Acc 106 - Sas 4

ACC 106: Intermediate Accounting 1
Student Activity Sheet Module # 4
Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

Section: _A-BSA-02____ Schedule: __(T) 5:30-7:30 PM ____________________ Date: _08-17-2021_____
Lesson Title: Materials:

Cash and Cash Equivalents (continuation) Calculator, Reviewer Notebook, Textbook
Learning Targets: References:

At the end of the learning session, I should be able to: Millan, Zeus Vernon B.; Intermediate
1. Account for post-dated checks, stale checks, deposit in Accounting 1
foreign banks, compensating balance and bank overdraft.
2. Describe the internal control over cash.
3. Account for petty cash funds and cash
shortages/overages.
Productivity Tip:
Take a deep breath. Inhale, exhale. Positive vibes in, negative vibes out. ☺
A. LESSON PREVIEW/REVIEW
1) Activity 1 : Pretest (2 mins)
Welcome back to ACC 106 - Intermediate Accounting 1! Let’s have your fourth day in Intermediate Accounting
by expanding your knowledge in financial reporting of cash and cash equivalents as we continue the last part
of this topic. Answer the pretest below to check your understanding of the topic. Write True or False:
True 1. Savings accounts are usually classified as cash on the balance sheet.
False 2. Certificates of deposit are usually classified as cash on the balance sheet.
False 3. Companies include postdated checks and petty cash funds as cash.
False 4. Cash equivalents are investments with original maturities of six months or less.
False 5. Bank overdrafts are always against the cash account in the balance sheet offset.
2) Activity 2 (LO1, LO2, & LO3): What I Know Chart, part 1 (3 mins)
Alright! Let’s see what you already know, answer the first column (What I know). Leave the third column
(What I Learned) blank at this time.
What I Know Questions What I Learned (Activity 5)

True 1. For the computation of cash, False
postdated checks drawn as payment
to suppliers are excluded, true or
false?
I don’t have any idea. 2. Give at least two examples of Imprest system and bank
internal controls over cash? reconciliation.
ACC 106- Intermediate Accounting 1
SAS Day 4

Cash shortage is the lack 3. What is the difference between Cash shortage is when the
or insufficient amount of cash shortage and overages? cash count results less than
money while overages is the balance per record while
the surplus. cash overage is when the
cash amount results more
than the balance per record.
B. MAIN LESSON
1) Activity 3 (LO1, LO2, & LO3): Content Notes (10 mins)
Make sure to highlight or underline the important parts!
LO1: Account for post-dated checks, stale checks, deposit in foreign banks, compensating
balance and bank overdraft.
POSTDATED CHECKS -not currently available for immediate use

Postdated Check Received From a Customer Exclude from cash.
Postdated Check Drawn Include in cash.
Unreleased/ Undelivered check Include in cash
Stale checks Include in cash.
COMPENSATING BALANCE - minimum amount that must be maintained in an entity’s bank account as
a support for funds borrowed.
LEGALLY RESTRICTED NOT LEGALLY RESTRICTED
TREATMENT Excluded from cash, part of Included in cash

current/noncurrent assets
depending on the restriction
PRESENTATION Disclosed in the notes Disclosed in the notes

* Compensating balances increase both the yield rate for the lender and the effective interest rate for the
borrower.
DEPOSIT IN FOREIGN BANKS

RESTRICTED UN RESTRICTED
TREATMENT Excluded from cash Included in cash
SAS Day 4

MEASUREMENT As receivable subject to Face amount translated at the current

appropriate allowances exchange rate as of the reporting date.
PRESENTATION Statement of Financial Position Statement of Financial Position (SFP)

