WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
CASH
Cash – 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 and other items that are unrestricted for use in
the current operations.
1. Cash on Hand
2. Cash in bank
3. Cash fund (for current operations)
CASH EQUIVALENTS
Cash equivalents are short-term and highly liquid investments that are readily convertible into cash and
so near their maturity that they present insignificant risk of changes in value because of changes in
interest rates. Only highly liquid investments that are acquired three months before maturity can qualify
as cash equivalents.
1. Time Deposit
2. Money Market Instrument or Commercial Paper
3. Treasury Bills
4. Redeemable preference shares with mandatory redemption acquired three months before maturity.
TIME DEPOSIT, MONEY MARKET INST., T-BILLS
1
Originally invested/acquired for more than
three months before maturity date
a) Remaining term is three months
or less from the BS date.
b) Remaining term is more than three
months but within one year
c) Remaining term is more than
one year
2
-short-term
investments
-short-term
investments
-long-term
Investments
Originally invested/acquired for three months
-cash and
months or less before maturity date
Cash equivalents
CASH AND CASH EQUIVALENTS
1. On an enterprise’s October 31, 2001 balance sheet which of the following items should be included in
the amount reported as cash?
I.
A check payable to the enterprise, dated January 2, 2002, in payment of a sale made in
December 2001.
II. A check drawn on the enterprise’s account, payable to a vendor, dated and recorded in the
company’s books on December 31, 2001 but not mailed until January 10, 2002.
a. I only
b. II only
c. I and II only
d. Neither I nor II
2.
On October 31, 2003, Dingo, Inc. had cash accounts at three different banks. One account balance is
segregated solely for a November 15, 2003 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 Dingo’s October 31, 2003 classified
balance sheet?
a. 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.
b. The segregated and regular accounts should be reported as current assets, 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 net of the overdraft.
3.
Alaking received cash to be held in trust for Ambit under an escrow agreement. The effects of such
transaction should be presented in Alaking’s financial statements as
a. part of cash
b. a liability
c. an asset and a liability
d. an off-balance sheet item but disclosed in the notes
Page 1 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
Compensating balance
4. The effect of compensating balance is
a. to provide greater security for the borrower
b. to decrease the yield on the loan to the lender
c. to increase the yield on the loan to the borrower
d. to increase the yield on the loan to the lender.
5.
Compensating balance agreements that do not legally restrict the amount of funds shown on the
balance sheet should:
a. be reported in the current asset section
b. be reported in the Long-term investment section
c. be reported in the other asset section
d. be reported in the footnotes
6.
Bank overdraft
a. Is a debit balance in a cash in bank account.
b. Is offset against demand deposit account in another bank.
c. Which cannot be offset is classified as current liability.
d. Which cannot be offset is classified as non-current liability.
7.
Cash in foreign currency is valued at
a. Face value
b. Current exchange rate
c. Current exchange rate reduced by allowance for expected decline in peso
d. Estimated realizable value
8.
If material, deposit in foreign countries which are subject to foreign exchange restriction should be
shown separately as
a. Current asset with no disclosure of the restriction.
b. Non-current asset with no disclosure of the restriction.
c. Current assets with disclosure of the restriction.
d. Non-current asset with disclosure of the restriction.
PROBLEM SOLVING
(CASH COMPOSITION)
1. On December 31, 2008, DETERMINED Co’s “cash and cash equivalents account” balance per
ledger of P5,800,000 includes:
Manager’s checks
P 70,000
Traveler’s checks
100,000
Treasury note
50,000
Treasury shares, purchased on 12/1/08, to be
150,000
reissued on 3/1/09
Escrow deposit
200,000
Bank drafts
20,000
Postal money orders
20,000
Demand deposit
100,000
Treasury bills, purchased December 16, 2008 due
50,000
March 15, 2009
160-day treasury bill
30,000
Time deposit-PCIB, one-year, due March 31, 2009
170,000
Time deposit-PNB- 90 days
180,000
Time deposit-BPI- 120 days
40,000
Money market instrument-due date 2/28/09
Money market instrument-due date 6/1/09
45,000
Cash in bank-Metrobank, which includes a
1,050,000
compensating balance of P50,000 for short-term
borrowing arrangement. The compensating balance
is not legally restricted as to withdrawal.
Cash in bank-Metrobank
(
100,000)
Cash in bank-Firstbank, which includes a
compensating balance of P50,000 for long-term
borrowing arrangement. The compensating balance
is legally restricted as to withdrawal.
