CASH AND CASH EQUIVALENTS
Easy:
1. Cash equivalents are
a. Short-term and highly liquid investments that are readily convertible into
cash and so near their maturity that they represent insignificant risk of
changes in value because of changes in interest rate.
b. Short-term and highly liquid investments that are readily convertible into
cash.
c. Short-term and highly liquid investments that are readily convertible into
cash and so near their maturity that they represent significant risk of
changes in value because of changes in interest rates
d. Short-term and highly liquid investments that are readily convertible into
cash with remaining maturity of three months.
2. Which is normally deducted from the bank statement balance in preparing bank
reconciliation?
a.
b.
c.
d.
Certified check
Deposit in transit
Outstanding check
Reduction of loan charged to the account of the depositor
3. A bank statement
a. shows the activity that increased or decreased the depositor's account
balance.
b. is a credit reference letter written by the depositor's bank.
c. is a bill from the bank for services rendered.
d. lets a depositor know the financial position of the bank as of a certain date.
4. A person authorized to write checks drawn on a checking account at a bank
must sign and have on file with the bank a
a.
b.
c.
d.
checkbook
bank card
signature card
deposit ticket
5. A bank reconciliation should be prepared periodically because
a.
b.
c.
d.
the depositor's records and the bank's records are in agreement
the bank has not recorded all of its transactions
the bank must make sure that its records are correct
any differences between the depositor's records and the bank's records
should be determined, and any errors made by either party should be
discovered and corrected
6. Which one of the following term best describes the amount of cash or cash
equivalents that could currently be obtained by selling an asset in an orderly
disposal?
a.
b.
c.
d.
Realizable value
Fair value
Residual value
Value in use
7. Which of the following is true?
a. Lapping is the transfer of cash from one bank to another bank to conceal a
shortage.
b. Sinking fund can be classified as a current asset under certain
circumstances.
c. The practice of opening books of accounts beyond the close of the
accounting period is called kiting.
d. Misappropriation of collections from customers is called window dressing.
8. Which of the following is likely considered as cash and cash equivalents for
financial reporting purposes as of December 31, 2012?
a.
b.
c.
d.
Trust fund with original maturity of 120 days
Bank overdraft
Treasury bills acquired December 1, 2012, maturing on March 1, 2013.
Post dated checks
9. A voucher
a. is normally prepared in the Accounting Department
b. system is an internal control procedure to verify that the assets in the ledger
are the ones the company owns
c. is received from customers to explain the purpose of a payment
d. system is used to control cash receipts
10.Deposits held as compensating balances
a. Usually do not earn interest
b. If legally restricted and held against short-term credit may be included as
cash
c. If unrestricted as to withdrawal may be included as cash
d. If legally restricted and held against long-term credit may be included
among current assets
11.The bank reconciliation
a.
b.
c.
d.
is sent to the bank for verification
is part of the internal control system
is for information purposes only
should be prepared by an employee who records cash transactions
12.Which of the following would be subtracted from the balance per books on a
bank reconciliation?
a.
b.
c.
d.
Notes collected by the bank
Outstanding checks
Deposits in transit
Service charges
13.What is the major purpose of an Imprest petty cash fund?
a.
b.
c.
d.
To
To
To
To
effectively plan cash inflows and outflows
ease the payment of cash to vendors
effectively control cash disbursements
determine the honesty of the petty cashier
14.Procedures designed to protect cash from theft and misuse from the time it is
received until it can be deposited in a bank are called
a.
b.
c.
d.
detective controls
cash controls
preventive controls
accounting controls
15.Which of the following is usually considered cash?
a.
b.
c.
d.
Money market savings certificates
Checking accounts
Certificates of deposit
Postdated check
16.All of the following are necessary components of internal control over cash,
except:
a.
b.
c.
d.
Daily deposit of all receipts in the company's bank account
Bank reconciliation
Petty cash system
Cash reserve
17.The objectives of internal control are to
a. provide control over "internal-use only" reports and employee internal
conduct
b. prevent fraud, and promote the social interest of the company
c. control the internal organization of the accounting department personnel
and equipment
d. provide reasonable assurance that operations are managed to achieve goals,
financial reports are accurate, and laws and regulations are complied with
18.Which one of the following term best describes the amount of cash or cash
equivalents that could currently be obtained by selling an asset in an orderly
disposal?
a.
b.
c.
d.
Value in use
Residual value
Fair value
Realizable value
19.Which of the following would be added to the balance per books on a bank
reconciliation?
a.
b.
c.
d.
Outstanding checks
Service charges
Deposits in transit
Notes collected by the bank
20.The reconciliation of the cash register tape with the cash in the register is an
example of
a.
b.
c.
d.
other controls.
establishment of responsibility.
independent internal verification.
segregation of duties.
21.A bank statement provides information about all of the following, except
a.
b.
c.
d.
NSF checks
Bank charges for the period
Check cleared during the period
Errors made by the company
22.Credit memorandums from the bank
a.
b.
c.
d.
decrease a bank customer's account
show the bank has collected a note receivable for the customer
show that a company has deposited a customer's NSF check
are used to show a bank service charge
23.Which of the following is not an effective system to control cash?
a. Preparing monthly bank reconciliation
b. Securing an approved voucher before issuing check
c. Making payments from daily receipts before making any deposits to
minimize withdrawals and check issuances
d. Deposits of receipts intact at the bank
24.In reimbursing the petty cash fund, which of the following is true?
a. Cash is debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense accounts are debited
25.Cash deposited in a bank experiencing financial DIF is written down to
a.
b.
c.
d.
Maturity value
Estimated realizable value
Value in use
Present value
26.The cash account in the depositor's ledger is a(n)
a.
b.
c.
d.
liability with a credit balance
asset with a credit balance
asset with a debit balance
liability with a debit balance
27.If the petty cash fund is not replenished and an adjustment entry is not made
accordingly
a.
b.
c.
d.
Cashier is irresponsible
Expenses are overstated, cash is understated
Complete audit on cash is required
Cash and income are overstated
28.Which of the following should not be considered cash by an accountant?
a.
b.
c.
d.
travelers' checks
bank checking accounts
money orders
postage stamps
29.Which one of the following below is not an element of internal control?
a.
b.
c.
d.
information and communication
monitoring
risk assessment
behavior analysis
30.The payment of accounts payable made after the close of the accounting period
are recorded as if it were made at the end of the current period.
a.
b.
c.
d.
Lapping
Fishing
Window dressing
Kiting
31.Cash denominated in foreign currency shall be translated to Philippine peso
using
a.
b.
c.
d.
Passing rate
Average rate
Exchange rate
Historical rate
32.A voucher is usually supported by
a.
b.
c.
d.
a purchase order
a supplier's invoice
all of the above
a receiving report
33.Which of the following will not require an adjusting entry on the depositor's
books?
a. Loan proceeds credited to the depositor's account
b. DAIF check from a customer
c. Deposit of another entity credited by the bank to the account of the
depositor
d. Collection from a customer amounting to P90,000 recorded by depositor as
P900,000.
34.An element of internal control is
a.
b.
c.
d.
controlling accounts
journals
subsidiary ledgers
risk assessment
35.All of the following would be regarded as financial instruments, except
a.
b.
c.
d.
Notes payable
Bank overdraft
Cash
Equipment
36.LMN Company issued a note solely in exchange for cash. Assuming that the
items below differ in amount the present value of note at issuance is equal to
the
a. Face amount discounted at the prevailing interest rate for similar notes
b. Proceeds received
c. Proceeds received, discounted at the prevailing interest rate for similar
notes
d. Face amount
37.During a bank reconciliation process,
a. Outstanding checks are added and deposits in transit are subtracted to the
bank statement balance.
b. Outstanding checks and deposits in transit are added to the bank statement
balance.
c. Outstanding checks are subtracted and deposits in transit are added to the
bank statement balance.
d. Outstanding checks and deposits in transit are subtracted from the bank
statement balance.
38.A P100 petty cash fund has cash of P18 and receipts of P80. The journal entry
to replenish the account would include a
a.
b.
c.
d.
debit to Cash for P80.
credit to Cash for P80
credit to Petty Cash for P84.
debit to Cash Over and Short for P2.
