
The FRSC conceptual framework mentions two assumptions only. However, it is widely
believed that an inherent trait of the financial statements are the basic assumptions of:
• Accounting Entity. The business is separate from the owners, managers, and employees who
constitute the business. Therefore transactions of the said individuals should not be included as
transactions of the business.
• Time Period. Financial reports are to be prepared for one year or a period of twelve months.
• Monetary unit. There are two aspects under this assumption. First is the quantifiability of the
peso, meaning that the elements of the financial statements should be stated under one unit of
measure which is the Philippine Peso. Second is the stability of the peso, means that there is still
an assumption that the purchasing power of the peso is stable or constant and that instability is
insignificant and therefore ignored.
Financial capital maintenance – Under this concept, a profit is earned only if the financial
(or money) amount of the net assets at the end of the of the period exceeds the financial
(or money) amount of the net assets at the beginning of the period, after excluding
any distributions to, and contributions from, owners during the period.
Physical capital maintenance – Under this concept, a profit is earned only if the physical
productive capacity (or operating capability) of the enterprise (or the resources need to
achieve that capacity) at the end of the period exceeds the physical productive capacity at
the beginning of the period, after excluding any distributions to, and contributions from,
owners during the period.
REFERENCES:
R.A. 9298
https://www.ifrsbox.com/
https://Investopedia.com
https://courses.lumenlearning.com/
Financial Accounting 1, Volume 1 Part 1, Christian Valix et al.
ADDITIONAL READINGS:
Financial Accounting 1, Volume 1 Part 1, by Christian Valix, Jose Peralta, and Chrsitian Valix, Chapters 1-6.
NAME:
ID NUMBER: _
ACTIVITY SECTION
ACTIVITY 1: REFLECTION
Why do you want to become a CPA? As of today, in which sector of accountancy do you prefer to work?
State your reason.
ACTIVITY 2:
Identify which assumption or principle may be applied to each situation. Give brief explanation:
1. Princess Company does not report bankruptcy yet because they think they can still continue
operations amidst COVID19 pandemic.
2. Assume Apple Company is currently suing Ample company for copyright violation over its
software
package. Since this software package is the only operation the small tech company does, losing this
lawsuit would be detrimental. There is a 95 percent expectation that Apple will win the lawsuit.
3. Your business bought a new building for P10,000,000. You recorded the building account on the
same amount.
4. Thor Company has a receivable from a customer named Loki. Loki recently had problems with
his finances and told Thor that he may not be able to pay his debt. From that day, Thor Company
did not recognize the debt anymore. He recorded that as an expense/loss.
5. Bong No, together with his friends has created a business registered as NoNoNo Company last
2018. Bong No needed a large amount of money last June 2020 because he was hospitalized due
CONCEPTUAL FRAMEWORK MODULE
SCHOOL OF ACCOUNTANCY
to COVID. He borrowed from his relatives, and when the due date came, they told Bong No to
just give them the company as payment. Bong No and other owners refused.
6. Instead of preparing daily financial statements, you prepared financial statements for the period
January 1 to December 31, 2019, your first year of operations. Aside from this annual report, you
also prepared quarterly and semi-annual reports.
7. The standard requires you to give detailed information of your cash balance such as its
composition
and restrictions, if there are any. You showed these details in the notes to financial statements.
EVALUATION
Which part of the discussion did Which part of the discussion did
you find most enjoyable to you find most difficult?
learn?
missmaicustodio@dwcc.
edu.ph
CONCEPTUAL FRAMEWORK MODULE
SCHOOL OF ACCOUNTANCY
MODULE 2
CASH
OVERVIEW:
This module will serve as an introduction to the accounting standards for cash and cash equivalents. This
module shall give you the basic knowledge in the accounting and proper classification of accounts related
to or within the description of cash.
KNOWLEDGE REQUIRED:
This module requires knowledge in the fundamentals of accounting, including analyzing, journalizing and
preparation of adjusting entries.