(SFP)
The nature of restriction is

disclosed in the notes.
BANK OVERDRAFT - is possible in checking accounts (not in savings/time deposits) where a negative
(credit) balance occurs in the cash in bank account resulting from overpayment of checks in excess of
the deposit.
General PRESENTATION OF BANK OVERDRAFT: CURRENT LIABILITIES
OFFSETTING
2 OR MORE ACCOUNTS IN THE SAME BANK 2 OR MORE ACCOUNTS IN DIFFERENT BANKS
The overdraft may be offset, provided the other Offsetting is not allowed.
bank account is restricted.
LO2: Describe the internal control over cash.
INTERNAL CONTROL OVER CASH

Cash is susceptible to theft and fraud. It has high inherent risk compared to other assets.
Examples of internal controls over cash:
● Segregation of Incompatible Duties

● Imprest System
● Bank Reconciliation
● Cash Counts
● Minimum Cash Balance
● Lockbox Accounts
● Non Encashment of Personal Checks from Petty Cash Fund
● Voucher System
SAS Day 4

LO3: Account for petty cash funds and cash shortages/overages.
ACCOUNTING FOR CASH:

SHORTAGES AND OVERAGES
CASH
OVERAGE
Count > Records

Count is greater than
CASH
the records
SHORTAGE
Count < Records
Count is less than the
records
PETTY CASH FUND - money set aside for small amounts of cash disbursements.
● Imprest System
● Fluctuating Fund System
Transactions: (Master the journal entries on the following)

● Establishment of Petty Cash Fund
● Disbursements Out of the Petty Cash Fund
● Replenishment of Petty Cash Disbursements
● Adjustment for Unreplenished Fund at the Reporting Date
● Subsequent Changes in Ledger Balance of Petty Cash Fund
2) Activity 4: Skill-building Activities (15 mins + 2 mins checking) Score: ________________
Let’s try to practice what you have learned! Check your answers against the Key to Corrections found at the
end of this SAS. Write your score on the space provided.
Part I. True or False. Write TRUE if the statement is correct, otherwise,write FALSE.
TRUE 1. Short-term, highly liquid investments may be included with cash on the balance sheet.
TRUE 2. All claims held against customers and others for money, goods, or services are reported as
current assets.
TRUE 3. Checks drawn which are post-dated should be reverted back to cash even if the checks are
already delivered to payees.
FALSE 4. A compensation balance that is legally restricted as to withdrawal can be included as part of
cash and cash equivalents.
FALSE 5. A bank overdraft should always be offset from another bank account with a positive balance.
SAS Day 4

Part II. Multiple Choice. Encircle the Letter of Your Choice.
1. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.'s
2. Which of the following is considered cash?
a. Certificates of deposit (CDs)
b. Money market checking accounts
c. Money market savings certificates
d. Post-dated checks
3. Travel advances should be reported as
a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
4. Which of the following items should not be included in the Cash caption on the balance
sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
SAS Day 4

5. All of the following may be included under the heading of "cash" except
a. currency.
b. money market funds.
c. checking account balance.
d. savings account balance
6. In which accounts are post-dated checks received classified?
a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.
7. In which account are postage stamps classified?
a. Cash.
b. Office supplies.
c. Receivables.
d. Inventory.
8. What is a compensating balance?
a. Savings account balances.
b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
d. Minimum deposits required to be maintained in connection with a borrowing arrangement.
9. Under which section of the balance sheet is "cash restricted for plant expansion"
SAS Day 4

reported?
a. Current assets.
b. Non-current assets.
c. Current liabilities.
d. Stockholders' equity.
10. A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts
of cash and
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
11. Bank overdrafts, if material, should be
a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.
12. 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 legally restricted and held against long-term credit may be included among current assets.
d. none of these
13. What is the proper accounting treatment for a stale check?
a. Revert back to cash and accounts payable.
SAS Day 4