39.What entry is required in the depositor's accounts to record outstanding
checks?
a.
b.
c.
d.
debit Cash; credit Accounts Receivable
debit Accounts Receivable; credit Cash
debit Cash; credit Accounts Payable
none
40.A bank reconciliation is prepared monthly in order for the enterprise to
a.
b.
c.
d.
Unearth any undetected cash fraud
Correct bank errors
Correct book errors
Arrive at the correct cash balance
41.Which of the following is normally classified as a current liability on the balance
sheet?
a.
b.
c.
d.
Bank overdrafts
Customer NSF checks
Postdated checks
Travel advances
42.Petty cash fund is
a.
b.
c.
d.
Money kept on hand for making minor disbursements of coins and currency
Restricted cash
Set aside for the payment of payroll
Separately classified as a current asset
43.A firm's internal control environment is not influenced by
a. monitoring policies
b. personnel policies
c. organizational structure
d. management's operating style
44.The internal control feature that is specific to petty cash is
a.
b.
c.
d.
Imprest system
Assignment of responsibility
Separation of duties
Proper authorization
45.EFT
a.
b.
c.
d.
makes it easier to document purchase and sale transactions
means Effective Funds Transfer
can process certain cash transactions at less cost than by using the mail
means Efficient Funds Transfer
46.A bank reconciliation should be prepared
a. to explain any difference between the depositor's balance per books with the
balance per bank.
b. when an employee is suspected of fraud.
c. by the person who is authorized to sign checks.
d. whenever the bank refuses to lend the company money.
47.Under the voucher system, every transaction is recorded at the time of
a.
b.
c.
d.
paying
requisitioning
ordering
incurring
48.Accompanying the bank statement was a debit memorandum for an NSF check
received from a customer. This item would be included on the bank
reconciliation as a(n)
a.
b.
c.
d.
addition to the balance per depositor's records
addition to the balance per bank statement
deduction from the balance per bank statement
deduction from the balance per depositor's records
49.Entries are made to the Petty Cash account when
a.
b.
c.
d.
making payments out of the fund.
replenishing the petty cash fund.
recording shortages in the fund.
establishing the fund.
50.A debit or credit memorandum describing entries in the depositor's bank
account may be enclosed with the bank statement. An example of a credit
memorandum is
a. deposited checks returned for insufficient funds
b. notification that a customer's check for P375 was recorded by the depositor
as P735 on the deposit ticket
c. a promissory note left for collection
d. a service charge
51.The amount of cash to be reported on the balance sheet at June30 is the
a.
b.
c.
d.
adjusted balance appearing in the bank reconciliation for June 30
total of the cash column in the cash receipts journal as of June 30
total of the cash column in the cash payments journal as of June 30
balance as of June 30 on the bank statement
52.Journal entries based on the bank reconciliation are required in the depositor's
accounts for
a.
b.
c.
d.
outstanding checks
bank errors
deposits in transit
book errors
53.Cash equivalents include
a.
b.
c.
d.
stocks and short-term bonds
checks
money market accounts and commercial paper
coins and currency
54.During the month, a company was informed that a check they had issued was
accidentally destroyed. On the bank reconciliation, the company would
a.
b.
c.
d.
Add the amount to the balance per the depositor's records
Add the amount to the balance per the bank statement
deduct the amount from the balance per the bank statement
deduct the amount from the balance per the depositor's records
55.During 2017, Creative Inc has monthly cash expenses of P150,000. On
December 31, 2017, their cash balance is P1,550,000. The ratio of cash to
monthly cash expenses is
a.
b.
c.
d.
11.1
10.3
10.7
9.7
56.Which of the following would be subtracted from the balance per bank on a
bank reconciliation?
a.
b.
c.
d.
Notes collected by the bank
Service charges
Deposits in transit
Outstanding checks
57.Cash equivalents
a.
b.
c.
d.
will be converted to cash within two years
will be converted to cash within 90 days
will be converted to cash within 120 days
are illegal in some states
58.Following the completion of the bank reconciliation, an adjusting entry was
made that debited cash and credited Interest Revenue. Therefore the bank
reconciliation must have included an item that was
a.
b.
c.
d.
added to the balance per bank statement
added to the balance per depositor's records
deducted from the balance per bank statement
deducted from the balance per depositor's records
59.Cash is generally considered as a
a.
b.
c.
d.
Depreciable asset
Fixed asset
Non-monetary asset
Financial asset
60.Which of the following is not considered cash for financial reporting purposes?
a.
b.
c.
d.
Postdated checks and IOUs
Money orders, certified checks, and personal checks
Coin, currency and available funds
Petty cash funds and change funds
61.Which of the following reconciling items does not require a journal entry?
a.
b.
c.
d.
Bank collection of note receivable
NSF check
Deposit in transit
Bank service charge
62.What happens when a petty cash is in use?
a. Petty cash is debited when the fund is replenished
b. Most small amounts are paid from cash receipts before they are deposited
c. Petty cash is credited when the fund is replenished
d. Expenses paid with petty cash are recorded when the fund is replenished
63.As contemplated in accounting, cash includes
a. Any negotiable instrument
b. Money and any negotiable instrument that is payable in money and
acceptable by the bank for deposit and immediate credit
c. Money only
d. Money and anything negotiable instrument
64.One of the following is least likely classified as cash for financial reporting
purposes.
a.
b.
c.
d.
Bank drafts and money orders
Stale checks issued to creditors
Post-dated checks from customers
Undelivered checks to trade suppliers
65.Internal control does not consist of policies and procedures that
a.
b.
c.
d.
protect assets from misuse
guarantee the company will not go bankrupt
ensure that business information is accurate
aid management in directing operations toward achieving business goals
66.Accompanying the bank statement was a debit memorandum for bank service
charges. On the bank reconciliation, the item is
e.
f.
g.
h.
an addition to the balance per depositor's records
an addition to the balance per bank statement
a deduction from the balance per bank statement
a deduction from the balance per depositor's records
Average:
67.Which will not require an adjusting entry in the depositor's books?
a. Check in payment of account payable for P1,000 is recorded by the
depositor as P100
b. Bank service charge
c. Deposit of another company is credited to the account of the depositor
d. NSF check from customer
68.The minimum cash amount that banks often require customers to whom they
lead money to maintain in checking accounts is called
a. Compensating balance
b. Money market fund
c. Cash equivalent
d. Bank overdraft
69.If a petty cash fund is established in the amount of P2,500, and contains P2,000
in cash and P450 in receipts for disbursements when it is replenished, the
journal entry to record replenishment should include credit to the following
accounts
a.
b.
c.
d.
Cash, P450; cash over and short, P50
Petty cash, P450.
Cash, P500.
Petty cash, P500.
70.Receipts from cash sales of P9,500 were recorded incorrectly in the cash
receipts journal as P5,900. This item would be included on the bank
reconciliation as a(n)
a.
b.
c.
d.
deduction from the balance per depositor's records
deduction from the balance per bank statement
addition to the balance per depositor's records
addition to the balance per bank statement
71.Which of the following is an incorrect application of the imprest system of cash
control?
a. Cash disbursements must be made in the form of checks, regardless of the
amount
b. Material cash disbursements must be made in the form of checks
c. Cash receipts must be deposited on a regular basis
d. Insignificant cash disbursements must be made out of the petty cash fund
72.At the current year-end, a trustee held cash in the sinking fund account
representing annual deposits to the fund and the interest earned on these
deposits. How should the sinking fund be reported?
a. The entire balance in the sinking fund account should appear as current
asset
b. Only the accumulated deposits should appear as noncurrent asset
c. The entire balance in the sinking fund account should appear as noncurrent
asset
d. The cash in the sinking fund should appear as a current asset
73.Balance per book is more than correct balance. No error was committed. There
must be
a.
b.
c.
d.
Deposits credited by the bank but not yet recorded by the company
Deposits in transit
Bank charges not yet recorded by the company
Outstanding checks
74.All of the following are considered cash, except
a.
b.
c.
d.
