CASH

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

1. Cash on Hand (CUTCMoBa)

C – Customer’s checks
U – Undeposited cash collections
T – Traveler’s check
C – Cashier’s/Official/Treasurer’s/Manager’s checks
Mo – Postal money orders
Ba – Bank drafts

2. Cash in bank

a. Current account/checking account/demand deposit/commercial deposit

b. Savings deposit

3. Cash Fund (CPRIntPeDiT)

C – Change fund
P – Payroll fund, Purchasing fund
R – Revolving fund
Int – Interest fund
Pe – Petty cash fund
Di – Dividend fund
T – Travel fund, Tax fund

Fund for Noncurrent Operations (PACIS)

P – Pension fund, Preferred redemption fund
A – Acquisition of PPE
C – Contingent fund
I – Insurance fund
S – Sinking fund

CASH EQUIVALENTS
- Short-term and highly liquid investments
- Acquisition Maturity (3 months or less)
- So near their maturity that they present insignificant risk of changes in value
Items that may qualify as cash equivalents include the following:
1. Time deposit
2. Money market instrument or commercial paper
3. Treasury bills, treasury notes and treasury bonds
4. Redeemable preference shares with mandatory redemption period
PETTY CASH FUND

Imprest Cash Control System

- All receipts must be deposited.
- All payments must be drawn thru checks.
- Establishment of petty cash fund.

BANK RECONCILIATION

Form of Bank Reconciliation

1. Adjusted balance method.
2. Book to Bank method.
3. Bank to Book method.

Reconciling items:
1. Book reconciling items
a. Credit memos
b. Debit memos
c. Errors
2. Bank reconciling items
a. Deposit in transit
b. Outstanding checks
c. Errors

LECTURE DRILLS
Problem 1
An entity provided the following data on December 31, 2023:
Cash on hand 500,000
Cash in bank 4,000,000
Cash in sinking fund 1,500,000
Treasury bills, purchased November 1, 2023 and maturing January 31, 2024 2,500,000
Time deposit, purchased October 1, 2023 and maturing January 31, 2024 2,000,000

Compute the cash and cash equivalents on December 31, 2023.

Problem 2
An entity had the following cash balances on December 31, 2023:
Cash in bank 5,000,000
Petty cash fund, all funds were reimbursed on December 31, 2023 50,000
Money market placement or commercial papers 1,500,000
Saving deposit 800,000

Compute the cash and cash equivalents on December 31, 2023.

Problem 3
On December 31, 2023, POT Co’s “cash account” balance per ledger of ₱5,320,000 includes:
Time deposit – PCIB, it can be preterminated 60,000
Time deposit – PNB, 90 days 170,000
Time deposit – BPI, 120 days 180,000
Money market instrument – due date 2/28/2024 40,000
Money market instrument – due date 6/1/2024 45,000
Cash in bank – BDO, which includes a compensating balance of ₱50,000 for short- 1,050,000
term borrowing arrangement. The compensating balance is not legally restricted
as to withdrawal.
Cash in bank – BDO (100,000)
Cash in bank – RCBC, which includes a compensating balance of ₱50,000 for long- 450,000
term borrowing arrangement. The compensating balance is legally restricted as to
withdrawal.
Cash in bank – PNB (60,000)
Cash in bank – BPI, which includes a compensating balance of ₱40,000 for short- 150,000
term borrowing arrangement. The compensating balance is legally restricted as to
withdrawal.
Cash in bank – Eastwest, which includes a compensating balance of ₱40,000 for 250,000
short-term borrowing arrangement.
Petty cash fund, which includes an unreplenished voucher for ₱4,000 10,000
Payroll fund 100,000
Manager’s checks 90,000
Traveler’s checks 100,000
Bank drafts 20,000
Postal money orders 25,000
Demand deposit 100,000
90-day BSP treasury bill 50,000
160-day treasury bill 30,000
Travel fund 20,000
Interest fund 40,000
Tax fund 30,000
Sinking fund 420,000
Preferred redemption fund 100,000
Contingent fund 200,000
Insurance fund 500,000
Fund for acquisition of PPE 1,000,000
IOU officers 18,000
Customer’s post-dated checks 92,000
Customer’s checks returned by bank marked “NSF” 80,000
Redeemable preferred shares – acquired 3 months before maturity 40,000
Visa Card – credit limit 20,000
TOTAL ₱5,320,000

Required:
Compute the cash and cash equivalents that should be shown in the balance sheet.
Problem 4
On December 1, 2023, Lady Company established a petty cash fund of P50,000. On December 31,
2023, the petty cash fund comprised the following information:

Coins and currencies 6,000

Petty cash vouchers for miscellaneous expenses 46,000
The petty cash fund was replenished on December 31, 2023.

Prepare the necessary entry for the replenishment of petty cash fund.

Problem 5
The books of DIANA Company show a cash in bank balance of ₱79,440 as of July 31. DIANA’s bank
statement shows a cash balance for the company of ₱51,800. Additional information that might be
useful reconciling the disparity between the two balances follows:

a. A deposit of ₱16,000 was recorded by the bank on July 5, but it should have been recorded
for DINA Company rather than DIANA Company.
b. Petty cash of ₱8,500 was included in the cash balance.
c. Check No. 6152 in payment of electric bill for ₱5,700 was correctly recorded by the bank but
was recorded in the cash disbursements journal of DIANA as ₱7,500.
d. The bank statement does not show receipts of ₱12,600 that were deposited on July 31.
e. The bank statement indicated a service charge of ₱3,000.
f. A check of ₱7,440 was returned marked NSF. The check had been included in the July 23
deposit. As of July 31, the check had not been redeposited.
g. Proceeds from cash sales of ₱30,600 for July 18 were stolen. The Company expects to
recover this amount from the insurance company. The cash receipts were recorded in the
books, but no entry was made for the loss.
h. Interest of ₱2,400 accrued on funds the bank had invested for DIANA for the month of July.
i. Outstanding checks totaled ₱28,400 as of July 31.
j. The July 21 deposit included a check for ₱14,100 that had been returned on July 15 marked
NSF. DIANA had made no entry upon return of the check. The redeposit of the check on July
21 was recorded in the cash receipts journal of DIANA as a collection on account.

Required:
Prepare a bank reconciliation as of July 31.

Problem 6
Effective Company showed the following information:

Cash in bank balance, March 31 200,000

Book credits for April 720,000
Book debits for April 800,000
Bank statement balance, March 31 330,000
Bank debits 530,000
Bank credits 700,000
Note collected by bank:
March 60,000
April 100,000
Service charge:
March 8,000
April 2,000
 NSF check:
March 20,000
April 30,000
Deposit in transit:
March 80,000
April 220,000
Outstanding checks:
March 178,000
April 372,000

Required:
Prepare a proof of cash for the month of April.