UNIVERSITY OF EASTERN PANGASINAN

BINALONAN, PANGASINAN

GOVERNMENT ACCOUNTING
THEORIES
QUIZ NO. 1

1. Which of the following should not be considered “cash”?

a. Change fund
b. Certified check
c. Personal check
d. Postdated check
2. All of the following may be included in “cash”, except
a. Currency
b. Money market instrument
c. Checking account balance
d. Saving account balance
3. Deposit held as compensating balance
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
4. What is the treatment of customers’ postdated checks?
a. Account receivable
b. Prepaid expenses
c. Cash
d. Account payable
5. Which of the following is not considered as a cash equivalent?
a. A these-year treasury note maturing on May 30 of the current year purchased by the entity
on April 15 of the current year
b. A three-year treasury note maturing on May 30 of the current year purchased by the entity
on January 15 of the current year
c. A 90-day T-bill
d. A 60-day money market placement
6. At the end of the current year, an entity had various checks and papers in the safe. Which of the
following should not be included in “cash” in the current year-end statement of financial position?
a. US $20,000 cash
b. Past due promissory note issued in favor of the entity by the President
c. Another entity’s P150,000 check payable to the entity dated December 15 of the current year
d. The entity’s undelivered check payable to a supplier dated December 31 of the current year
7. Which of the following should be excluded from cash and cash equivalents?
a. The minimum cash balance in the current account which is maintained to avoid service
charge
b. A check issued by the entity on December 27 of the current year but dated January 15 of
next year
c. Time deposit which matures in one year
d. A customer’s check denominated in a foreign currency
8. Which of the following statement is incorrect?
a. The accounting function should be separated from the custodianship of asset
b. Certain clerical personnel should be rotated among various jobs
c. The responsibility for receiving merchandise and paying for it should usually be given to
one person

PREPARED BY: LEONIDES L. GAVINA

 d. An entity’s personnel should be given well-defined responsibilities
9. At the end of the current year, an entity had cash accounts at three different banks. One account
is segregated solely for payment into a bond sinking fund. A second account, used for branch
operations, is overdrawn. The third account, used for regular corporate operations, has a positive
balance. How should these accounts be reported?
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
10. Under which classification is cash restricted for plant expansion reported?
a. Current assets
b. Noncurrent asset
c. Current liabilities
d. Equity
11. Petty cash fund is
a. Separately classified as current asset
b. Money kept on hand for making minor disbursements of coin and currency rather than by
writing checks
c. Set aside for the payment of payroll
d. Restricted cash
12. The internal control feature specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system
13. What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements
14. The petty cash fund account under the imprest fund system is debited
a. Only when the fund is created
b. When the fund is created and everytime it is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is created and when the fund is descreased
15. In reimbursing the petty cash fund, which of the following is true?
a. Cash in debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense account are debited
16. Which of the following statement in relation to petty cash is incorrect?
a. The imprest petty cash system in effect adheres to the rule of disbursement by check
b. Entries are made to the petty cash account only to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end
c. The petty cash account is debited when the fund is replenished
d. The petty cash fund is reported as part of current asset.
17. When a petty cash fund is used, which of the following statement is true?

a. The balance of the petty cash fund should be reported in the statement of financial
position as a long-term investment