Bank draft
Money order
Bills and coins
Stale check
75.Account of the petty cash fund of Francis Company showed its composition as
follows:
Coins and currency
Paid vouchers:
Transportation
Gasoline
Office supplies
Postage stamps
Due from employees
Manager's check returned by bank marked "NSF"
Check drawn by the entity to the order of petty cash
custodian
3,300
600
400
500
300
1,200
3,000
1,000
2,700
What is the correct amount of the petty cash fund for statement presentation
purposes?
a.
b.
c.
d.
7,000
9,000
10,000
6,000
SOLUTION:
Coins and currency
Check drawn by the entity to the order of the petty cash
custodian
3,300
2,700
6,000
The check drawn by the entity to the order of the petty cash custodian is
actually a replenishment check and therefore part of cash
76.Which of the following shall not be considered cash for financial reporting
purposes?
a.
b.
c.
d.
Coin, currency and available funds
Petty cash funds and change funds
Money orders, certified checks and personal checks
Postdated checks and IOUs
77.The cash account in Jose Company's ledger showed a balance at December 31,
2009 of P4,415,000 which consisted of the following:
Petty cash fund
Undeposited receipts, including a postdated customer check for
P70,000
Cash in Allied Bank, per bank statement, with a check for
P40,000 still outstanding
Bond sinking fund - cash
Vouchers paid out of collections, not yet recorded
IOUs signed by employees, taken from collections
24,000
1,220,000
2,245,000
850,000
43,000
33,000
4,415,000
At what amount should cash be reported in the December 31, 2009 statement of
financial position?
a.
b.
c.
d.
3,419,000
3,489,000
3,379,000
3,449,000
SOLUTION:
Petty cash fund
Undeposited receipts (1,220,000 - 70,000)
Cash in Allied bank (2,245,000 - 40,000)
24,000
1,150,000
2,205,000
3,379,000
The postdated customer check of P70,000 should be reverted to accounts
receivable. The outstanding check of P40,000 is deducted from the Cash in
Allied Bank because the cash balance given is per bank statement. The bond
sinking fund is shown as a noncurrent investment. The vouchers paid should be
recorded as expenses. The IOUs should be shown as advances to employees
78.Under PAS 7, cash equivalents are short-term and highly liquid investments
that are
a.
b.
c.
d.
Readily convertible into cash and acquired one year before maturity
Readily convertible into cash and acquired three months before maturity
Classified as available-for-sale securities
Readily convertible into cash and acquired six months before maturity
79.If the petty cash fund is not replenished and an adjustment entry is not made
accordingly,
a.
b.
c.
d.
Expenses are overstated, cash is understated
Cash and income are overstated
Cashier is irresponsible
Complete audit on cash is required
80.Receipts from cash sales of P9,500 were recorded incorrectly in the cash
receipts journal as P5,900. What entry is required in the depositor's accounts?
a.
b.
c.
d.
debit
debit
debit
debit
Accounts Receivable; credit Cash
Cash; credit Accounts Receivable
Sales; credit Cash
Cash; credit Sales
81.Cash equivalents are
a. Short-term and highly liquid investments that are readily convertible into
cash and acquired three months before maturity
b. Short-term and highly liquid marketable equity securities
c. Short-term and highly liquid investments that are readily convertible into
cash
d. Short-term and highly liquid investments that are readily convertible into
cash with remaining maturity of three months
82.A bank reconciliation is prepared monthly in order to for the enterprise to
a.
b.
c.
d.
Correct book errors
Unearth any undetected cash fraud
Arrive at the correct cash balance
Correct bank errors
83.In reconciling the bank balance with the book cash balance, which of the
following would not cause the bank balance shown in the bank statement to be
lower than the unadjusted book balance?
a.
b.
c.
d.
Deposits in transit
Cash on hand at the company
Interest credited to the account by the bank
NSF checks from a customer as reported on the bank statement
84.A check drawn by a depositor in payment of a voucher for P725 was recorded in
the journal as P257. What entry is required in the depositor's accounts?
a.
b.
c.
d.
debit
debit
debit
debit
Accounts Receivable; credit Cash
Cash; credit Accounts Payable
Cash; credit Accounts Receivable
Accounts Payable; credit Cash
85.Which of the following statements concerning compensating balance agreement
is not true?
a.
b.
c.
d.
They
They
They
They
must be disclosed in the financial statements footnotes.
always involve legal restrictions on the cash received
reduce the amount of cash available to the borrower.
increase the effective interest rate to the borrower
86.A bank reconciliation is
a. A statement sent by bank to depositor on a monthly basis
b. A formal financial statement that lists all of a firm's bank account balances
and previously closed bank accounts
c. A merger of two previously competing banks currently in the process of
reconciliation
d. A schedule that accounts for the differences between a firm's bank
statement balance (balance per bank) and the balance shown in its general
ledger (balance per books)
87.Santos Company gathered the following reconciling information in preparing its
August bank reconciliation:
Cash balance per books, 8/31
Deposits in transit
Notes receivable and interest collected by bank
Bank charge for check printing
Outstanding checks
NSF check
P3,500
150
850
20
2,000
170
The adjusted cash balance per books on August 31 is
a.
b.
c.
d.
2,310
2,460
4,160
4,010
88.A P100 petty cash fund contains P92 in petty cash receipts, and P6.50 in
currency and coins. The journal entry to record the replenishment of the fund
would include a
a.
b.
c.
d.
debit to Cash Short and Over for P1.50
credit to Petty Cash for P93.50
credit to Cash Short and Over for P1.50
credit to Cash for P92
89.There are three parties to a check. The drawer is
a.
b.
c.
d.
the party to whom payment is to be made
a written document signed by the depositor
the bank on which the check is drawn
is the one who signs the check ordering payment by the bank
90.Jomel Company had the following bank reconciliation on March 31 of the
current year:
Balance per bank statement, March 31
Deposits in transit
Outstanding checks
Balance per book, March 31
Data per bank statement for the month of April
Deposits
4,650,000
1,000,000
(1,250,000)
4,400,000
6,000,000
Disbursements
5,000,000
All reconciliation items on March 31 cleared through the bank in April.
Outstanding checks at April 30 totaled P750,000 and deposits in transit
amounted to P1,500,000. What is the amount of cash receipts per book in April
a.
b.
c.
d.
5,000,000
6,500,000
5,500,000
7,500,000
SOLUTION:
Bank receipts for April
Deposit in transit - March 31
Deposits in Transit - April 30
Book receipts for April
6,000,000
(1,000,000)
1,500,000
6,500,000
91.Floyd Company reported the following information as of the end of the current
year.




Investment securities of P1,000,000. These securities are share investment
in entities that are traded in the Philippine Stock Exchange. As a result, the
shares are very actively traded in the market.
Investment securities of P2,000,000. These securities are government
treasury bills. The treasury bills have a 10 year term and purchased on
december 31 at which time they had 2 months to go until they mature.
Cash of P3,400,000 in the form of coin, currency, saving account and
checking account.
Investment securities of P1,500,000. These securities are commercial
papers. The term of the papers is nine months and they were purchased on
December 31 at which time they had 3 months to go until they mature.
How much should be reported as cash and cash equivalents at the end of the
current year?
a.
b.
c.
d.
6,400,000
6,900,000
7,900,000
5,400,000
SOLUTION:
Government T bills
Cash
Commercial papers
2,000,000
3,400,000
1,500,000
6,900,000
The share investments cannot qualify as cash equivalents because they are very
actively traded and do not have maturity date.