450,000Cash in bank-Secondbank
(
60,000)
Cash in bank-Seatacbank, which includes a
compensating balance of P40,000 for short-term
borrowing arrangement. The compensating balance
is legally restricted as to withdrawal.
150,000Page 2 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
Cash in bank-Seabank, which includes a
compensating balance of P40,000 for short- term
borrowing arrangement.
Petty cash fund, which includes an unreplenished
voucher for P4,000
Payroll fund
Travel fund
Interest fund
Tax fund
Sinking fund
Preferred redemption fund
Contingent fund
Insurance fund
Fund for acquisition of Property, plant & Equipment
expected to be disbursed in 2009
IOU officers
Customer’s post-dated checks
Customer’s checks returned by bank marked “NSF”
250,00010,000100,00020,00040,00030,000420,000100,000200,000500,000800,00020,00070,00020,000-
Redeemable preferred shares-acquired 3 months
from date of maturity
Unused credit line
Revolving fund
Visa Card-credit limit
Total
15,000200,000100,00020,000P5,400,000-
Required:
Compute the cash and cash equivalents that should be shown in the balance sheet.
a. P2,141,000
c. P2,591,000
b. P2,401,000
d. P2,641,000
(CASH COMPOSITION)
2. On December 31, 2008, GAME K N BA? Co’s cash and cash equivalents account balance per
ledger of P4,000,000 includes:
Demand deposit
Undeposited collection
Time deposit-30 days
NSF check of customer
35- day money market placement due 1/28/09
45-day commercial papers due 2/4/09
Savings deposit in closed bank
IOU from an employee
Preferred redemption fund
P
2,200,000
300,000
500,000
20,000
300,000
80,000
50,000
150,000
400,000
P
4,000,000
Additional information:
a. Included in the demand deposit of P2,500,000 was a customer check amounting to P50,000
dated January 25, 2009.
b. Also included in the demand deposit is a customer check amounting to P90,000 dated
December 31, 2007. GAME K N BA? Neglected to encash the check. On December 31, 2008,
the customer was informed and he was willing to replace this with a new one. New check is
yet to be received from the customer.
c. Check of P60,000 dated January 31, 2009 in payment of accounts payable was recorded and
mailed December 31, 2008.
d. Check of P70,000 in payment of accounts payable was recorded on December 31, 2008 but
mailed to creditors on January 15, 2009.
e. The company uses the calendar year. The cash receipts journal was held open until January
15, 2009, during which time P80,000 was collected and recorded on December 31, 2008.
Required:
1.
2.
Prepare adjusting entries to correct the cash account
Compute the cash and cash equivalents to be shown on December 31, 2008 balance sheet.
3. The following pertains to JOSIAH corp. on December 31,2013:
Postal money order
50,000
Correct cash balance in a general checking account
with BPI Bank
320,000
Overdraft in a special checking account with RCBC Bank
(JOSIAH does not have another account with RCBC bank)
20,000
Cash accumulated in a special fund that will be used for
Page 3 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
Plant expansion in five years
Cash surrender value of life insurance policy
Cash travel advances in the hands of sales personnel
Treasury warrants
Currency and coins in a petty cash fund (the company
has not replenished the fund to the imprest amount of
P5, 000)
150,000
32,000
12,000
20,000
1,000
How much cash should JOSIAH corp. report on the December 31,2013 statement of financial position?
a. P383, 000
c. P372, 000
b. P391, 000
d. P352, 000
(Cash and Cash Equivalents)
4. Brayden Co. reported a total cash and cash equivalent of P6,325,000 on December 31,2013,
which includes the following information:
a.
Two certificates of deposits, each totaling P500,000. These certificates of deposits have a maturity
of 120 days.
b.
A check that is dated January 12, 2014 in the amount of P125,000
c.
A commercial paper of P2,100,000 which is due in 90 days
d.
Currency and coins on hand amounted to P7,700
Brayden Co. has agreed to maintain a cash balance of P500,000 in one of its bank at all times to ensure
future credit availability (This amount is legally restricted as to withdrawal and was included in the above
balance)
How much is the correct amount of cash and cash equivalents that Brayden should report in its
December 31,2013 statement of financial position?
a. P2,600,000
c. P5,200,000
b. P3,100,000
d. P6,200,000
(Cash and Cash Equivalents)
5.