PREPARED BY: LEONIDES L. GAVINA

 b. The petty cashier’s summary of petty cash payments serves as a journal entry that is
posted to the appropriate general ledger account
c. The reimbursement of the petty cash fund should be credited to the cash account
d. Entries that include a credit to the cash account should be recorded at the time
payments from the petty cash fund are made
18. A Cash Over and Short account
a. Is not generally accepted
b. Is debited when the petty cash fund proves out over
c. Is debited when the petty cash fund proves out short
d. Is a account to cash
19. Which of the following statement in relation tom petty cash fund is false?
a. Each disbursement from petty cash should be supported by a petty cash voucher
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund
out of the general cash account.
c. At any time, the sum of the cash in the petty cash fund and the total of petty cash
vouchers should equal the amount for which the imprest petty cash fund was
established.
d. With the establishment of an imprest petty cash fund, one person is given the authority
and responsibility for issuing checks to cover minor disbursements.
20. Which of the following statements in relation to the cash short or over count is true?
a. It would be impossible to have cash shortage or overage if employees were paid in cash
rather than by check.
b. The entry to account for daily cash sales for which a small amount of cash shortage
existed would include a debit to cash short or over account.
c. If the cash short or over account has a debit balance at the end of the period it must be
debited to an expense account.
d. A credit balance in a cash short or over account should be considered a liability because
the short changed costumer will demand return of this amount.
21. A bank reconciliation is
a. A formal financial statement that lists all of the bank account balances of an entity.
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 entity’s cash balance as
shown in the bank statement and the cash balance shown in the general ledger.
22. Which of the following items must be added to the cash balance per ledger in preparing a bank
reconciliation which ends with adjusted cash balance?
a. Note receivable collected by bank in favor of the depositor and credited to the
account of the depositor
b. NSF customer check
c. Service charge
d. Erroneous bank debit
23. 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
24. In preparing a monthly bank reconciliation, which of the following would be added to the
balance per bank statement to arrive at the correct cash balance?
a. Outstanding checks
b. Bank service charge
c. Deposit in transit
d. A customer’s note collected by the bank on behalf of the depositor
25. Which of the following must be deducted from the bank statement balance in preparing a bank
reconciliation which ends with adjusted cash balance?
a. Deposit in transit

PREPARED BY: LEONIDES L. GAVINA

 b. Outstanding check
c. Reduction of loan charged to the account of the depositor
d. Certified check
26. If the balance shown on entity’s bank statement is less than the correct cash balance and
neither the entity nor the bank has made any errors, there must be
a. Deposit credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the entity
27. If the cash balance shown on entity’s accounting records is less than the correct cash balance
and neither the entity nor the bank has made any errors, there must be
a. Deposit credited by the bank but not yet recorded by the entity
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the entity
28. Which of the following would not require an adjusting entry on the depositor’s books?
a. NSF check from customer
b. Check in payment of account payable as recorded by the depositor is overstated
c. Deposit of another entity is credited by the bank to the account of the depositor
d. Bank service charge
29. Bank reconciliation are normally prepared on a monthly basis to identify adjustments needed in
the depositor’s records and identify bank errors. Adjustments on the part of the depositor should
be recorded for
a. Bank errors, outstanding checks and deposit in transit
b. All items except bank errors, outstanding checks and deposit in transit
c. Book errors, bank errors, deposit in transit and outstanding checks
d. Outstanding checks and deposits in transit
30. Bank statement 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 depositor
31. Which of the following statement is false?
a. A certified checks is a liability of the bank certifying it.
b. A certified checks will be accepted by many persons who would not otherwise accept a
personal checks
c. A certified checks is one drawn by a bank upon itself
d. A certified checks should not be included in the outstanding checks
32. A proof of cash
a. Is a physical count of currencies on hand at the end of reporting period
b. Is a formal statement showing the total cash receipts during the year
c. Is a four-column bank reconciliation showing reconciliation of cash balances per book
and per bank at the beginning and end of the current month and reconciliation of cash
receipts and cash disbursements of the bank and the depositor during the current month
d. Is a summary of cash receipts and cash payments
33. A proof of cash would be useful for
a. Discovering cash receipts that have been recorded in the journal
b. Discovering time lag in making deposit
c. Discovering cash receipts that have been recorded but have not been deposited
d. Discovering an inadequate separation of incompatible

34. Which of the following is not a characteristic of system of cash control

a. Use of a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received

PREPARED BY: LEONIDES L. GAVINA

 d. Internal audits at irregular intervals
35. Which of the following statement in relation to bank reconciliation is true
a. Bank service charge will cause the cash balance per ledger to be higher than that
reported by the bank, all other things being equal
b. Credit memos will cause the cash balance per ledger to be higher than that reported by
the bank, all other things being equal
c. Outstanding checks will cause the cash balance per ledger to be higher than that
reported by the bank, all other things being equal
d. The cash amount reported in the statement of financial position must be the balance
reported in the bank statement

*****************************END OF QUIZ****************************

PREPARED BY: LEONIDES L. GAVINA