92.The cash balance of Ace Company on January 1, 2013 was P10,000,000. During
2013, the changes in certain accounts were:
Accounts receivable
Inventory
Accounts payable
4,000,000 increase
3,500,000 decrease
5,000,000 decrease
Total sales and cost of goods sold were P30,000,000 and P20,000,000
respectively. All sales and purchases were on account. Various operating
expenses of P3,000,000 were paid in cash. There were no other transactions
during the year. What is the cash balance on December 31, 2013?
a. 11,500,000
b. 17,000,000
c. 8,000,000
d. 14,500,000
93.Which of the following will not require an adjusting entry on the depositor's
books?
a. Collection from a customer amounting to P90,000 recorded by depositor as
P900,000.
b. Loan proceeds credited to the depositor's account
c. DAIF check from a customer
d. Deposit of another entity credited by the bank to the account of the
depositor
94.Which is not considered as a cash equivalent
a. A three-year treasury note maturing on May 30 of the current year
purchased by the entity on April 15 of the current year
b. A three –year treasury note maturing on May 30 of the current year
purchased by the entity on January 15 of the current year
c. A 60-day money market placement
d. A 90-day T-bill
95.Rafael Company had the following account balances at December 31, 2009:
Cash in bank
Cash on hand
Cash restricted for addition to plant (expected to be disbursed in
2010)
2,250,000
125,000
1,600,000
Cash in bank includes P600,000 of compensating balance against short- term
borrowing arrangement. The compensating balance is not legally restricted as
to withdrawal by Rafael. In the current assets section of Rafael's December 31,
2009 statement of financial position, total cash should be reported at
a. 1,775,000
b. 2,375,000
c. 2,250,000
d. 3,975,000
SOLUTION:
Cash in bank
Cash on hand
Total cash
2,250,0
00
125,00
0
2,375,0
00
A compensating balance is a minimum checking or demand deposit account
balance that must be maintained in connection with a borrowing arrangement
with a bank. The compensating balance is part of cash if it is not legally
restricted as to withdrawal. Otherwise, if it is legally restricted, the
compensating balance is excluded from the amount shown as "cash", and shown
separately as current or noncurrent asset depending on the bank loan to which
it is related. In many instances, compensating balance agreements are informal
and therefore, the compensating balances are not legally binding
96.Under the Imprest fund system, the 'petty cash fund' account is debited
a.
b.
c.
d.
When the fund is created and every time it is replenished
When the fund is created and when the size of the fund is increased
Only when the fund is created
When the fund is abolished and when the size of the fund is decreased
97.Which is normally added to the cash balance per ledger in order to determine
the correct cash balance?
a. Note receivable collected by bank in favour of the depositor and credited to
depositor's account
b. NSF customer check
c. Service charge
d. Erroneous bank debit
98.Which of the following would not be included with the Cash and Equivalents on
the Balance Sheet?
a.
b.
c.
d.
e.
Short-Term Receivables
Municipal Securities
Certificates of Deposit
Money Market Mutual Funds
Commercial Paper
99.The December 31, 2009 trial balance of Ken Company includes the following
accounts:
Petty cash fund
50,000
Current account - First Bank
Current account - Second Bank (overdraft)
Money market placement - Third Bank
Time deposit - Fourth Bank
4,000,000
( 250,000)
1,000,000
2,000,000
The petty cash fund includes unreplenished December 2009 petty cash expense
vouchers for P15,000 and an employee check for P5,000 dated January 31,
2010.
A check for P 100,000 was drawn against First Bank current account dated and
recorded December 29, 2009 but delivered to payee on January 15, 2010.
The Fourth Bank time deposit is set aside for land acquisition in early January
2010.
The December 31, 2009 statement of financial position should report"cash and
cash equivalents" at
a.
b.
c.
d.
4,130,000
4,880,000
5,150,000
5,130,000
SOLUTION:
Petty cash fund (50,000 - 15,000 - 5,000)
Current account - First Bank (4,000,000 + 100,000)
Money market placement
Total cash and cash equivalents
30,000
4,100,000
1,000,000
5,130,000
In the absence of specific term, money market placement, time deposit and
treasury bills are short-term investment of three months or less and therefore
qualify as cash equivalents
100. Lann Company's checkbook balance on December 31, 2009 was P5,000,000.
In addition, Lann held the following items in its safe on that date:
Check payable to Lann, dated January 2, 2010 in payment of a
sale made in December 2009, not included in December 31
checkbook balance
Check payable to Lann, deposited December 15 and included in
December 31 checkbook balance, but returned by bank on
December 30 stamped "NSF." The check was redeposited on
January 2, 2010 and cleared on January 9, 2010
Check drawn on Lann's account, payable to a vendor, dated and
recorded in Lann's books on December 31, 2009 but not mailed
until January 10, 2010
2,000,000
500,000
300,000
The proper amount to be shown as "cash" on December 31, 2009 should be
a.
b.
c.
d.
4,800,000
5,300,000
6,800,000
6,500,000
SOLUTION:
Checkbook balance
NSF customer check
Undelivered company check
Adjusted cash balance
5,000,000
( 500,000)
300,000
4,800,000
The customer check of P2,000,000 payable to Lann is properly not included in
cash because it is postdated January 2, 2010. The NSF customer check of
P500,000 should be reverted to accounts receivable on December 31, 2009
because it was redeposited after December 31, 2009. The check of P300,000
drawn by Lann is undelivered on December 31, 2009. Thus, the undelivered
check is restored to cash by debiting cash and crediting accounts payable
101.
The following data pertain to Thor Company on December 31, 2013:
Checkbook balance
Bank statement balance
Check drawn on Thor’s account, payable to supplier, dated and
recorded on December 31
Cash in sinking fund
4,000,000
5,000,000
500,000
2,000,000
On December 31, 2013, how much should be reported as non current
investment?
a.
b.
c.
d.
6,500,000
4,500,000
5,500,000
2,000,000
SOLUTION:
Cash in sinking fund is considered as noncurrent investment.
102. Bank reconciliations are normally prepared on a monthly basis to identify
adjustments in the depositor's records and to identify errors. Adjustments
should be recorded by the depositor for
a. Bank service charges, NSF checks, outstanding checks and deposits in
transit
b. Bank errors, outstanding checks and deposits in transit
c. Book errors and bank errors
d. All items, except bank errors, outstanding checks and deposits in transit
103.
Bank overdraft, if material, should be
a.
b.
c.
d.
Reported as a deduction from cash
Reported as a deduction from the current asset section
Netted against cash and a net cash amount reported
Reported as a current liability
104. The petty cash fund of Dindo Company on December 31, 2009, the end of
the entity's reporting period, is composed of the following:
Currencies
Coins
Petty cash vouchers:
Gasoline payments for delivery equipment
Medical supplies for employees
Repairs of office equipment
Loans to employees
A check drawn by the entity payable to the order of Grace de la
Cruz, petty cash custodian, representing her salary
An employee's check returned by the bank for insufficiency of
funds
A sheet of paper with names of several employees together with
contribution for a birthday gift of a co-employee. Attached to the
sheet of paper is a currency of
20,000
2,000
3,000
1,000
1,500
3,500
15,000
3,000
5,000
The petty cash general ledger account has an imprest balance of P50,000. What
is the amount of petty cash fund that should be shown in the statement of
financial position on December 31, 2009?
a.
b.
c.
d.
37,000
22,000
27,000
42,000
SOLUTION:
Currencies
Coins
Check drawn to the order of the petty cash custodian
20,000
2,000
15,000
37,000
The check drawn payable to the order of the petty cash custodian representing
her salary is actually an accommodation check. Thus, it isincluded as part of
cash
105. Accompanying the bank statement was a credit memorandum for a shortterm note collected by the bank for the customer. What entry is required in the
depositor's accounts?
a. debit Notes Receivable; credit Cash
b. debit Cash; credit Notes Receivable
c. debit Accounts Receivable; credit Cash
d. debit Cash; credit Miscellaneous Income
106. Ino Company’s bank statement for the month of April included the following
information:
Bank service charge for April
Check deposited by Letty during April was not collectible and has
been marked “NSF” by the bank and returned
15,000
40,000
In comparing the bank statement to its own records, Ino found the following:
Deposits made but not yet recorded by bank
Checks written and mailed but not yet recorded by bank
130,000
100,000
All deposits in transit and outstanding checks have been properly recorded in
Ino’s books. Ino Company found a check for P35,000, payable to Ino Company
that had not yet been deposited and had not been recorded in Ino’s books. Ino’s
books show a cash in bank account balance of P920,000.
What is the adjusted cash in bank at April 30?
a.
b.
c.
d.
930,000
965,000
900,000
865,000
SOLUTION:
Balance per book
Unrecorded customer check
Bank service charge
NSF check
Adjusted book balance
107.