The cash account of Ria on December 31, 2013 has a balance of P151,000 and it consists
of the following:
Bills and coins on hand
P52,780
Traveler’s check
22,400
Credit memo from supplier's for purchase returns
6,500
Postage stamps
120
Petty cash including paid cash vouchers of P1,650
2,000
Balance in Savings Account with a bank closed by the Bangko Sentral ng Pilipinas 36,000
Customer's check dated January 15, 2013
8,000
Money order
800
IOU of an employee
400
Checking Account Balance in Bank of PI
22,000
Total
P151,000
The correct cash balance on December 31, 2013 is
a. 98,900.
c. 97,530.
b. 98,730.
d. 98,330.
(Cash and Cash Equivalents)
6.
Assume the following data of Dianne Corporation of its cash and short-term, highly liquid
investments for December 31, 2013:
Cash on hand
Checking account No. 143-BPI
Checking account No. 155 -BPI
Securities:
120-day Certificate of Deposit
BSP-Treasury Bills (No.1)
BSP-Treasury Bills (No.2)
180 days Commercial Paper
Money Market Funds
P80,000
200,000
(30,000)
Date Acquired
12/10/13
11/30/13
10/31/13
12/01/13
11/21/13
Maturity Date
01/31/14
04/30/14
01/20/14
06/20/14
02/10/14
Amount
P600,000
5,000,000
1,000,000
1,400,000
2,000,000
The correct cash and cash balance on December 31, 2013 is
a. 3,850,000
c. 5,250,000
b. 3,880,000
d. 5,280,000
7.Jerome Company’s checkbook balance on December 31, 2007 was P5,000,000. In addition, Jerome
held the following items in its safe on that date:
Check payable to Jerome, dated January 2, 2008 in payment of a sale
Page 4 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
made in December 2007, not included in December 31 checkbook
balance
Check payable to Jerome, deposited December 15 and included in
December 31 checkbook balance, but returned by bank on December
stamped “NSF” The check was redeposited on January 2, 2008 and
cleared on January 9, 2008
2,000,000
500,000
Check drawn on Jerome’s account payable to vendor, dated and
recorded in Jerome’s books on December 31, but not mailed until
January 10, 2008
300,000
The proper amount to be shown as “cash” on Jerome’s balance sheet at December 31, 2007 is
a. 4,800,000
b. 5,300,000
c. 6,500,000
d. 6,800,000
PETTY CASH FUND
Imprest system- is a system of control of cash which requires that all cash receipts should be deposited
intact and all cash disbursements should be made by means of check.
A. Imprest fund system
B. Fluctuating fund system
Petty cash fund
1. Who is responsible, at all times, for the amount of the petty cash fund?
a. The president.
b. The general office manager.
c. The general cashier.
d. The petty cash custodian.
2.
Which of the following is not an appropriate procedure for controlling the petty cash fund?
a. The petty cash custodian files receipts by category of expenditure after their presentation to the
general cashier so that variations in different types of expenditures can be monitored.
b. Surprise counts of the fund are made from time to time by a superior of the petty cash custodian
to determine that the fund is being accounted for satisfactorily.
c. The petty cash custodian obtains signed receipts from each individual to whom petty cash is
paid.
d. Upon receiving petty cash receipts as evidence of disbursements, the general cashier issues a
company check to the petty cash custodian, rather than cash, to replenish the fund.
3.
Which one of the following statements is incorrect?
a. The accounting function should be separated from the custodianship of a company's assets.
b. Certain clerical personnel in a company should be rotated among various jobs.
c. The responsibility for receiving merchandise and paying for it should usually be given to one person.
d. A company's personnel should be given well-defined responsibilities.
4.
In most situations, the petty cash fund is reimbursed just prior to the year end and an adjusting
entry is made to avoid
a. the overstatement of cash and the understatement of expenses.
b. the understatement of cash and the overstatement of expenses.
c. the misstatement of revenues.
d. the understatement of cash with the appropriate statement of expenses.
5.
In replenishing a petty cash fund, which one of the following entries is required?
a. Debit Petty Cash, credit Cash in bank
b. Debit individual expense accounts, credit Cash in bank
c. Debit Petty Cash, credit individual expense accounts
d. Debit Cash in bank, credit Petty Cash
6.
On January 1, 2002, Kyle Corporation established a petty cash fund of P400. On December 31, 2002,
the petty cash fund was examined and found to have receipts and documents for miscellaneous
expenses amounting to P364. In addition, there was cash amounting to P44. What entry would be
required to record replenishment of the petty cash fund on December 31, 2002?
a. Petty Cash.................... 364
Cash Short and Over.........