LEARNING OBJECTIVES
After studying this module, you should be able to:
1. Identify whether an account may be considered as part of cash or not.
2. Prepare adjusting entries to correct wrong classification and use of different cash accounts.
INTRODUCTION
Cash includes money and other negotiable instrument that is payable in money and acceptable by bank for
deposit or immediate encashment. These negotiable instruments include checks, bank drafts and money
orders.
Persons receiving money order and bank drafts have less worries in terms of availability of funds because
these negotiable instruments represent an amount of money guaranteed by bank or other financial
institution.
edu.ph
LESSON 2: CLASSIFICATIONS
Cash may be grouped into two:
2.1 Restricted – cash that the company already has set a purpose aside from using it in normal
operations
Example 1: Money in a bank that the company saved and has set aside for the purpose of
purchasing a building.
- It should be noted that restricted cash is different from normal cash in a way that it is
not free to be used for anything else.
Restricted cash is classified in other line item, within current or noncurrent, depending on purpose.
In our previous example, the restricted cash is under noncurrent asset because it will be used for
purchase of noncurrent asset.
2.2 Unrestricted – cash with no other purpose, only for normal operations
- Under this group, cash may be classified as:
o Cash on Hand – in possession, or awaiting deposit
o Cash in Bank – well, obviously, cash that is in the possession of banks
o Cash Fund – cash set aside for current purposes (e.g. petty cash fund, payroll
fund, dividend fund)
If on December 29, 2019, due to confusion, you have journalized the receipt as follows,
Date Account Titles Debit Credit
Dec 29 Cash 1 0 0 0 0
Accounts Receivable 1 0 0 0 0
To record receipt of payment from customer
If on December 20, 2019, you have entered the following entry upon issuing a check:
Date Account Titles Debit Credit
Dec 20 Accounts Payable 2 0 0 0 0
Cash 2 0 0 0 0
To record receipt of payment from customer
We have to contact the customer and inform them about the stale check, and request for a new check to
be issued.
If the check is only for an immaterial amount, and not related to receivables, we may prepare an adjusting
entry like this:
Date Account Titles Debit Credit
Dec 31 Miscellaneous Expense 3 0 0 0 0
Cash 3 0 0 0 0
To adjust for a check received that has become
stale
If the check is only for an immaterial amount, and not related to liabilities, we may prepare an adjusting
entry like this:
Date Account Titles Debit Credit
Dec 31 Cash 4 0 0 0 0
Miscellaneous Income 4 0 0 0 0
To adjust previous payment of accounts payable
due to check becoming stale
You must prepare an adjusting entry, as follows, because the company cash has not been reduced by the
transaction and the liability is not yet settled because N. Lustre has not yet received the cash
Date Account Titles Debit Credit
Dec 31 Cash 5 0 0 0 0
Accounts Payable 5 0 0 0 0
To record payment of accounts payable to N.
Lustre
LESSON 7: COMPENSATING BALANCE
A compensating balance is a minimum balance that must be maintained in a bank account, normally used
to offset the cost incurred by a bank to set up a loan. The compensating balance may not be available for
company use, and may need to be disclosed in the borrower's notes to the financial statements. Our
treatment to compensating balance depends on the agreement made with the banks:
7.1 Informal Agreement – The balance is not restricted as to withdrawal, meaning the company
may withdraw the balance when they want to. In this case, the compensating balance is part of
company’s cash.
Note: Compensating balance is already included in the total cash balance in an account
7.2 Formal Agreement - The bank restricts the use of compensating balance because it serves like
a collateral for a loan to the company by the bank. Due to this restriction, the compensating
balance may not be included as part of cash. This restricted cash, like what we have discussed
earlier, will be classified as current or noncurrent, depending on the corresponding liability.