920,000
35,000
(15,000)
(40,000)
900,000
On December 31, 2012, Victor Company had the following cash balances:
Cash in bank
Petty cash fund (all funds were reimbursed on 12/31/2012)
Time deposit (due February 1, 2013)
1,800,000
50,000
250,000
Cash in bank includes P600,000 of compensating balance against short-term
borrowing arrangement on December 31, 2012. The compensating balance is
legally restricted as to withdrawal by Victor. In the December 31, 2012
statement of financial position, what total amount should be reported as cash
and cash equivalents?
a. 1,250,000
b. 2,100,000
c. 1,500,000
d. 1,850,000
108.
Which will not require an adjusting entry on the depositor’s books?
a. Check in payment of account payable amounting to P50,000 is recorded by
the depositor as P5,000
b. Deposit of another entity is credited to the account of the depositor
c. NSF check from customer
d. Bank service charge
109.
On December 31, 2009, Gabriel Company had the following cash balances:
Cash in bank
Petty cash fund (all funds were reimbursed on 12/31/2009)
Time deposit (due February 1, 2010)
1,800,000
50,000
250,000
Cash in bank includes P600,000 of compensating balance against short-term
borrowing arrangement at December 31, 2009. The compensating balance is
legally restricted as to withdrawal by Gabriel. In the current assets section of
Gabriel's December 31, 2009 statement of financial position, what total amount
should be reported as cash and cash equivalents?
a.
b.
c.
d.
1,850,000
1,250,000
2,100,000
1,500,000
SOLUTION:
Cash in bank (1,800,000 - 600,000)
Petty cash fund
Time deposit
Total cash
1,200,000
50,000
250,000
1,500,000
Since the compensating balance is legally restricted, it is excluded from the
amount shown as cash. In this Gerard, the compensating balance is shown as
"cash held as compensating balance" as a current asset because the related
loan is short-term. The term of the time deposit is not given. It is assumed that
it is three months or less, this being the normal banking practice. Accordingly,
the time deposit is a cash equivalent
110. Karlo Company’s checkbook balance on December 31, 2013 was P212,000.
In addition, Karlo held the following items in its safe on December 31.
A check for P4,500 from Payless Company received December 30, 2013, which
was not included in the checkbook balance. An NSF check from Garner
Company in the amount of P9,000 that had been deposited at the bank, but was
returned for lack of sufficient funds on December 29, 2013. The check was
redeposited on January 3, 2014. Coin and currency on hand amounted to
P14,500. What is the proper amount to be reported as cash on December 31,
2013?
a.
b.
c.
d.
204,000
213,000
207,500
222,000
SOLUTION:
Balance per book
Customer check
NSF check
Currency and coins
Total cash
111.
a.
b.
c.
d.
112.
212,000
4,500
(9,000)
14,500
222,000
The petty cash fund account under the imprest fund system is debited
When the fund is created and everytime it is replenished
When the fund is created and when the size of the fund is increased
When the fund is created and when the fund is decreased
Only when the fund is created
A bank reconciliation is
a. A schedule that accounts for the differences between an entity’s cash
balance as shown on its bank statement and the cash balance shown in its
general ledger
b. A merger of two banks that previously were competitors
c. A statement sent by the bank to depositor on a monthly basis
d. A formal financial statement that lists all of the bank account balances of an
enterprise
113. Significant deposits in a foreign bank subject to foreign exchange restriction
should be classified
a.
b.
c.
d.
114.
As
As
As
As
cash and cash equivalents with appropriate disclosure
held-to-maturity securities with appropriate disclosure
non-trade receivables with appropriate disclosure
part of the noncurrent assets with appropriate disclosure
Joseph Company had the following account balances at December 31, 2013:
Cash in banks
Cash on hand
Cash legally restricted for additions to plant
2,250,000
125,000
1,600,000
Cash in bank includes P600,000 of compensating balances against short-term
borrowing arrangements. The compensating balances are not legally restricted
as to withdrawal by Joseph. In the current assets’ section of Joseph’s December
31, 2013 balance sheet, total cash should be reported at
a.
b.
c.
d.
3,975,000
1,775,000
2,250,000
2,375,000
SOLUTION:
Cash on hand (P125,000) and cash in banks (P2,250,000) are both reported as
cash in the current section of the balance sheet because they are both
unresticted and readily available for us. Cash legally restricted to additions to
plants ar shown in the long-term asset section of the balance sheet as in
investment.
115. In reconciling the bank balance with the cash balance, which of the
following would not cause the bank balance shown in the bank statement to be
lower than the unadjusted book balance?
a.
b.
c.
d.
NSF checks from a customer, as reported on the bank statement
Interest credited to the account by the bank
Cash on hand at the company
Deposits in transit
116. If the cash balance shown in an entity's accounting records is less than the
correct cash balance and neither the entity nor the bank has made any errors,
there must be
a.
b.
c.
d.
Bank charges not yet recorded by the entity
Outstanding checks
Deposits in transit
Deposits credited by the bank but not yet recorded by the company
117. On March 31, 2013, Charisse Company received its bank statement.
However, the closing balance of the account was unreadable. Attempts to
contact the bank after hours did not secure the desired information. Thus, you
had to prepare a bank reconciliation from the available information summarized
below:
February 28 book balance
Note collected by bank
Interest earned on note
NSF check of customer
Bank service charge on NSF check
Other bank service charges
Outstanding checks
Deposit of February 28 placed in night depository
Check issued by Jane Company charged to Charisse’s account
1,460,000
100,000
10,000
130,000
2,000
3,000
202,000
85,000
20,000
What is the cash balance per bank statement?
a.
b.
c.
d.
1,338,000
1,435,000
1,557,000
1,532,000
SOLUTION:
February 28 book balance
Note collected by bank
Interest earned on note
NSF check
Bank service charge (2,000 + 3,000)
Adjusted book balanc
1,460,000
100,000
10,000
(130,000)
(5,000)
1,435,000
Balance per bank statement (squeeze)
Deposit in transit
Bank error
Outstanding checks
Adjusted bank balance
1,532,000
85,000
20,000
(202,000)
1,435,000
118.
Under PAS 7, cash equivalents are
a. Readily convertible to known amounts of cash
b. Investments with original maturities of three months or less
c. Treasury bills, commercial paper and money market purchased with excess
cash.
d. All of these
119. To be reported as “cash and cash equivalent”, the cash and cash equivalent
must be
a.
b.
c.
d.
Set aside for the liquidation of long-term debt
Deposited in Bank
Available for the purchase of property, plant and equipment
Unrestricted in use for current operations
120. A debit balance (i;e., shortage) in the 'cash short or over' account at the end
of the period that can be attributed to the fault of the petty cashier is treated as
a
a.
b.
c.
d.
Payable to employee
Miscellaneous income
Receivable from employee
Miscellaneous expense
121. Which of the following must be deducted from the bank statement balance in
preparing a bank reconciliation which ends with adjusted cash balance?
a.
b.
c.
d.
Certified check
Reduction of loan charged to the account of the depositor
Outstanding check
Deposit in transit
122. Balance per bank is less than correct balance. No error was committed.
There must be
a.
b.
c.
d.
123.
Deposits credited by the bank but not yet recorded by the company
Outstanding checks
Bank charges not yet recorded by the company
Deposits in transit
Which is not a key element of internal control over cash receipts?
a. Daily recording of all cash receipts in the accounting records.
b. Cash deposit on a regular basis
c. Immediate counting by the person opening the mail or using the cash
register
d. Daily entry in a voucher register
124. In preparing a bank reconciliation, interest paid by the bank on the account
is
a.
b.
c.
d.
125.
Subtracted from the bank balance
Subtracted from the book balance
Added to the bank balance
Added to the book balance
Deposits held as compensating balances
a. Usually do not earn interest.
b. None of these.
c. If legally restricted and held against long-term credit may be included
among current assets.
d. If legally restricted and held against short-term credit may be included as
cash.
126.
a.
b.
c.
d.
127.
