City

FAR 2: BANK RECONCILIATION

Who you are tomorrow begins with what you do today.
Tim Fargo

The bank statement for December 31, 2019 bank account of Hope Corp. provided the following information:

Balance, November 30, 2019 P 62,000

Total debits, including the following: 167,000
Bank service charges P 1,000
NSF check returned in December 9,000
Total credits (including P 19,000 note receivable of Hope, collected in December) 205,000

The bank service charges, NSF check and note collection were not yet recorded by Hope Corp.

The accountant provided the following information:

P 47,000 - Deposits in transit which include the following:

A. Checks of P 9,000 received from customers dated January 15, 2020, recorded in 2019

B. Undeposited collections of P 3,000 (excluding Petty Cash Fund)

40,000 - Outstanding checks which include the following:

A. Certified checks of P 4,000

B. Checks issued to vendors dated January 5, 2020 of P 8,000, recorded by Hope in 2019

C. Checks of P 2,000 written and recorded by Hope in December but delivered in January 2020

2,000 - Erroneous bank credit in December corrected by the bank in January 2020
18,000 - Book credits for P 24,000 was recorded at P 42,000. The error was discovered in January 2020.
7,000 - Understatement in collection from customer in December corrected by Hope in December

Petty cash fund at December 31, 2019 is P 5,000.

Determine the following as of December 31, 2019:

1. Adjusted cash in bank balance
A. P 110,000 B. P 119,000 C. P 96,000 D. P 112,000

2. Cash in bank balance per ledger

A. P 90,000 B. P 119,000 C. P 82,000 D. P 84,000

3. Adjusted cash balance

A. P 124,000 B. P 101,000 C. P 117,000 D. P 115,000

4. Net adjustment to cash

A. P 28,000 net credit adjustment C. P 28,000 net debit adjustment
B. P 20,000 net debit adjustment D. P 20,000 net credit adjustment

5. Balance per bank is less than correct cash balance. No error was committed. There must be
A. Deposits credited by the bank but not yet recorded by the company
B. Deposits in transit
C. Outstanding checks
D. Bank charges not yet recorded by the company

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Norma Company prepared the following reconciliation schedule of its cash on hand:

Balance per book P 100,000

Add:
Notes collected by bank P 20,000

Error by the bank in recording deposits 17,000

Outstanding check 15,000 52,000

Less:
Bank service charges P 2,000

Deposits in transit 18,000

Error by the bank in recording payments 3,000

Error in recording collections in the CRJ 7,000 30,000

Balance per bank P 122,000

Norma Company has cash on hand of P 9,000 as at year end.

6. What is the adjusted balance of cash in bank?

A. P 120,000 B. P 125,000 C. P 134,000 D. P 111,000

7. The amount to be reported as cash is

A. P 120,000 B. P 125,000 C. P 134,000 D. P 111,000

8. In performing a book to BANK reconciliation, debit memorandum for service charges by the bank is
A. Added to the bank balance C. Added to the book balance
B. Deducted from the bank balance D. Deducted from the book balance

9. In performing a book to BANK reconciliation, outstanding checks are

A. Added to the bank balance C. Added to the book balance
B. Deducted from the bank balance D. Deducted from the book balance

10. The P7,000 book error represents what type of error?

A. Overstated receipts C. Overstated disbursements
B. Understated receipts D. Understated disbursements

The bookkeeper of Grace Company recently prepared the following bank reconciliation on December 31, 2017:

Balance per bank statement P 10,000,000

Add: Deposit in transit P 750,000
Checkbook and other bank charge 25,000
Error made by Grace in recording check No.
1005 (issued in December) 75,000
Customer check marked DAIF 250,000 1,100,000
Total 11,100,000
Deduct: Outstanding checks 950,000
Note collected by bank (includes P200,000 interest) 1,150,000 2,100,000
Balance per book P 9,000,000

Grace has P 500,000 cash on hand on December 31, 2017.