REFERENCES:
Valix, Financial Accounting and Reporting Volume 1, 2017
investopedia.com
ADDITIONAL READINGS:
Financial Accounting 1, Volume 1 Part 1, by Christian Valix, Jose Peralta, and Chrsitian Valix, Chapter 7
CONCEPTUAL FRAMEWORK MODULE
SCHOOL OF ACCOUNTANCY
ACTIVITY SECTION
ACTIVITY 1:
PROVIDE ADJUSTING ENTRIES. (ASSUME FS DATE: DECEMBER 31, 2019)
1. On November 30, 2019, you have received a check from Baby Blue Company for a service that
you have already done on account. The check was dated February 13, 2020. Upon checking, you
have only journalized the recognition of receivable and income, but not the payment transaction.
What adjusting entry should you make?
Date Account Titles Debit Credit
2. On October 5, 2019, you have paid a supplier P50,000 through issuance of a check dated
December 20, 2019, for an equipment purchased on the same date. You failed to record any
transaction.
Date Account Titles Debit Credit
3. On October 5, 2019, you have paid a supplier P50,000 through issuance of a check dated February
20, 2019, for an equipment purchased on the same date. You failed to record any transaction.
Date Account Titles Debit Credit
4. On November 2, 2019, you have drawn and recorded a check amounting to P20,000 to pay J. Reid
Company for a Land purchased on that day. On December 31, 2019, the reporting date, the check
was still in the company’s premises, because J. Reid have forgotten to claim it.
Date Account Titles Debit Credit
ACTIVITY 2
Determine whether the following is included or excluded from cash:
EVALUATION
Which part of the discussion did Which part of the discussion did
you find most enjoyable to you find most difficult?
learn?
edu.ph
CONCEPTUAL FRAMEWORK MODULE
SCHOOL OF ACCOUNTANCY
MODULE 2
CASH
OVERVIEW:
This module will serve as an introduction to the accounting standards for cash and cash equivalents. This
module shall give you the basic knowledge in the accounting and proper classification of accounts related
to or within the description of cash.
KNOWLEDGE REQUIRED:
This module requires knowledge in the fundamentals of accounting, including analyzing, journalizing and
preparation of adjusting entries.
LEARNING OBJECTIVES
After studying this module, you should be able to:
3. Identify whether an account may be considered as part of cash or not.
4. Prepare adjusting entries to correct wrong classification and use of different cash accounts.
INTRODUCTION
Cash includes money and other negotiable instrument that is payable in money and acceptable by bank for
deposit or immediate encashment. These negotiable instruments include checks, bank drafts and money
orders.
Persons receiving money order and bank drafts have less worries in terms of availability of funds because
these negotiable instruments represent an amount of money guaranteed by bank or other financial
institution.
missmaicustodio@dwcc.
edu.ph
LESSON 2: CLASSIFICATIONS
Cash may be grouped into two:
4.1 Restricted – cash that the company already has set a purpose aside from using it in normal
operations
Example 1: Money in a bank that the company saved and has set aside for the purpose of
purchasing a building.
- It should be noted that restricted cash is different from normal cash in a way that it is
not free to be used for anything else.
Restricted cash is classified in other line item, within current or noncurrent, depending on purpose.
In our previous example, the restricted cash is under noncurrent asset because it will be used for
purchase of noncurrent asset.
4.2 Unrestricted – cash with no other purpose, only for normal operations
- Under this group, cash may be classified as:
o Cash on Hand – in possession, or awaiting deposit
o Cash in Bank – well, obviously, cash that is in the possession of banks
o Cash Fund – cash set aside for current purposes (e.g. petty cash fund, payroll
fund, dividend fund)
If on December 29, 2019, due to confusion, you have journalized the receipt as follows,
Date Account Titles Debit Credit
Dec 29 Cash 1 0 0 0 0
Accounts Receivable 1 0 0 0 0
To record receipt of payment from customer
If on December 20, 2019, you have entered the following entry upon issuing a check:
Date Account Titles Debit Credit
Dec 20 Accounts Payable 2 0 0 0 0
Cash 2 0 0 0 0
To record receipt of payment from customer
We have to contact the customer and inform them about the stale check, and request for a new check to
be issued.