Bank statements provide information about all of the following except
Bank charges for the period
NSF checks
Checks cleared during the period
Errors made by the depositor
The ‘Cash Short or Over’ account
a. Is contra-cash account
b. Is debited upon reimbursement when the petty cash funds proves out short
c. Is debited upon reimbursement when the petty cash funds proves out over
d. Is a real account
128. In preparing a monthly bank reconciliation, which of the following items
would be added to the balance per bank statement to arrive at the correct cash
balance?
a.
b.
c.
d.
A customer’s note collected by the bank on behalf of the depositor
Bank service charge
Deposits in transit
Outstanding checks
129. The cash account in the current assets section of the statement of financial
position of Maria Company consisted of the following:
Bond sinking fund cash
Checking account in FEBTC (A P320,000 check is still
outstanding per bank statement)
Currency and coins awaiting deposit
Deposit in a bank closed by BSP
Petty cash fund (of which P 10,000 in is the form of paid
vouchers)
Receivables from officers and employees
1,500,000
3,155,000
1,135,000
500,000
50,000
175,000
6,515,000
The correct cash balance should be
a.
b.
c.
d.
5,830,000
4,330,000
4,440,000
4,830,000
SOLUTION:
FEBTC
Currency and coins
Petty cash fund (50,000 - 10,000)
Total
3,155,000
1,135,000
40,000
4,330,000
The outstanding check of P320,000 is not deducted from the FEBTC checking
account because the FEBTC account is believed to be the balance per book. The
term "bank statement" appearing on the problem simply signifies that the
outstanding check was determined from the bank statement. It does not mean
that the checking account in FEBTC is the balance per bank statement. The
deposit in bank closed by BSP is shown as noncurrent asset
130. If the cash balance in an entity's bank statement is less than the correct
cash balance and neither the entity nor the bank has made any errors, there
must be
a. Deposits in transit
b. Deposits credited by the bank but not yet recorded by the entity
c. Outstanding checks
d. Bank charges not yet recorded by the entity
Difficult:
131. Rommel Company keeps all its cash in a checking account. An examination
of the company’s accounting records and bank statement for the month ended
June 30, 2013 revealed the following information:







The cash balance per book on June 30 is P8,500,000.
A deposit of P1,000,000 that was placed in the bank’s night depository on
June 30 does not appear on the bank statement.
The bank statement shows on June 30, the bank collected note for Rommel
and credited the proceeds of P950,000 to the Company’s account.
Checks outstanding on June 30 amount to P300,000.
Rommel discovered that a check written in June for P200,000 in payment of
an account payable, had been recorded in the Company’s records as
P20,000.
Included with the June bank statement was NSF check for P250,000 that
Rommel had received from a customer on June 26.
The bank statement shows a P20,000 service charge for June.
The cash in bank to be shown in the statement of financial position on June 30,
2013 is
a.
b.
c.
d.
9,000,000
9,360,000
8,300,000
9,180,000
SOLUTION:
Balance per book
Note collected by bank
Book error (200,000 - 20,000)
NSF check
Service charge
Adjusted book balance
132.
a.
b.
c.
d.
133.
8,500,000
950,000
(180,000)
(250,000)
(20,000)
9,000,000
A proof of cash would be useful for
Discovering
Discovering
Discovering
Discovering
time lag in making deposits
cash receipts that have been recorded but not been deposited
an inadequate separation of incompatible duties of employees
cash receipts that have not been recorded in the journal
Reconciliation of Jam Company’s bank account at May 31 is:
Balance per bank statement
Deposits outstanding
Checks outstanding
Correct cash balance
2,100,000
300,000
(30,000)
2,370,000
Balance per book
Bank service charge
Correct cash balance
2,372,000
(2,000)
2,370,000
June data are as follows:
Checks recorded
Deposits recorded
Collection by bank (P400,000 note plus
interest)
NSF check returned with the June 30 statement
Balances
Bank
2,300,000
1,620,000
420,000
10,000
1,830,000
Book
2,360,000
1,800,000
1,810,000
The check outstanding on June 30 amounted to
a.
b.
c.
d.
60,000
30,000
0
90,000
SOLUTION:
Check outstanding - May 31
Checks recorded in June
Total
Checks recorded by bank in June
Check outstanding - June 30
30,000
2,360,000
2,390,000
(2,300,000)
90,000
134. The following statements pertain to accounting for petty cash fund. Which
statement is false?
a. Each disbursement from petty cash should be supported by a petty cash
voucher
b. With the establishment of an imprest petty cash fund, one person is given
the authority and responsibility for issuing checks to cover minor
disbursements
c. At any time, the sum of the cash in the petty cash fund and the total of petty
cash vouchers should equal the amount for which the imprest petty cash
fund was established
d. The creation of a petty cash fund requires a journal entry to reflect the
transfer of fund out of the general cash account
135.
Which is false concerning measurement of cash and cash equivalents?
a. If a bank or financial institution holding the funds of the company is in
bankruptcy or financial difficulty, cash should be written down to estimated
realizable value
b. Cash is measured at face value
c. Cash in foreign currency is measured at the current exchange rate
d. Cash equivalents should be measured at maturity value, meaning face value
plus interest
136. Which of the following items must be added to the cash balance per ledger
in preparing a bank reconciliation which ends with adjusted cash balance?
a. NSF customer check
b. Note receivable collected by bank in favor of the depositor and credited to
the account of the depositor
c. Erroneous bank debit
d. Service charge
137.
a.
b.
c.
d.
Which of the following statements is false?
A certified check should not be included in the outstanding checks
A certified check is one drawn by a bank upon itself
A certified check is a liability of the bank certifying it
A certified check will be accepted by many persons who would not otherwise
accept a personal check
138. Cash data related to Ron Company for the month of January of the current
year are shown below:
Balance per book, January 31
Balance per bank statement, January 31
Collections on January 31 but undeposited
NSF check received from a customer returned by the bank on
February 5 with the January bank statement
Checks outstanding on January 31
Bank debit memo for safety deposit box rental not recorded by
the depositor
A creditor’s check for P30,000 was incorrectly recorded in the
depositor’s book as
A customer’s check for P200,000 was recorded by the depositor
as
The depositor neglected to make an entry in its books for a check
drawn in payment of an accounts payable
What is the adjusted cash in bank on January 31?
a.
b.
c.
d.
2,950,000
3,130,000
3,400,000
3,500,000
3,130,000
3,500,000
550,000
50,000
650,000
5,000
300,000
20,000
125,000
SOLUTION:
Balance per book
Overstatement of creditor’s check
Understatement of customer’s check
NSF check
Bank debit memo for safety deposit box
Unrecorded check
Adjusted book balance
3,130,000
270,000
180,000
(50,000)
(5,000)
(125,000)
3,400,000
Balance per bank
Undeposited collections
Checks outstanding
Adjusted bank balance
3,500,000
550,000
(650,000)
3,400,000
139. In your audit of Jose Inc.’s cash account as of December 31, 2013, you
ascertained the following information. The book keeper’s bank reconciliation on
November 30, 2013, is as follows:
Bank balance per bank statement, November 30
Add: Deposit in transit
Total
Less: Outstanding checks
No. 3408
3413
3414
3416
3417
Balance
Add: Bank service charge for Nov
Balance per books
*Entered in check register in Dec.
24,298
3,648
27,946
440
300
6,820
3,924
800
12,284
15,662
36*
15,698
The cash receipts journal shows a total receipts for December of P371,766. The
check register reflects total checks issued in December of P377,632. A
collection of P5,912 was recorded on company books on Dec. 31 was not
deposited until Jan. 2, 2014. The balance per bank statement at Dec. 31, 2013 is
P17,516. The statement shows total receipts of P373,502 and checks paid of
P380,284.Your examination revealed the following additional information:




Check no.3413 dated Nov. 24, 2013, was entered in the Check Register as
P300. Your examination of the paid returned with the December bank
statement reveals that the amount of the check is P30.
Check no. 3417 was mutilated and returned by the payee. A replacement
check(no.3453) was issued. Bothe checks were entered in the Check register
but no entry was made to cancel check no. 3417.
The Dec. bank statement includes an erroneous bank charge of P480.