8
Cash in bank................
356
b. Miscellaneous Expense......... 364
Cash Short and Over.........
8
Petty Cash..................
356
c. Miscellaneous Expense......... 364
Cash Short and Over.........
8
Cash in bank................
356
d. Miscellaneous Expense......... 356
Cash Short and Over.........
8
Cash in bank................
364
Page 5 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
PROBLEM SOLVING
1.Your firm has been engaged to examine the financial statements of the NCPAR Company for the year
ended December 31, 2010. In connection with this audit, you have been assigned to audit the Petty cash
fund. You conducted your count at 9:15 a.m. on January 4, 2011 in the presence of Mr. Rodel E. Ocon,
the cashier and at the same time the petty cash custodian. A count of the petty cash fund under the
custody of Rodel E. Ocon showed its composition as follows:
Currencies:
Denomination
Bills:
Coins:
Quantity
P1,000
3
P500
7
P100
6
P50
4
P20
5
P10
48
P5
20
P1
20
CHECKS:
Particulars
Maker
Date
Payee
Rodel Ocon
March 1, 2010
Client
MerilouEmployee
December 2,
2010
Client
DeboraPresident
December 20,
2010
NCPAR
Company
December 28,
2010
Client
Petty
cash
custodian
Payment for cash
advances drawn from
the petty cash fund
January 1, 2010
Payment for cash
advances drawn from
the petty cash fund but
was returned by the
bank for insufficiency
of fund.
Payment for cash
advances drawn from
the petty cash fund
December 1, 2010
Replenishment of PCF
Amoun
t
P9,600
P1,000
P3,000
P16,00
0
VOUCHERS:
Particulars
Date
Taxi fare-OR No. 155
December 15, 2010
Amount
2,400
Gasoline-OR No. 688
December 16, 2010
1,600
Office supplies
December 22, 2010
2,000
OR # 64794 – Bureau of Posts
December 23, 2010
1,200
IOU signed by Jigo-company messenger
December 24, 2010
4,800
Others:
Unused stamps, P400
The general ledger shows an imprest petty cash fund balance of P50,000.
Required: Working paper for Petty Cash Fund
Answer the following:
QUESTION:
1. How much is the petty cash shortage or overage?
a. P0
c. P10,000 overage
b. P10,000 shortage
d. P9,600 shortage
Page 6 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
2.
How much is the adjusted petty cash fund at December 31, 2010.
a. P24,000
c. P33,600
b. P14,000
d. P14,400
(PETTY CASH FUND)
2.The petty cash fund of Abigail Company on December 31, 2008 is composed of the following:
Coins and currencies
17,000
Petty cash vouchers:
Gasoline payments
1,000
Supplies
2,000
Cash advances to employees
3,000
Employee’s check returned by bank marked NSF
4,000
Check drawn by the company payable to the order of the
petty cash custodian, representing salary for the month
18,000
A sheet of paper with names of employees together with contribution
for a birthday gift of a co-employee in the amount of
5,000
Total
50,000
The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of petty
cash on December 31, 2008?
a. 50,000
b. 35,000
c. 40,000
d. 39,000
(Effective Interest Rate)
3. Luke Company is in need of P3,375,000 to finance its building expansion program. Luke is
currently negotiating a loan with Metro Bank which requires the company to maintain a
compensating balance of 5% of the loan principal on deposit in a current account at the bank.
Luke, Inc. currently maintains a balance P50,000 in its current account. The current account
earns interest of 4% per annum; the interest rate on the loan is 12% per annum.
a.
b.
1. What is the principal amount of the loan?
P3,375,000
c.
P3,325,000
d.
a.
b.
2. What is the effective interest rate on the loan?
8%
c. 13%
12.91%
d. 12%
P3,500,000
P3,480,000
BANK RECONCILIATION
It is a schedule prepared that accounts for the differences between cash balances per books and per bank
statement.
THEORY QUESTIONS
Bank reconciliation
1. Which of the following is a key element of internal control over cash payments?
a. periodically reconciling the cash account balance on the company's books to the bank statement
balance
b. making daily bank deposits
c. requiring that all petty cash vouchers be approved by two signatures
d. authorizing and verifying that all cash received is recorded daily
2.