b. Revert back to cash and a credit to gain.
c. Ignored
d. Either a or b
14. 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.
15. Karen Company provided the following information on December 31, 2016:
Cash on hand P500,000
Petty cash fund 20,000
Security bank current account 3,000,000
BDO current account No. 1 400,000
BDO current account No. 2 (50,000)
BSP treasury bill - 60 days 4,000,000
BPI time deposit - 30 days 1,000,000
The cash on hand included a customer post-dated check of P100,000 and postal money order of P40,000. A
check for P300,000 was drawn against the Security Bank account, dated January 15, 2017, delivered to the
payee and recorded December 31, 2016. The BPI time deposit is set aside for acquisition of equipment.
What total amount of cash and cash equivalents should be reported on December 31, 2016?
a. P7,470,000
b. P7,770,000
SAS Day 4

c. P8,070,000
d. P9,070,000
3) Activity 5: What I Know Chart, part 2 (3 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in the “What I
Learned” column. Let’s see your improvement!
4) Activity 6 (LO1, LO2, & LO3): Check for Understanding (10 mins)
To better test your knowledge on the topic, write in the space provided in each item the best answer without
looking in your content notes. Be honest at all times. Your teacher will provide you the key answer in this
activity.
MULTIPLE CHOICE- ENCIRCLE THE LETTER OF YOUR CHOICE.
1. Consider the following: Cash in Bank – checking account of 13,500, Cash on hand of
500, Post-dated checks received totaling 3,500, and Certificates of deposit totaling
124,000. How much should be reported as cash in the balance sheet?
a. 13,500.
b. 14,000.
c. 17,500.
d. 131,500.
2. On January 1, 2010, Lynn Company borrows 2,000,000 from National Bank at 11%
annual interest. In addition, Lynn is required to keep a compensatory balance of 200,000
on deposit at National Bank which will earn interest at 5%. The effective interest that Lynn
pays on its 2,000,000 loan is
a. 10.0%.
b. 11.0%.
c. 11.5%.
d. 11.6%.
3. Kennison Company has cash in bank of 10,000, restricted cash in a separate account of
3,000, and a bank overdraft in an account at another bank of 1,000. Kennison should
report cash of
a. 9,000.
b. 10,000.
c. 12,000.
d. 13,000.
SAS Day 4

4. Kaniper Company has the following items at year-end:

Cash in bank 20,000
Petty cash 300
Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400
Kaniper should report cash and cash equivalents of

a. 20,000.
b. 20,300.
c. 25,800.
d. 27,200.
5. Lawrence Company has cash in bank of 15,000, restricted cash in a separate account of
4,000, and a bank overdraft in an account at another bank of 2,000. Lawrence should
report cash of
a. 13,000.
b. 15,000.
c. 18,000.
d. 19,000
6.Steinert Company has the following items at year-end:

Cash in bank 30,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100
Steinert should report cash and cash equivalents of

a. 30,000.
b. 30,500.
c. 38,700.
d. 40,800
7. As of December 31, 20x1, the petty cash fund of TUMULT COMMOTION Co. with a general
ledger balance of P15,000 comprises the following:
Coins and currencies P 2,550

Petty cash vouchers:
Gasoline for delivery equipment P3,000
Medical supplies for employees 2,040 5,040
IOU’s:
Advances to employees 2,220
A sheet of paper with names of several employees
together with contribution to bereaved employee,
SAS Day 4

attached is a currency of 2,400

Checks:
Check drawn to the order of the petty cash custodian 3,000
Personal check drawn by the petty cash custodian 2,400
The entry to record the replenishment of the petty cash fund includes
a. A debit to cash short/overage account of P2,190 and a credit to cash on hand of P9,450.
b. A credit to cash short/overage account of P810 and a credit to cash of P12,450.
c. A debit to cash short/overage account of P810 and a credit to petty cash fund of P12,450.
d. A debit to cash short/overage account of P2,190 and a credit to cash in bank of P9,450.
8. On April 1, Jennifer Company established an imprest system petty cash fund for P 10,000 by writing
a check drawn against the general checking account. On April 30, the fund contained the following:
Currency and coins 3,000.00
Receipts for office supplies 4,000.00
Receipts for postage still unused 2,000.00
Receipts for transportation 600.00
On April 30, the entity wrote a check to replenish the fund. What is the amount of replenishment under
the imprest fund system?
a. P 10,000
b. P 6,600
c. P 7,000
d. P 3,000
9. ABC Company provided the following account balances on December 31, 2016:
Cash in bank P2,250,000
Cash on hand 125,000
Cash restricted for addition to plant expected to
be disbursed in 2017 1,600,000
Cash in money market account 750,000
Treasury bill purchased November 1, 2016 maturing
January 31, 2017 3,500,000
Treasury bill purchased December 1, 2016 maturing
March 31, 2017 2,000,000
Cash in bank included P600,000 of compensating balance against short-term borrowing

