SAMPLE PROBLEMS – Cash & Cash Equivalents

Sample Problem 1
The records of SML Co. on December 31, 20x1 show the following:

Checks drawn but not yet issued to payees 120,000

Customers’ check dated January 15 20x2 35,000
Customers’ checks dated Dec. 31, 20x1 40,000
SML’s check dated Jan. 15, 20x2 already mailed to
16,000
payee
Cash on hand 130,000
Employees’ checks representing unclaimed
salaries, 14,000
held by the treasurer
Petty cash fund (fully replenished) 20,000

How much is included as Cash on December 31, 20x1?

Sample problem 2
Behringer Co. holds the following securities on December 31, 20x1:
Treasury bill acquired on Nov. 1, 20x1, maturing on
January 20x2 300,000
Money market placements to RCBC trust, made on
800,000
Dec 15, 20x1, maturing on August 31, 20x2.
Redeemable preference shares acquired on
1,600,00
December 31, 20x1 and redeemable on March 31,
0
20x2
Three-month time deposit with UCPB - unrestricted 950,000
Investment in shares of stocks acquired on
450,000
December 31, 20x1 to be sold on January 20x2
Sample Problem 3

What is the amount of cash?

Sample Problem 4
Comprehensive Problem

The following pertains to Bongseok Corporation on December 31, 2023:

Postage stamps…………………………………………………………………...……P 1,000

Employees postdated check…………………………………………………….…. 4,000
IOU from controller’s sister……………………………………….…………..…..10,000
Credit memo from a vendor for a purchase return………………….…20,000
Traveler’s check…………………………………………………………………..……..50,000
Postal money order…………………………………………………………………...30,000
Petty cash fund………………….…………………………………………………….…70,000
Treasury bills, due 3/31/2024 (purchased 12/31/23)…………….….200,000
Treasury bills, due 1/31/2024 (purchased 01/31/23)………………..300,000
Listed stock helds as temporary investments………………………………15,000
Current account at Metrobank………………………………………….…..2,000,000
Savings account at Metrobank………………………………………………....750,000
Current account at BPI……………………………………………………………(100,000)
Payroll account…….…………………………………………………………………..500,000
Foreign bank account – restricted (in equivalent pesos)…………1,000,000
Treasury warrants……………………………………………………………………..300,000
Two certificate of deposits, amounting P500,000 each,
Maturity days of 90 days and 120 days………………………1,000,000
Time deposit – PNB………………………………………………………………..2,000,000
Unused credit line………………………………………………………………….1,500,000

Additional information:
 A check for P200,000 was drawn against Metrobank current
account dated and recorded December 27, 2023 but delivered to
payee on January 10, 2024
 The PNB time deposit is set aside for land acquisition in early
January 2024
 The petty cash includes unreplenished December 2023 petty cash
vouchers for P15,000 and an employee check for P5,000 dated
January 31, 2024
 The savings account at Metrobank includes a deposit in escrow
amounting to P340,000 and a compensating balance of P250,000
which is legally restricted

What amount should be reported as “cash and cash equivalents” on

December 31, 2023?
Topic: IMPREST SYSTEM: Petty Cash Fund

How is Petty Cash Transaction Controlled and Reported?

As control measures of petty cash fund, the procedures are

widely used:

 One person is usually given the responsibility of

operating the petty cash fund
 Each time an expenditure is made, a source document
(called a petty cash voucher) is prepared for payment
evidence. The voucher is signed by the person receiving
the cash and by the person in charge of the fund (petty
cashier). The petty cash voucher includes the amount
and purpose of the expenditure.
 A record (usually multi columned) is kept to record
each expenditure from the petty cash fund
 Each time the fund is almost depleted and also at the
end of every accounting period, a check is prepared for
the amount spent and cashed to replenish the petty
cash fund.

PETTY CASH RECEIPT

No. 121 Date August 1, 2001
Paid to Metropolitan Times Amount: 300

For Daily Newspaper

Charge to Miscellaneous Administrative Expense
Payment received:
S.O. Hall Approve by N.E.R
No Description Journal Entry

1 Petty Cash xxx

An establishment of petty cash fund Cash
2 Payment expenses by the petty cash No Entry
custodian
3 Kinds of Expenses xxx
Receiving disbursement evidences
and replenished petty cash Cash
4 Petty Cash Xxx
Petty cash funds are too small and
needed to increase petty cash fund Cash
balance
5 Cash xxx
Petty cash funds are too much and
needed to decrease petty cash fund Petty Cash
balance

5 Kinds of Expenses xxx

At the end of period, to make an
adjusting entry (If there are Petty Cash
unrecorded transactions)
6 Petty cash xxx
At the beginning of next period, the
reversing entries is developed Kinds of Expenses
Topic: Bank Reconciliation
Bank Deposits

There are three kinds of bank deposits, namely:

1.Demand Deposit
 This is the current account or checking account or commercial
deposit where deposits are covered by deposit slips and where funds
are withdraw able on demand by drawing checks against the bank.
 A demand deposit is noninterest bearing.

2.Saving Deposit
 The depositor is given a passbook upon the initial deposit. The
passbook is required when making deposits and withdrawals.
 Withdrawals are made anytime but the bank sometimes may
require notice of withdrawal.
 A saving deposit is interest bearing.

3.Time Deposit
 This is similar to saving deposit in the sense that it is interest
bearing.
 A time deposit is evidenced, however by, a formal agreement
embodied in an instrument called certificate of deposit.
 Time deposit may be predetermined or withdrawn on demand or
after a certain period of time agreed upon.

Bank Reconciliation Statement

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.
The reconciliation usually prepared monthly because the bank
provides the depositor with the bank statement at the end of every month.

