Professional Documents
Culture Documents
Cash HO
Cash HO
- 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.
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
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
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
BANK RECONCILIATION
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
On December 31, 2022, 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 2/28/2023 40,000
Money market instrument – due date 6/1/2023 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 2
On December 31, 2022, an entity established a petty cash fund of ₱50,000. On December 31, 2022
the petty cash fund comprised coins and currencies ₱6,000 and vouchers for expenses ₱47,000. The
petty cash fund was replenished on December 31, 2022. Prepare the necessary entries.
Problem 3
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 4
Effective Company showed the following information:
Required:
Prepare a proof of cash for the month of April.