Which is not a key element of internal control over cash receipts?
a. daily recording of all cash receipts in the accounting records
b. daily entry in a voucher register
c. immediate counting by the person opening the mail or using the cash register
d. daily deposit intact
3.
A bank reconciliation is
a. A formal financial statement that lists all of the bank account balances of an enterprise.
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 schedule that accounts for the differences between an enterprise’s cash balance as shown on its
bank statement and the cash balance shown in its general ledger.
4.
If the balance shown on a company's bank statement is less than the correct cash balance, and
neither the company nor the bank has made any errors, there must be
a. deposits credited by the bank but not yet recorded by the company.
b. outstanding checks.
c. bank charges not yet recorded by the company.
Page 7 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
d.
deposits in transit.
5.
If the cash balance shown in a company's accounting records is less than the correct cash balance,
and neither the company nor the bank has made any errors, there must be
a. deposits credited by the bank but not yet recorded by the company.
b. deposits in transit.
c. outstanding checks.
d. bank charges not yet recorded by the company.
6.
In preparing the bank reconciliation, certified checks should be excluded from outstanding checks.
The rational for this treatment is
a. the bank, when certifying checks, draws the check in its account
b. the bank, when certifying checks, automatically debits the company’s account
c. the bank, when certifying checks, automatically credits the company’s account
d. the bank, when certifying checks, assumes the obligation to pay the drawee when the check is
presented for payment
7.
Which of the following statements is false?
a. Certified check is a liability of the bank certifying it.
b. Certified check will be accepted by many persons who would not otherwise accept a personal
check.
c. Certified check is one drawn by the bank upon itself.
d. Certified check should not be included in the outstanding check.
8.
Bank statements provide information about all of the following except
a. checks cleared during the period.
b. NSF checks.
c. bank charges for the period.
d. errors made by the company.
9.
Which of the following items would be added to the book balance on a bank reconciliation?
a. Outstanding checks
b. A check written for P63 entered as P36 in the accounting records
c. Interest paid by the bank
d. Deposits in transit
10. In preparing a bank reconciliation, interest paid by the bank on the account is
a. added to the bank balance.
b. subtracted from the bank balance.
c. added to the book balance.
d. subtracted from the book balance.
11. In preparing a monthly bank reconciliation, which of the following items would be added to the
balance reported on the bank statement to arrive at the correct cash balance?
a. Outstanding checks
b. Bank service charge
c. Deposits in transit
d. A customer's note collected by the bank on behalf of the depositor
12. Which of the following is deducted from the cash balance per bank when computing for the cash
balance reported in the books?
a. Deposit in transit
c. Credit memo
b. Error
d. Debit memo
13. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the
depositor's records and to identify bank errors. Adjustments should be recorded for
a. bank errors, outstanding checks, and deposits in transit.
b. all items except bank errors, outstanding checks, and deposits in transit.
c. book errors, bank errors, deposits in transit, and outstanding checks.
d. outstanding checks and deposits in transit.
Proof of cash
14. A proof of cash would be useful for
a. Discover cash receipts that have not been recorded in the journal.
b. Discovering time lag in making deposits.
c. Discovering cash receipts that have been recorded but have not been deposited.
d. Discovering an inadequate separation of incompatible duties of employees.
15. Del Co. prepares a four-column bank reconciliation. Check no. 8859 was written for P5,670 on the
books, but the check was written and cleared the bank for the correct amount, P6,570. The correct
treatment on the reconciliation would be:
Page 8 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
a.
b.
c.
d.
on
on
on
on
the
the
the
the
bank side, deduct P900 from payments and add P900 to ending balance
book side, deduct P900 from payments and add P900 to ending balance
book side, add P900 to payments and deduct P900 from ending balance
bank side, add P900 to receipts and add P900 to ending balance
PROBLEM SOLVING
(ONE MONTH-BANK RECONCILIATION)
1. The books of WOWOWEE Company show a cash in bank balance of P79,440 as of July 31.
WOWOWEE’s bank statement shows a cash balance for the company of P51,800. Additional
information that might be useful reconciling the disparity between the two balances follows:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
A deposit of P16,000 was recorded by the bank on July 5, but it should have been recorded for Eat
Bulaga Company rather than WOWOWEE Company.
Petty cash of P8,500 was included in the cash balance.
Check No. 6152 in payment of electric bill for P5,700 was correctly recorded by the bank but was
recorded in the cash disbursements journal of WOWOWEE as P7,500.