If the check is only for an immaterial amount, and not related to receivables, we may prepare an adjusting
entry like this:
Date Account Titles Debit Credit
Dec 31 Miscellaneous Expense 3 0 0 0 0
Cash 3 0 0 0 0
To adjust for a check received that has become
stale
If the check is only for an immaterial amount, and not related to liabilities, we may prepare an adjusting
entry like this:
Date Account Titles Debit Credit
Dec 31 Cash 4 0 0 0 0
Miscellaneous Income 4 0 0 0 0
To adjust previous payment of accounts payable
due to check becoming stale
You must prepare an adjusting entry, as follows, because the company cash has not been reduced by the
transaction and the liability is not yet settled because N. Lustre has not yet received the cash
Date Account Titles Debit Credit
Dec 31 Cash 5 0 0 0 0
Accounts Payable 5 0 0 0 0
To record payment of accounts payable to N.
Lustre
LESSON 7: COMPENSATING BALANCE
A compensating balance is a minimum balance that must be maintained in a bank account, normally used
to offset the cost incurred by a bank to set up a loan. The compensating balance may not be available for
company use, and may need to be disclosed in the borrower's notes to the financial statements. Our
treatment to compensating balance depends on the agreement made with the banks:
7.3 Informal Agreement – The balance is not restricted as to withdrawal, meaning the company
may withdraw the balance when they want to. In this case, the compensating balance is part of
company’s cash.
Note: Compensating balance is already included in the total cash balance in an account
7.4 Formal Agreement - The bank restricts the use of compensating balance because it serves like
a collateral for a loan to the company by the bank. Due to this restriction, the compensating
balance may not be included as part of cash. This restricted cash, like what we have discussed
earlier, will be classified as current or noncurrent, depending on the corresponding liability.
REFERENCES:
Valix, Financial Accounting and Reporting Volume 1, 2017
investopedia.com
ADDITIONAL READINGS:
Financial Accounting 1, Volume 1 Part 1, by Christian Valix, Jose Peralta, and Chrsitian Valix, Chapter 7
ACTIVITY SECTION
ACTIVITY 1:
PROVIDE ADJUSTING ENTRIES. (ASSUME FS DATE: DECEMBER 31, 2019)
5. On November 30, 2019, you have received a check from Baby Blue Company for a service that
you have already done on account. The check was dated February 13, 2020. Upon checking, you
have only journalized the recognition of receivable and income, but not the payment transaction.
What adjusting entry should you make?
Date Account Titles Debit Credit
6. On October 5, 2019, you have paid a supplier P50,000 through issuance of a check dated
December 20, 2019, for an equipment purchased on the same date. You failed to record any
transaction.
Date Account Titles Debit Credit
7. On October 5, 2019, you have paid a supplier P50,000 through issuance of a check dated February
20, 2019, for an equipment purchased on the same date. You failed to record any transaction.
Date Account Titles Debit Credit
8. On November 2, 2019, you have drawn and recorded a check amounting to P20,000 to pay J. Reid
Company for a Land purchased on that day. On December 31, 2019, the reporting date, the check
was still in the company’s premises, because J. Reid have forgotten to claim it.
Date Account Titles Debit Credit
ACTIVITY 2
Determine whether the following is included or excluded from cash:
EVALUATION
Which part of the discussion did Which part of the discussion did
you find most enjoyable to you find most difficult?
learn?
REPLENISHMENT:
Transportation expense 3,000
Medical Supplies 2040
Advances to employees 2220
Cash short or over 2,190
Cash in Bank 9,450
On January 1, 2002, Princess Corporation established a petty cash fund of ₱400. On December 31, 2002,
the petty cash fund was examined and found to have receipts and documents for miscellaneous expenses
amounting to ₱364. In addition, there was cash amounting to ₱44. What entry would be required to record
replenishment of the petty cash fund on December 31, 2002?
Princess Company’s petty cash custodian has the following in its cash box:
Bills and Coins: P 520
Petty Cash Vouchers: P 1,700
Postdated Checks from Company Officers: P 1,000 IOUs from employees (vale): P 500
An envelope which has a “Happy Birthday” on it. It has a “P 350” writing at the back It was left unopened.