Bank reconciliation are prepared to:

a)Explain the difference between the cash balance reported on the bank
statement and the cash balance in the accounting books.
b)Arrive at the adjusted (correct) cash balance to be shown in the financial
statements.
c)Provide information for reconciling journal entries.

A bank statement is a monthly report of the bank to the depositor

showing:
1.The cash balance per bank at the beginning;
2.The deposits made by the depositor and acknowledged by the bank;
3.The checks drawn by the depositor and paid by the bank; and
4.The daily cash balance per bank during the month.

RECONCILING ITEMS

Book Reconciling Items:

1.Credit memos – These are book reconciling items not representing
deposits credited by the bank to the account of the depositor but not yet
recorded by the depositor as cash receipts.
The following are examples of credit memos.
Interest earned – This is a type of credit memo that will appear on the
bank statement when a bank gives a company interest on its account
balances.
Notes receivable – This is a type of reconciliation where the bank will
increase the company's checking account for the amount it collected
(principal and interest) and will decrease the account by the collection fee it
charges.
Proceeds of bank loan credited to the account of the depositor.
Matured time deposits transferred by the bank to the current account of
the depositor.

2.Debit Memos - These are book reconciling items not representing checks
paid by the bank which are charged or debited by the bank to the account of
the depositor but not yet recorded by the depositor as cash disbursements.

The following are examples of debit memos:

No Sufficient Funds (NSF) – These are checks that were not honored by
the bank of the person or company writing the check because that account
did not have a sufficient balance.
Technically Defective Checks - These are check that deposited but
returned by the bank because of technical defects such as absence of
signature/ countersignature, erasures, mutilated checks, conflict between
amount in words and figures.
Bank service charges – This type of debit memo comprises fees deducted
from the bank statement for the bank's processing of the checking account
activity.
These include bank charges for interest, collection, checkbook and penalty.
Reduction of Loan – This pertains to amount deducted from the current portion of
depositor in payment for loan which the depositor owes the bank and
which has already matured.

3. Errors - These are book reconciling items which represent the errors
made by the accountant or another person in charge during the
bookkeeping process
Bank Reconciling Items:

1.Deposits in Transit – These are collections already recorded by the

depositor as cash receipts but not yet reflected on the bank statements.

The following are examples of deposits in transit:

Collections already forwarded to the bank for deposit but too late to
appear in the bank statement. E.g. deposits are mailed to the bank, placed in
an overnight depository
Undeposited collections or those still in the hands of the depositor.
These are cash on hands awaiting delivery to the bank for deposit.

2.Outstanding Checks - These checks are already recorded by the

depositor as cash disbursements but not yet reflected on the bank
statement.

The following are examples of outstanding check:

Check drawn and drawn but not yet presented by payee for payment.
Certified checks - the bank, when certifying the checks automatically
debits (reduces) the depositor's account and assumes direct liability on
paying the certified checks to the payee. Certified checks should be
deducted if included because they are no longer outstanding.
Stale checks - checks that remain outstanding for a relatively long period
of time, are reverted back to cash, meaning, they are added back to the cash
balance per books, and are excluded from outstanding checks.

3.Errors - These are bank reconciling items which represent the errors
made by the bank such as erroneously debiting the company’s account for
the transaction that does not exist.
 FORMS OF BANK RECONCILIATION:

1. Adjusted balance method - Under this method, the book

balance and the bank balance are brought to a correct cash
balance that must appear on the balance sheet.

Balance per book, end Xxx

Add: Credit Memos Xxx
Total Xxx
Less: Debit Memos Xxx
Adjusted book balance Xxx

Balance per bank, end Xxx

Add: Deposits in Transit Xxx
Total Xxx
Less: Outstanding Checks Xxx
Adjusted bank balance Xxx

2. Book to bank method - Under this method, the book balance is

reconciled with the bank balance or the book balance is adjusted
to equal the bank balance.
Book balance Xxx
Add: Credit Memos Xxx
Outstanding Checks Xxx Xxx
Total Xxx
Less: Debit Memos Xxx
Deposit in Transit Xxx (Xxx)
Bank Balance Xxx
3. Bank to book method - Under this method, the bank balance is
reconciled with the book balance or the bank balance is adjusted
equally with the bank balance.

Bank Balance Xxx

Add: Deposit in Transit Xxx
Debit Memos Xxx Xxx
Total Xxx
Less: Outstanding Checks Xxx
Credit Memos Xxx (Xxx)
Book balance Xxx

ILLUSTRATION
You received your July 2018 bank statement. The July 31, 2018
cash balance in your accounting books is P300,000 while the
cash balance shown on the bank statement is P430,000. You
determined the following reconciling item:
a. Credit memo - P190,000
b. Debit memo - P30,000
c. Deposits in transit - P50,000
d. Outstanding checks - P20,000

Prepare the bank reconciliation.

 1. Bank Reconciliation using ADJUSTED BALANCE
METHOD:

Balance per book, end P300,000

Credit memos (CM) 190,000
Debit memos (DM) (30,000)
Book errors 0
Adjusted balance P460,000

Balance per bank, end P430,000

Deposits in transit (DIT) 50,000
Oustanding checks (OC) (20,000)
Bank errors 0
Adjusted Balance P460,000

2. Bank Reconciliation using BOOK TO BANK METHOD:

Book balance P300,000
Add: Credit Memos 190,000
Outstanding Checks 20,000 210,000
Total 510,000
Less: Debit Memos 30,000
Deposit in Transit 50,000 (80,000)
Bank Balance 430,000

3. Bank Reconciliation using BANK TO BOOK METHOD:

 Bank Balance P430,000
Add: Deposit in Transit 50,000
Debit Memos 30,000 80,000
Total 510,000
Less: Outstanding Checks 20,000
Credit Memos 190,000 (210,000)
Book balance 300,000

Notes”