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 -short-term
or less from the BS date. investments
b) Remaining term is more than three -short-term
months but within one year investments
c) Remaining term is more than -long-term
one year Investments

2 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
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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.
450,000-
Cash 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.
150,000-
Cash in bank-Seabank, which includes a
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 compensating balance of P40,000 for short- term
borrowing arrangement. 250,000-
Petty cash fund, which includes an unreplenished
voucher for P4,000 10,000-
Payroll fund 100,000-
Travel fund 20,000-
Interest fund 40,000-
Tax fund 30,000-
Sinking fund 420,000-
Preferred redemption fund 100,000-
Contingent fund 200,000-
Insurance fund 500,000-
Fund for acquisition of Property, plant & Equipment 800,000-
expected to be disbursed in 2009
IOU officers 20,000-
Customer’s post-dated checks 70,000-
Customer’s checks returned by bank marked “NSF”
20,000-
Redeemable preferred shares-acquired 3 months
from date of maturity 15,000-
Unused credit line 200,000-
Revolving fund 100,000-
Visa Card-credit limit 20,000-
Total P5,400,000-

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 P 2,200,000

Undeposited collection 300,000
Time deposit-30 days 500,000
NSF check of customer 20,000
35- day money market placement due 1/28/09 300,000
45-day commercial papers due 2/4/09 80,000
Savings deposit in closed bank 50,000
IOU from an employee 150,000
Preferred redemption fund 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. Prepare adjusting entries to correct the cash account
2. 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
Plant expansion in five years 150,000
Cash surrender value of life insurance policy 32,000
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Cash travel advances in the hands of sales personnel 12,000
Treasury warrants 20,000
Currency and coins in a petty cash fund (the company
has not replenished the fund to the imprest amount of
P5, 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 P80,000

Checking account No. 143-BPI 200,000
Checking account No. 155 -BPI (30,000)

Securities: Date Acquired Maturity Date Amount

120-day Certificate of Deposit 12/10/13 01/31/14 P600,000
BSP-Treasury Bills (No.1) 11/30/13 04/30/14 5,000,000
BSP-Treasury Bills (No.2) 10/31/13 01/20/14 1,000,000
180 days Commercial Paper 12/01/13 06/20/14 1,400,000
Money Market Funds 11/21/13 02/10/14 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
made in December 2007, not included in December 31 checkbook
balance 2,000,000
Check payable to Jerome, deposited December 15 and included in
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 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
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

PROBLEM SOLVING

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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 Quantity
Bills: P1,000 3
P500 7
P100 6
P50 4
P20 5
Coins: P10 48
P5 20
P1 20

CHECKS:
Particulars Amoun
Maker Date Payee t
Payment for cash
advances drawn from
the petty cash fund
Rodel Ocon March 1, 2010 Client January 1, 2010 P9,600
Payment for cash
advances drawn from
the petty cash fund but
was returned by the
Merilou- December 2, bank for insufficiency
Employee 2010 Client of fund. P1,000
Payment for cash
advances drawn from
Debora- December 20, the petty cash fund
President 2010 Client December 1, 2010 P3,000
Petty
cash
NCPAR December 28, custo- P16,00
Company 2010 dian Replenishment of PCF 0

VOUCHERS:
Particulars Date Amount
December 15,
Taxi fare-OR No. 155 2010 2,400
December 16,
Gasoline-OR No. 688 2010 1,600
December 22,
Office supplies 2010 2,000
December 23,
OR # 64794 – Bureau of Posts 2010 1,200
December 24,
IOU signed by Jigo-company messenger 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

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Driven for real excellence! THEORY OF ACCOUNTS AND PRACTICAL ACCOUNTING 1 – H002
 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.