arrangement. The compensating balance is legally restricted as to withdrawal. What total amount
should be reported as cash and cash equivalents on December 31, 2016?
a. P6,025,000
b. P6,625,000
c. P8,225,000
d. P8,625,000
SAS Day 4

10. The following information is shown in the accounting records of Manolito Company for the year
2019:
Balances as of January 1:
Cash P620,000
Accounts receivable 670,000
Merchandise inventory 860,000
Accounts payable 530,000
Balances as of December 31:
Accounts receivable 910,000
Merchandise inventory 780,000
Accounts payable 480,000
Total sales and cost of goods sold for 2019 were P7,980,000 and P5,830,000, respectively. All sales
and all merchandise purchases were made on credit. Various operating expenses of P1,070,000 were
paid in cash. Assume that there were no other pertinent transactions. The cash balances on
December 31, 2019 would be:
a. P1,080,000
b. P1,490,000
c. P2,560,000
d. P3,050,000
C. LESSON WRAP-UP
1) Activity 7: Thinking about Learning (5 mins)
1. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number you just completed.
2. Think about your Learning

3.
From a rating of 1-10, determine if you have learned all the learning objectives. What is the reason for your
rating? _____9 over 10 for the reason that even if I learned a lot today I’m still a little confused.
__________________________________________________________________________________
What part of the module gave you a hard time to comprehend? _The activity 6 solving problem.
______________________________________________________________________________________
Any other questions or concerns you want to raise?
__ None for now.
2) Assignment
To enhance your knowledge regarding the topic, answer Problems 1, 2, and 3 in your book. Your teacher
will provide the key answers later on.
SAS Day 4

FAQs
1. How important is separation of duties in internal control over cash?
Separation of duties is the number one tool endorsed by American Institute of Certified Public Accountants,
the governing body of CPAs. The key to this function is that the staff members receiving or managing the
collection of money does not get involved in the disbursement of money. For cash receipts, ideally, all
payments would arrive in the mail and the person opening the mail stamps the received date or places the
company’s ‘For Deposit Only’ stamp on the back of the check. The check(s) is logged in a spreadsheet and
totaled for that day. From there the check(s) is transferred to another staff member to copy and prepare the
deposit ticket. The deposit is made on the same day as receipt or first available opportunity the next
morning. Try not to have checks lying around overnight. If involved in retail, restaurant, or some cash service
business, the cash register should be reconciled by the register operator and then reconciled by
management that same day while the operator watches. To ensure that the cashier did their job correctly,
have a policy notice to the customer that basically states that if the customer does not get a receipt, the
purchase is free. This forces the cashier to create a sales ticket. In your smaller business operations, this is
difficult to achieve because there isn’t enough staff to comply with the separation of duties. The best backup
is the two person rule. (Reference:https://businessecon.org/effective-internal-controls-for-cash/)
KEY TO CORRECTIONS
Activity 1: Pre-test: TRUE OR FALSE

1. TRUE 2. FALSE 3. FALSE 4. FALSE 5. FALSE
Nos. 1 and 3- Savings accounts and petty cash funds are classified as cash on the balance sheet.
Nos. 2 and 3- Certificates of deposit and post dated checks are not classified as cash.
No. 4- PAS 7 states that “only highly liquid investments that are acquired three months before maturity can
qualify as cash equivalents”.
No. 5- An entity that maintains two or more accounts in one bank and one account results in an overdraft,
such overdraft may be offset against the other bank account with debit balance.
Activity 4: Skill-building Activities- MULTIPLE CHOICE