11. The adjusted balance of Grace Company’s cash in bank is

A. P 9,800,000 B. P 9,300,000 C. P 10,300,000 D. P 9,875,000

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12. The amount to be reported as cash as of December 31, 2017 should be
A. P 9,800,000 B. P 9,300,000 C. P 10,300,000 D. P 9,875,000

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13. In performing a bank to book reconciliation, deposits in transit are

A. Added to the bank balance C. Added to the book balance
B. Deducted from the bank balance D. Deducted from the book balance

14. In performing a bank to book reconciliation, credit memorandum for note collected by the bank is
A. Added to the bank balance C. Added to the book balance
B. Deducted from the bank balance D. Deducted from the book balance

15. The P25,000 book error represents what type of error?

A. Overstated receipts C. Overstated disbursements
B. Understated receipts D. Understated disbursements

The following data are presented by FGH Co. on September 30, 2019:

Disbursements per books, including: P 100,000

A. Debit memorandum for NSF check in August 3,000
B. Debit memorandum for Bank charges in August 1,000

It was discovered that, a check for P 51,000 issued in September 20 was recorded as P 15,000.

Disbursements per bank, including: P 120,000

A. Debit memorandum for NSF check in September 5,500
B. Debit memorandum for bank charges in September 1,500

Check No. 120 for P 4,000 issued in the last day of August cleared the bank in the first week of September.

16. Outstanding checks in September amount to

A. P 23,000 B. P 25,000 C. P 27,000 D. P 29,000

17. What is the correct amount of checks issued by FGH Co. in September?
A. P 136,000 B. P 132,000 C. P 96,000 D. P 104,000

18. What amount of checks issued in December cleared the bank in September?
A. P 107,000 B. P 109,000 C. P 105,000 D. P 113,000

19. For the month of August, total receipts per book and bank are P 250,000 and P 252,000, respectively. Notes collected by
the bank from the company’s customers are P 20,000 and P 15,000, respectively, for July and August. These receipts are
included in the bank statement and properly noted as credit memoranda. The company usually records these receipts in
the following month.

Deposits outstanding as of the end of July are P 11,000. These deposits cleared the bank in August.

What is the amount of deposits in transit in August?

A. P 2,000 B. P 4,000 C. P 11,000 D. P 26,000

20. For the month of August, total receipts per book and bank are P 70,000 and P 84,000, respectively. Notes collected by the
bank from the company’s customers are P 5,000 and P 12,000, respectively, for July and August. These receipts are
included in the bank statement and properly noted as credit memoranda. The company usually records these receipts in
the following month.

Deposits outstanding as of the end of August are P 3,000. All deposits in transit in July cleared the bank in August.

Also, it was discovered that the receipts were understated by P 9,000, still uncorrected.

What is the amount of deposits in transit in July?

A. P 1,000 B. P 2,000 C. P 5,000 D. P 9,000

21. Consider the following data as of December 31, 2017:

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A. Total book credits in December, P 500,000
B. November service charge taken up in December, P 1,000
C. December service charge taken up in January 2018, P 1,500
D. November outstanding checks, P 10,500
E. December outstanding checks, P 5,000

Solve for total bank debits.

A. P 488,000 B. P 482,000 C. P 494,000 D. P 506,000

Reconciliation of Jeanne Corporation’s bank account at November 30, 2019 follows:

Balance per bank statement P 3,150,000

Deposits in transit 450,000
Checks outstanding (45,000)
Correct cash balance P 3,555,000

Balance per books P 3,558,000

Bank service charge (3,000)
Correct cash balance P 3,555,000

December data: Bank Books

Checks recorded P 3,450,000 P 3,540,000
Deposits recorded 2,430,000 2,700,000
Collection by bank (P 600,000 plus interest) 630,000 -
NSF check returned with December bank statement 15,000 -
Balances P 2,745,000 P 2,715,000

Determine the following:

22. Outstanding checks for December
A. P 132,000 B. P 90,000 C. P 87,000 D. P 135,000

23. Deposits in transit for December

A. P 360,000 B. P 900,000 C. P 270,000 D. P 720,000
24. Adjusted balance at December 31, 2017
A. P 2,880,000 B. P 3,330,000 C. P 3,510,000 D. P 3,333,000