On Jan. 3, 2014, the bank informed your client that a Dec. bank charge of
P423 was omitted from the statement.
Your examination of the bank credit memo accompanying the Dec. bank
statement discloses that it represents proceeds from the note collection in
Dec. for P4,000.
The outstanding checks at Dec. 31,2013, are as follows:


No. 3468
No.3417
No.3418
No.3419
440
800
2,814
5,788
What is the total outstanding checks at Dec.31?
a.
b.
c.
d.
9,072
9,842
8,602
9,042
140. You are conducting an audit of the MART CORPORATION for the year ended
December 31, 2013. The internal control procedures surrounding cash
transactions were not adequate. Jane Quipit, the bookkeeper-cashier handles
cash receipts, maintains accounting records and prepares the monthly
reconciliations of the bank account. She prepared the following reconciliation
at the end of the year:
Balance per bank statement
Add
Deposit in transit
Note collected by bank
Balanc
e
Less
Outstanding checks
Balance per general ledger
315,000
157,725
13,500
171,225
486,225
222,075
264,150
In the process of your audit, you gathered the following:




At December 31, 2013, the bank statement and the general ledger showed
balances of P315,000 and P264,150 respectively.
The cut off bank statement showed a bank charge on January 02, 2014 for
P35,250 representing a correction of an erroneous bank credit.
Included in the list of outstanding checks were the following:
 A check payable to a supplier, dated December 29, 2013, in the amount
of P13,275, released on January 05, 2014.
 A check representing advance payment to a supplier in the amount of
P33,489, the date of which is January 04, 2014, and released in
December 2013.
On December 31, 2013, the company received and recorded customer’s
postdated check amounting to P45,000.
Compute the adjusted deposit in transit as of December 31, 2013.
a.
b.
c.
d.
112,500
202,725
112,725
157,725
141. Jason Company provided the following information with respect to its cash
and cash equivalents on December 31, 2009.
Checking account at First Bank
Checking account at Second Bank
Treasury bonds
Payroll account
Value added tax account
Foreign bank account - restricted (in equivalent pesos)
Postage stamps
Employee's postdated check
IOU from president's brother
Credit memo from a vendor for a purchase return
Traveler's check
Not-sufficient-fund check
Petty cash fund (P20,000 in currency and expense receipts for
P30,000)
Money order
( 200,000)
3,500,000
1,000,000
500,000
400,000
2,000,000
50,000
300,000
750,000
80,000
300,000
150,000
50,000
180,000
What amount would be reported as unrestricted cash on December 31, 2009?
a.
b.
c.
d.
6,900,000
4,900,000
4,600,000
5,900,000
SOLUTION:
Checking account at Second Bank
Payroll account
Value added tax account
Traveler's check
Petty cash fund
Money order
Total unrestricted cash
3,500,000
500,000
400,000
300,000
20,000
180,000
4,900,000
142. Jason Company provided the following information with respect to its cash
and cash equivalents on December 31, 2009.
Checking account at First Bank
Checking account at Second Bank
Treasury bonds
Payroll account
Value added tax account
Foreign bank account - restricted (in equivalent pesos)
( 200,000)
3,500,000
1,000,000
500,000
400,000
2,000,000
Postage stamps
Employee's postdated check
IOU from president's brother
Credit memo from a vendor for a purchase return
Traveler's check
Not-sufficient-fund check
Petty cash fund (P20,000 in currency and expense receipts for
P30,000)
Money order
50,000
300,000
750,000
80,000
300,000
150,000
50,000
180,000
What amount would be reported as unrestricted cash on December 31, 2009?
a.
b.
c.
d.
6,900,000
4,600,000
4,900,000
5,900,000
SOLUTION:
Checking account at Second Bank
Payroll account
Value added tax account
Traveler's check
Petty cash fund
Money order
Total unrestricted cash
3,500,000
500,000
400,000
300,000
20,000
180,000
4,900,000
143. The plan of organization and all the methods and measures adopted within
an entity to safeguard its assets, check the accuracy of its accounting data,
promote operational efficiency, and encourage adherence to managerial policies
is called
a.
b.
c.
d.
144.
Administrative control
Internal control
Managerial control
Accounting control
Which of the following statements are correct?
1
2
3
a.
b.
c.
d.
A certificate of deposit is an example of a money market instrument
Money market deposits are short-term loans between organizations such
as banks
Treasury bills are bought and sold on a discount basis
1 and 3 only
2 and 3 only
1 and 2 only
1, 2 and 3
145. On December 31, 2009, Ally Company's "cash account" balance per ledger of
P3,600,000 includes the following:
Demand deposit
Time deposit - 30 days
NSF check of customer
Money market placement due on June 30, 2010
Saving deposit
IOU from an employee
Pension fund
Petty cash fund
Customer check dated January 31, 2010
Customer check outstanding for 18 months
1,500,000
500,000
20,000
1,000,000
50,000
30,000
400,000
10,000
60,000
30,000
3,600,000
Check of P 100,000 in payment of accounts payable was dated and recorded on
December 31, 2009 but mailed to creditors on January 15, 2010.
Check of P50,000 dated January 31, 2010 in payment of accounts payable was
recorded and mailed December 31, 2009.
The entity uses the calendar year. The cash receipts journal was held open until
January 15, 2010, during which time P200,000 was collected and recorded on
December 31, 2009.
The "cash and cash equivalents" on December 31, 2009 should be
a.
b.
c.
d.
2,010,000
1,510,000
1,960,000
1,860,000
SOLUTION:
Demand deposit
Time deposit - 30 days
Saving deposit
Petty cash fund
Total cash and cash equivalents
1,450,000
500,000
50,000
10,000
2,010,000
Demand deposit per book
Undelivered check
Postdated check delivered
Window dressing of collection
Adjusted balance
1,500,000
100,000
50,000
( 200,000)
1,450,000
146. Daina Company provided the following information with respect to its cash
and cash equivalents on December 31, 2013:
Checking account at First Bank
(200,000)
Checking account at Second Bank
Treasury bonds
Payroll account
Value added tax account
Foreign bank account - restricted
Postage stamps
Employee’s postdated check
IOU from president’s brother
Credit memo from a vendor for a purchase return
Traveler’s check
NSF check
Petty cash (P20,000 in currency and expense receipts for
P30,000)
Money order
3,500,000
1,000,000
500,000
400,000
2,000,000
50,000
300,000
750,000
80,000
300,000
150,000
50,000
180,000
What amount should be reported as unrestricted cash on December 31, 2013:
a.
b.
c.
d.
5,900,000
4,900,000
4,600,000
6,900,000
SOLUTION:
Checking account at Second Bank
Payroll account
value added tax account
Traveler’s check
Petty cash fund
Money order
3,500,000
500,000
400,000
300,000
20,000
180,000
4,900,000
147. If material, deposits in foreign bank which are subject to foreign exchange
restriction shall be classified
a.
b.
c.
d.
As part of cash and cash equivalents
Separately as noncurrent asset with appropriate disclosure
Separately as current asset, with appropriate disclosure
Be written off as an extraordinary loss
148. At end of the current the year, an entity had cash accounts at three different
banks. One account balance is segregated solely for payment into a bond
sinking fund. A second account, used for branch operations, is overdrawn. The
third account, used for regular corporate operations, has a positive balance.
How should these accounts be reported in the year-end classified statement of
financial position?
a. The segregated and regular accounts should be reported as current assets
net of the overdraft
b. The segregated account should be reported as a noncurrent asset, the
regular account should be reported as a current asset, and the overdraft
should be reported as a current liability
c. The segregated account should be reported as a noncurrent asset, and the
regular account should be reported as a current asset net of the overdraft
d. The segregated and regular accounts should be reported as current assets,
and the overdraft should be reported as a current liability
149. Bank reconciliation are normally prepared on a monthly basis to identify
adjustments needed in the depositor’s records and to identify bank errors.
Adjustments on the part of the depositor should be recorded for
a.
b.
c.
d.