Part 1:
1. TRUE 2. TRUE 3. TRUE 4. FALSE 5. FALSE

No. 4- If the deposit is legally restricted because of formal compensating balance agreement, the
compensating balance is classified separately as “cash held as compensating balance” under current assets
if the related loan is short-term.
Part 2:
SAS Day 4

1. D 6. A 11. D
2. B 7. B 12. D
3. D 8. D 13. D
4. D 9. B 14. C
5. B 10. D 15. C
No. 15- Cash on hand P500,000
exclude post-dated check (100,000) P400,000
Petty cash fund 20,000
Security bank current account 3,000,000
add back post-dateD check 300,000 3,300,000
BDO current account No. 1 400,000
BDO current account No. 2 (50,000)
BSP treasury bill - 60 days 4,000,000
P8,070,000
Activity 6: Check for Understanding.Your teacher will provide the key answers in this activity.
Assignment. Your teacher will provide the key answers in this assignment.
“Put your best foot forward.”
-Nothing Follows-
SAS Day 4

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ACC 106: Intermediate Accounting 1

Student Activity Sheet Module # 4

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

Lesson Title: Materials:

Learning Targets: References:

What I Know Questions What I Learned (Activity 5)

ACC 106- Intermediate Accounting 1

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

POSTDATED CHECKS -not currently available for immediate use

Postdated Check Drawn Include in cash.

Unreleased/ Undelivered check Include in cash

Stale checks Include in cash.

TREATMENT Excluded from cash, part of Included in cash

PRESENTATION Disclosed in the notes Disclosed in the notes

DEPOSIT IN FOREIGN BANKS

TREATMENT Excluded from cash Included in cash

ACC 106- Intermediate Accounting 1

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

MEASUREMENT As receivable subject to Face amount translated at the current

PRESENTATION Statement of Financial Position Statement of Financial Position (SFP)

The nature of restriction is

General PRESENTATION OF BANK OVERDRAFT: CURRENT LIABILITIES

LO2: Describe the internal control over cash.

INTERNAL CONTROL OVER CASH

Examples of internal controls over cash:

● Segregation of Incompatible Duties

ACC 106- Intermediate Accounting 1

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

LO3: Account for petty cash funds and cash shortages/overages.

ACCOUNTING FOR CASH:

Count > Records

Transactions: (Master the journal entries on the following)

2) Activity 4: Skill-building Activities (15 mins + 2 mins checking) Score: ________________

ACC 106- Intermediate Accounting 1

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

Part II. Multiple Choice. Encircle the Letter of Your Choice.

a. Petty cash funds and change funds

b. Money orders, certified checks, and personal checks

c. Coin, currency, and available funds

d. Postdated checks and I.O.U.'s

2. Which of the following is considered cash?

a. Certificates of deposit (CDs)

b. Money market checking accounts

c. Money market savings certificates

3. Travel advances should be reported as

b. cash because they represent the equivalent of money.

a. Coins and currency in the cash register

b. Checks from other parties presently in the cash register

c. Amounts on deposit in checking account at the bank

d. Postage stamps on hand

ACC 106- Intermediate Accounting 1

Name: _APOSTOL, JESSICA NAVARRO ____________________________ Class number: _______

b. money market funds.

c. checking account balance.

d. savings account balance

6. In which accounts are post-dated checks received classified?

7. In which account are postage stamps classified?

8. What is a compensating balance?

a. Savings account balances.

b. Margin accounts held with brokers.

c. Temporary investments serving as collateral for outstanding loans.

d. Minimum deposits required to be maintained in connection with a borrowing arrangement.

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _

Name: _APOSTOL, JESSICA NAVARRO ______________________ Class number: _