Jim Trading’s internal control over its cash transactions is very weak. Actually, the company’s cash position at December 31,
2017 was as follows:
The cash book showed a balance of P 150,000, which included cash on hand. A credit of P 1,500 on the bank’s records did
not appear on the company’s books. The bank statement showed a balance of P 123,000; and the outstanding checks per
audit amounted to P 8,500. The cashier removed all of the cash on hand in excess of P 30,000 and then prepared the
following reconciliation:

Balance per books, Dec. 31, 2017 P 150,000

Add: Outstanding checks
No. 1501 P 1,100
1510 1,400
1515 1,500 3,000
P 153,000
Deduct: Cash on hand 30,000
Balance per bank, December 31, 2017 P 123,000
Deduct: Unrecorded credit 1,500
True cash P 121,500

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25. Cash shortage if any is

26. Cashier’s accountability for cash on hand is

Melanie Corporation was organized on January 3, 2017 with an authorized capital stock of P 5,000,000. At December 31, 2019
of the same year, the general ledger of said Company showed the following accounts and balances:

Accounts receivable P 200,000

Merchandise inventory 250,000
Land, building and furniture & fixtures 3,200,000
Accounts payable 420,000
Notes payable – bank 500,000
Ordinary shares and share premium 1,600,000
Sales 5,800,000
Expenses paid (excluding purchases) 725,000

Your review of the bank statement for December disclosed the following information:

Bank balance, December 31, 2017 P 524,500

Bank service charge ?
Deposits in transit 62,500
Total checks not returned by the bank 128,000

Your review also revealed that the cash received of P 62,500 on December 31, 2017 was deposited on January 2, 2018.
The company’s mark up on sales is 40%.

Assume that the bank service charge was P 6,000.

27. How much is the unadjusted cash balance as of December 31, 2017?
A. P 536,000 B. P 459,000 C. P 539,000 D. P 465,000

28. How much is the adjusted cash balance as of December 31, 2017?
A. P 536,000 B. P 459,000 C. P 539,000 D. P 465,000

Jennifer, Inc. established petty cash fund of P 10,000 at the beginning of January, 2017. During the month, Jennifer paid the
following out of the fund:

Travel advances (to Junior, employee) P 2,500 Meal allowances P 1,700

Office supplies 4,000 Load allowance 1,100

At the end of the period, Junior has liquidated his travel advances and reported disbursements supported with receipts
amounting to P 2,350. The company’s policy is to charge unliquidated advances to employees against their payroll.
Inventory of the office supplies reveal unused supplies worth P 350.

In addition, cash on hand counted at the end of January amounted to P 1,050, of which P 450 represents contributions
from employees for a donation drive for street children.

29. What is the entry to establish the fund?

30. What is the entry upon payments out of the fund?

31. What is the amount of replenishment check?

32. What is the shortage?

33. What is the entry to replenish the fund?

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34. A Cash Over and Short account in the books of Jennifer

A. Is not generally accepted
B. Is debited when the petty cash fund proves out over
C. Is debited when the petty cash fund proves out short
D. Is a contra account to Cash

35. If the fund was not replenished at year-end, what amount shall be presented as petty cash fund?

36. Heart Company reported petty cash fund comprising the following:

Coins and currency P 3,300

Paid vouchers:
Transportation, gasoline, supplies, stamps P 1,800
Due from employees 1,200 3,000
Manager’s check returned by the bank marked NSF 1,000
Check drawn by Heart Company to the order of the PCF custodian 2,700

What should be the correct amount of Petty Cash Fund?

A. P 10,000 B. P 7,000 C. P 6,000 D. P 9,000

37. The major purpose of an imprest petty cash fund system is to

A. Effectively plan cash inflows and outflows
B. Ease the payment of cash to vendors
C. Effectively control cash disbursements
D. Determine the honesty of the petty cashier

END.

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