On April 1, 2002, Mighty Company established an imprest petty cash fund for P10,000
by writing a check drawn against its general checking account. On April 30, the fund contained the following:
Currency and coins P3,000
Receipts for office supplies 4,000
Receipts for postage (still unused) 2,000
Receipts for transportation 600
On April 25, the company wrote a check to replenish the fund.
What is the amount of replenishment under the imprest fund system?
7000
Using the imprest fund system, provide entry for replenishment of the petty cash fund when the following expenses
were incurred:
Transportation Expense P 500.00
Advertising expense P 5,000.00
Fuel Expense P 2,000.00
Using the fluctuating fund system, provide entry for replenishment of the petty cash fund when the following
expenses were incurred:
Transportation Expense P 500.00
Advertising expense P 5,000.00
Fuel Expense P 2,000.00
Petty cash fund 7,500
Cash in Bank 7,500
Question 11
99000
Princess Company’s petty cash custodian has the following in its cash box:
Bills and Coins: P 520
Petty Cash Vouchers: P 1,700
Postdated Checks from Company Officers: P 1,000
IOUs from employees (vale): P 500
An empty envelope which has a “Happy Birthday” on it. It has a “P 350” writing at the back.
The Petty Cash is established at P3,500.
It is already reporting date and no replenishment has been done.
Provide the adjusting entry and closing entry assuming the custodian is responsible for the short/over.
Expenses 1,700
Advances to officers 1,000
Advances to employees 500
Cash short or over 130
Petty cash fund 3,330
Receivable from custodian 130
Cash short or over 130
The amount reported as "Cash" on a company's statement of financial position normally should exclude
postdated checks that are payable to the company.
cash in a payroll account.
undelivered checks written and signed by the company.
petty cash.
8700000
This represents the concepts that underlie the preparation and presentation of financial statements.
A. Statement of Financial Accounting Standards
B. Statement of Auditing Standards
C. Note to financial statement.
D. Conceptual framework
Question text
Answer:
7000000
On December 31, 2009, Princess Company had the following cash balances:
Cash in banks P1,800,000
Petty cash funds (all funds were reimbursed on 12/31/09) 50,000
Cash in banks includes P600,000 of compensating balances against short-term borrowing arrangements at
December 31, 2009. The compensating balances are not legally restricted as to withdrawal by West. In the current
assets section of West's December 31, 2009, balance sheet (statement of financial position), what total amount
should be reported as cash?
1850000
"Petty Cash fund" account can be seen on the face of financial statements.
False
Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the
information they already possess or can obtain from other sources, and their ability to process information.
Consequently, for information to be useful there must be a linkage between these users and the decisions they
make. This link is
A. Relevance C. Understandability
B. Reliability D. Materiality
Which statement is correct concerning the ASC framework?
I. The framework applies to the financial statements of all commercial, industrial and business reporting
enterprises, whether in the public and private sector
II. Special purpose financial reports, for example, prospectuses and computations prepared for taxation purposes,
are beyond the scope of the framework
A. Both I and II C. I only
B. Neither I nor II D. II only
Question 23
32000000
The principal purpose of a voucher system is to provide assurance that
all cash receipts are deposited intact in the bank.
all cash disbursements are approved before a check is issued.
all cash receipts are recorded in the accounting records.
all purchase invoices are supported by debit memoranda.
The cash account in the current asset section of the balance sheet for Princess Company showed the balance of
P555,000. It was found to include the following items:
Petty cash fund (P1,000 is in the form of paid vouchers) P5,000
Undeposited receipts (including post-dated check for P5,000), P120,000
Currencies and coins awaiting deposit, P55,000
Bond sinking fund – cash (expected to be disbursed next year), P100,000
Check drawn by manager-returned by bank marked NSF, P20,000
What is the correct cash balance for Princess Company’s balance sheet?
529000
In analyzing a company’s financial statements which financial statement would a potential investor primarily use to
assess the company’s liquidity and financial flexibility?
A. Balance sheet C. Statement of retained earnings
B. Income statement D. Cash flow statement