The bank statement does not show receipts of P12,600 that were deposited on July 31.
The bank statement indicated a service charge of P3,000
A check of P7,440 was returned marked NSF. The check had been included in the July 23 deposit. As
of July 31, the check had not been re-deposited.
Proceeds from cash sales of P30,600 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.
Interest of P2,400 accrued on funds the bank had invested for WOWOWEE for month of July.
Outstanding checks totaled P28,400 as of July 31.
The July 21 deposit included a check for P14,100 that had been returned on July 15 marked NSF.
WOWOWEE 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 WOWOWEE as a collection on account.
REQUIRED:
1. Prepare a bank reconciliation as of July 31.
2. Make the necessary adjusting journal entries.
(ONE MONTH-BANK RECONCILIATION)
2. You have gathered the following data in the preparation of bank reconciliation on December 31,
2011 for NCPAR Company:
A. Balance per bank statement, P2,000,000.
B. Balance per book, P1,350,000.
C. Bank service charge, P5,000.
D. Outstanding checks, P300,000.
E. Deposit in transit, P237,500.
F. Proceeds of bank loan, December 1, discounted for 6 months at 12%, not recorded on NCPAR
Company’s books, P470,000
G. Customer’s check charged back by bank for lack of counter signature, P25,000.
H. Check of PARE Company charged by the bank against NCPAR account, P75,000.
I. Customer’s note collected by bank in favor of NCPAR Company.
Face amount
200,000
Interest
20,000
Total
220,000
Less service charge
2,500 217,500
J.
K.
NCPAR
L.
Deposit of P50,000 incorrectly recorded by bank as, P5,000.
Erroneous debit memo of December 28, to charge
account with settlement of bank loan, P100,000.
Deposit of PARE Company credited to NCPAR account, P150,000.
Required:
a. Prepare bank reconciliation as of December 31, 2011?
b. Prepare adjusting journal entries
PROOF OF CASH (TWO-DATE BANK RECONCILIATION)
Formulas:
Deposit in transit, beg.
XX
Add Deposit made by the company this month
XX
Page 9 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
Total
XX
less Deposit acknowledged by the bank this month
XX
Deposit in transit, end
XX
Outstanding checks, beg.
XX
Add Checks issued by the company this month
XX
Total
XX
less Checks paid by the bank this month
XX
Outstanding checks, end
XX
PROBLEM SOLVING
COMPUTATION OF DEPOSIT IN TRANSIT
1. The following data are available for the Cash in bank of ABC Company for February of the current
year:
A. Deposit made by the company this February, P120,000.
B. Deposit in transit, January 31, P200,000
C. Customer’s check representing receipts in January amounting to P21,000 was erroneously
recorded by the company as P12,000.
D. Check of the company in January amounting to P2,000 was erroneously recorded by the
company as P20,000.
E. Deposit acknowledged by the bank in February, P150,000.
F. Erroneous bank charge in January 31, P13,000.
G. Erroneous bank credit in February 28, P14,000.
H. Customer’s note collected, January 31, P10,000.
I. Customer’s note collected, February 28, P12,000.
Required: Compute for the following:
1. Deposit in transit in February 28.
2. Unadjusted book receipts in February.
3. Unadjusted bank receipts in February.
PROBLEM 7: OUTSTANDING CHECKS
2.
A.
B.
C.
D.
E.
F.
G.
H.
I.
The following data are available for the Cash in bank of ABC Company for February of the current
year:
Checks issued by the company this February, P150,000.
Outstanding checks, January 31 P52,000.
Customer’s check representing receipts in January amounting to P12,000 was erroneously
recorded by the company as P21,000.
Check of the company in January amounting to P20,000 was erroneously recorded by the
company as P2,000.
Checks paid by the bank in February, P130,000.
Erroneous bank credit in January 31, P10,000.
Erroneous bank charge in February 28, P12,000.
Bank service charge, January 31, P2,000.
Bank service charge, February, P3,000.
Required: Compute for the following:
1. Outstanding checks in February 28.
2. Unadjusted book disbursements in February.
3. Unadjusted bank disbursements in February.
(Deposit in Transit)
3. In your audit of the cash account of PACMAN Company, you have ascertained the following data
relative to the debits per books and credits per bank:
Book debits in February
400,000
Bank credits in February
360,000
CM for interest earned in January but taken up in the books in February
5,000
Page 10 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
CM for interest earned in February but taken up in the books in March
6,000
Check from customer in January amounting to P40,000 but was taken
up in the books as P4,000.