1. What is the principal amount of the loan?

a. P3,375,000 c. P3,500,000
b. P3,325,000 d. P3,480,000

2. What is the effective interest rate on the loan?

a. 8% c. 13%
b. 12.91% d. 12%

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.
d. deposits in transit.
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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:
a. on the bank side, deduct P900 from payments and add P900 to ending balance
b. on the book side, deduct P900 from payments and add P900 to ending balance
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 c. on the book side, add P900 to payments and deduct P900 from ending balance
d. on the 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. 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.
b. Petty cash of P8,500 was included in the cash balance.
c. 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.
d. The bank statement does not show receipts of P12,600 that were deposited on July 31.
e. The bank statement indicated a service charge of P3,000
f. 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.
g. 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.
h. Interest of P2,400 accrued on funds the bank had invested for WOWOWEE for month of July.
i. Outstanding checks totaled P28,400 as of July 31.
j. 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 2,500 217,500
charge

J. Deposit of P50,000 incorrectly recorded by bank as, P5,000.

K. Erroneous debit memo of December 28, to charge
NCPAR account with settlement of bank loan, P100,000.
L. 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
Total XX

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 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. The following data are available for the Cash in bank of ABC Company for February of the current
year:
A. Checks issued by the company this February, P150,000.
B. Outstanding checks, January 31 P52,000.
C. Customer’s check representing receipts in January amounting to P12,000 was erroneously
recorded by the company as P21,000.
D. Check of the company in January amounting to P20,000 was erroneously recorded by the
company as P2,000.
E. Checks paid by the bank in February, P130,000.
F. Erroneous bank credit in January 31, P10,000.
G. Erroneous bank charge in February 28, P12,000.
H. Bank service charge, January 31, P2,000.
I. 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

CM for interest earned in February but taken up in the books in March 6,000

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 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 2,300
April bank service charges, taken up in the books in May 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 3,000
Outstanding checks as of May 31 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. Unadjusted book balance on September 30 amounted to P2,258,000

b. Total receipts per book in October, P1,400,000.
c. Total disbursements per book in October, P2,400,000.
d. Unadjusted bank balance on September 30 amounted to P2,100,000.
e. NSF checks on September 30 amounted to P60,000 while on October 31 amounted to P40,000.
f. Collection of accounts receivable not recorded by the company on September 30, P30,000 and
P50,000 on October 31.
g. Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
h. Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
i. Understatement of check in payment of rent payable on September 30, P90,000 and P120,000 on
October 31.
j. Deposit in transit on September 30, P130,000.
k. 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. How much is the outstanding checks September 30?

a. P95,000 c. P131,000
b. P63,000 d. P335,000

3. How much is the adjusted cash in bank balance September 30?

a. P2,138,000 c. P2,102,000
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 b. P2,170,000 d. P1,898,000

4. How much is the adjusted cash receipts during October?

a. P1,420,000 c. P1,450,000
b. P1,390,000 d. P1,382,000

5. How much is the adjusted cash in bank balance October 31?

a. P1,148,000 c. P1,178,000
b. P1,118,000 d. P1,110,000

6. Provide the adjusting journal entries.

6. Reconciliation of Jazz Company’s bank account at May 31 of the current year is:
Balance per bank
statement 2,600,000
Deposits outstanding 300,000
Bank service charge 10,000
Erroneous bank charge 40,000
Outstanding checks (100,000)
Erroneous bank credit (60,000)
CM for collection of note (600,000)
Balance per book 2,190,000

June data are as follows:

Bank Book
Checks recorded 2,200,00
0 2,500,000
Correction of erroneous bank credit in May 60,000 -
Deposits recorded 1,600,00
0 1,800,000
Correction of erroneous bank charge 40,000 -
Service charges recorded 50,000 -
CM for collection by bank 550,000 600,000
NSF checks returned with June 30 statement (will be redeposited) 100,000 -

1. How much is the total outstanding checks on June 30?

a. 400,000 c. 190,000
b. 510,000 d. 340,000
2. How much is the total deposit in transit on June 30?
a. 510,000 c. 100,000
b. 500,000 d. 90,000
3. How much is the total adjusted cash receipts in June?
a. 2,350,000 c. 2,190,000
b. 2,400,000 d. 2,030,000
4. How much is the total adjusted cash disbursements in June?
a. 2,650,000 c. 2,500,000
b. 2,410,000 d. 2,350,000
5. How much is the total adjusted cash balance as of June 30?
a. 2,480,000 c. 2,370,000
b. 2,280,000 d. 2,490,000

END OF HANDOUTS!

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