Bank errors, outstanding checks and deposits in transit
Book errors, bank errors, deposits in transit and outstanding checks
Outstanding checks and deposits in transit
All items except bank errors, outstanding checks and deposits in transit
150. Cagas Corporation is negotiating with a bank for a P300,000 one-year loan.
The loan is discounted with a 9 percent interest rate and a 20% compensating
balance. Suppose that Cagas Corporation requires the entire amount of
P300,000 as net proceeds, how much is the Loans required compensating
balance?
a.
b.
c.
d.
60,000
84,507
65,934
75,000
SOLUTION:
(300,000 / (100% - 9% - 20%)) 20%: P84,507
151. You are conducting an audit of the MART CORPORATION for the year ended
December 31, 2013. The internal control procedures surrounding cash
transactions were not adequate. Jane Quipit, the bookkeeper-cashier handles
cash receipts, maintains accounting records and prepares the monthly
reconciliations of the bank account. She prepared the following reconciliation
at the end of the year:
Balance per bank statement
Add
Deposit in transit
Note collected by bank
Balanc
e
Less
Outstanding checks
Balance per general ledger
In the process of your audit, you gathered the following:
315,000
157,725
13,500
171,225
486,225
222,075
264,150




At December 31, 2013, the bank statement and the general ledger showed
balances of P315,000 and P264,150 respectively.
The cut off bank statement showed a bank charge on January 02, 2014 for
P35,250 representing a correction of an erroneous bank credit.
Included in the list of outstanding checks were the following:
 A check payable to a supplier, dated December 29, 2013, in the amount
of P13,275, released on January 05, 2014.
 A check representing advance payment to a supplier in the amount of
P33,489, the date of which is January 04, 2014, and released in
December 2013.
On December 31, 2013, the company received and recorded customer’s
postdated check amounting to P45,000.
Compute the adjusted outstanding checks as of December 31, 2013.
a.
b.
c.
d.
152.
255,564
235,350
175,311
222,075
Kareen Company had the following bank reconciliation on June 30, 2010:
Balance per bank statement, June 30
Deposit in transit
Outstanding check
Balance per book, June 30
3,000,000
400,000
(900,000)
2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Kareen)
Disbursements (including P140,000 NSF check and P10,000
service charge)
9,000,000
7,000,000
All reconciling items on June 30 cleared through the bank in July. The
outstanding checks totaled P600,000 and the deposit in transit amounted to
P1,000,000 on July 31.
What is the amount of cash disbursements per book in July?
a.
b.
c.
d.
6,850,000
7,300,000
6,700,000
6,550,000
SOLUTION:
Disbursements per bank statement for July
NSF check in July
Service charge in July
Outstanding checks-June 30
7,000,000
(140,000)
(10,000)
(900,000)
Outstanding checks-July 31
Cash disbursements per book for July
600,000
6,550,000
153. The following statements pertain to the cash short or over account. Which
statement is true?
a. If the cash short or over account has a debit balance at the end of the period
it must be debited to an expense account
b. The entry to account for daily cash sales for which a small amount of cash
shortage existed would include a debit to cash short or over account
c. A credit balance in a cash short or over account should be considered a
liability because the short changed customer will demand return of this
amount
d. It would be impossible to have cash shortage or overage if employees were
paid in cash rather than by check
154. If the balance shown on an entity’s bank statement is less than the correct
cash balance and neither the entity nor the bank made any errors, there must
be
a.
b.
c.
d.
155.
Outstanding checks
Deposits created by the bank but not yet recorded by the entity
Deposits in transit
Bank charges not yet recorded by the entity
Which of the following statements is incorrect?
a. The responsibility for receiving merchandise and paying for it should usually
be given to one person
b. Certain clerical personnel in an entity should be rotated among various jobs
c. The accounting function should be separated from the custodianship of
entity assets.
d. An entity’s personnel should be given well-defined responsibilities
156. The checkbook balance of JR Company on December 31, 2009was
P4,000,000. Data about certain cash items follow:




A customer check amounting to P200,000 dated January 2, 2010 was
included in the December 31, 2009 checkbook balance.
Another customer check for P500,000 deposited on December 22, 2009 was
included in its checkbook balance but returned by the bank for insufficiency
of fund. This check was redeposited on December 26, 2009 and cleared two
days later.
A P400,000 check payable to supplier dated and recorded on December 30,
2009 was mailed on January 16, 2010.
A petty cash fund of P50,000 with the following summary on December 31,
2009:
Coins and currencies
Petty cash vouchers
5,000
43,000
Return value of 20 cases of soft drinks
2,000
50,000
A check of P43,000 was drawn on December 31, 2009 payable to Petty Cash.

What is the "cash" balance on December 31, 2009?
a.
b.
c.
d.
4,205,000
4,200,000
3,748,000
4,248,000
SOLUTION:
Checkbook balance
Postdated customer check
Undelivered check payable to supplier
Adjusted cash in bank
Petty cash:
Coins and currencies
Replenishment check
Total
4,000,000
( 200,000)
400,000
4,200,000
5,000
43,000
48,000
4,248,000
The return value of the soft drink bottles is shown as refundable deposit as a
current asset. The NSF check is redeposited and cleared before December 31,
2009. Thus, the same is not deducted anymore from the checkbook balance
157. The following data pertain to the cash transactions and bank account of
James Company for May of the current year:
Cash balance per accounting record
Cash balance per bank statement
Bank service charge
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting record
Outstanding checks
Deposit of May 30 not recorded by bank until June 1
Proceeds of a bank loan on May 30, not recorded in the
accounting record, net of interest of P30,000
Proceeds from a customer’s promissory notes, principal amount
of P800,000 collected by the bank not taken up in the accounting
record with interest
Check no 1086 issued to a supplier entered in the accounting
record as P210,000 but deducted in the bank statement at an
erroneous amount of
Stolen check lacking an authorized signature deducted from
James’s account by bank in error
Customer’s check returned by the bank marked NSF, indicating
that the customer’s balance was not adequate to cover the check;
no entry has been made in the accounting record to record the
1,719,000
3,195,000
10,000
12,000
685,000
500,000
570,000
810,000
120,000
80,000
77,000
returned check.
The adjusted cash in bank is
a.
b.
c.
d.
2,990,000
3,000,000
2,910,000
3,080,000
SOLUTION:
Balance per book
Service charge
Debit memo for printed checks
Proceeds of bank loan
Proceeds of customer’s note
NSF check
Adjusted book balance
1,719,000
(10,000)
(12,000)
570,000
810,000
(77,000)
3,000,000
Balance per bank
Outstanding checks
Deposit in transit
Bank error in recording check
Stolen check deducted by bank in error
Adjusted bank balance
3,195,000
(685,000)
500,000
(90,000)
80,000
3,000,000
158. At the end of the current year, an entity had various checks and papers in its
safe. Which item should not be included in its cash account in the current yearend statement of financial position?
a. Past due promissory note issued in favor of the entity by its President
b. The entity’s undelivered check payable to a supplier dated December 31 of
the current year
c. Another entity’s P150,000 check payable to the entity dated December 15 of
the current year
d. P20,000 cash
159.
Kenny Company had the following bank reconciliation on June 30, 2013:
Balance per bank statement, June 30
Deposit in transit
Outstanding check
Balance per book, June 30
3,000,000
400,000
(900,000)
2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Kenny)
Disbursements (including P140,000 NSF check and P10,000
service charge)
9,000,000
7,000,000
All reconciling items on June 30 cleared through the bank in July. The
outstanding checks totaled P600,000 and the deposit in transit amounted to
P1,000,000 on July 31.
What is the amount of cash receipts per book in July?
a.
b.
c.
d.
9,800,000
9,600,000
8,600,000
9,400,000
SOLUTION:
Deposits per bank statement for July
Note collected by bank
Deposit in transit-June 30
Deposit in transit-July 31
Cash receipts per book for July
9,000,000
(200,000)
(400,000)
1,000,000
9,400,000
160. If the cash balance shown on entity’s accounting records is less than the
correct cash balance and neither the entity nor the bank has made any errors,
there must be
a.
b.
c.
d.
Bank charges not yet recorded by the entity
Deposits in transit
Deposits created by the bank but not yet recorded by the entity
Outstanding checks