Check from customer in February amounting to P20,000 but was taken
up in the books as P4,000.
Check by the company issued to supplier in January amounting to P3,000
but was taken up in the books as P30,000.
Erroneous bank credit-February
2,500
Erroneous bank charge-January
1,000
Deposit in transit-January
50,000
How much is the undeposited collections at the end of February?
a. 47,500
b. 15,500
c. 31,500
d. 46,500
(OUTSTANDING CHECKS)
4. Based on the following information, the causes of the discrepancies between the book credits and
bank debits are ascertained:
Book credits in May
85,800
Bank debits in May
97,650
Check issued on May 29 for P5,700 erroneously
recorded in the books of the depositor as
7,500
Customer's DAIF check, returned by the bank of the
depositor in May
April bank service charges, taken up in the books in May
2,300
30
Payment of VISA credit card automatically debited by the
Bank on May 25, as per ADA, but taken up in the books
of the depositor in June
Outstanding checks as of May 31
3,000
4,500
How much is the outstanding checks at the beginning of the period?
a. 4,500
b. 12,880
c. 5,300
d. 11,880
COMPREHENSIVE PROBLEM (PROOF OF CASH)
5.
Data concerning the cash records of SUPER INGGO Company for the months of
September and October 2014 follow:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Unadjusted book balance on September 30 amounted to P2,258,000
Total receipts per book in October, P1,400,000.
Total disbursements per book in October, P2,400,000.
Unadjusted bank balance on September 30 amounted to P2,100,000.
NSF checks on September 30 amounted to P60,000 while on October 31 amounted to P40,000.
Collection of accounts receivable not recorded by the company on September 30, P30,000 and
P50,000 on October 31.
Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
Understatement of check in payment of rent payable on September 30, P90,000 and P120,000 on
October 31.
Deposit in transit on September 30, P130,000.
Outstanding checks on October 31, P30,000.
QUESTIONS: Based on the above data, answer the following questions:
1. How much is the deposit in transit October 31?
a. P369,000
c. P399,000
b. P339,000
d. P331,000
2.
a.
b.
How much is the outstanding checks September 30?
P95,000
c. P131,000
P63,000
d. P335,000
Page 11 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
WESLEYAN UNIVERSITY OF THE PHILIPPINES
NORTHERN CPA REVIEW
Mabini Street Extension, Cabanatuan City
3.
a.
b.
How much is the adjusted cash in bank balance September 30?
P2,138,000
c. P2,102,000
P2,170,000
d. P1,898,000
4.
a.
b.
How much is the adjusted cash receipts during October?
P1,420,000
c. P1,450,000
P1,390,000
d. P1,382,000
5.
a.
b.
How much is the adjusted cash in bank balance October 31?
P1,148,000
c. P1,178,000
P1,118,000
d. P1,110,000
6.
Provide the adjusting journal entries.
6. Reconciliation of Jazz
Balance per bank statement
Deposits outstanding
Bank service charge
Erroneous bank charge
Outstanding checks
Erroneous bank credit
CM for collection of note
Balance per book
Company’s bank account at May 31 of the current year is:
2,600,000
300,000
10,000
40,000
(100,000)
(60,000)
(600,000)
2,190,000
June data are as follows:
Checks recorded
Correction of erroneous bank credit in May
Deposits recorded
Correction of erroneous bank charge
Service charges recorded
CM for collection by bank
NSF checks returned with June 30 statement (will be redeposited)
1.
2.
3.
4.
5.
How much is the total
a. 400,000
b. 510,000
How much is the total
a. 510,000
b. 500,000
How much is the total
a. 2,350,000
b. 2,400,000
How much is the total
a. 2,650,000
b. 2,410,000
How much is the total
a. 2,480,000
b. 2,280,000
Bank
2,200,000
60,000
1,600,000
40,000
50,000
550,000
100,000
Book
2,500,000
1,800,000
600,000
-
outstanding checks on June 30?
c. 190,000
d. 340,000
deposit in transit on June 30?
c. 100,000
d. 90,000
adjusted cash receipts in June?
c. 2,190,000
d. 2,030,000
adjusted cash disbursements in June?
c. 2,500,000
d. 2,350,000
adjusted cash balance as of June 30?
c. 2,370,000
d. 2,490,000
END OF HANDOUTS!
Page 12 of 12
Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002