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2219 C.M. Recto, Ave. Sampaloc Manila Tel Nos. 735-5602, 735-5471 loc. 332/331

Practical Accounting 1/Theory of Accounts M. B. Guia

Accounting for Cash and Cash Equivalent (Study Notes)

 Most liquid asset and the standard medium of exchange.
 Basis for measuring and accounting for all other items.
Cash on hand
 Money or Money Substitute that is acceptable by the bank for deposits
 Undeposited collection, petty cash or other operating fund, postal money order, outstanding
checks, checks issued by the entity but not yet delivered or is post-dated
On demand deposit (Cash in Bank)
 Not restricted in use
 May be restricted provided that it is for current purposes
 Checking and savings account, Payroll Fund, savings to be used to purchase properties provided
the purchase will be held within one year after the balance sheet date.
Cash Equivalent
 These are short-term, highly liquid investments that are readily convertible to a known amount of
cash, and that are subject to an insignificant risk of changes in value.
o Short-term – the date of PURCHASE is 3 months (90days) or less
o Highly liquid investments – the issuer of the instruments is least likely to default at
maturity date. (ex. Treasury bills)
Restricted Cash
 When material in amount:
o Segregate restricted cash from “regular” cash.
o Current assets or non-current assets
 Examples, restricted for: (1) plant expansion, (2) retirement of long-term debt, and (3)
compensating balances.
Bank Overdrafts
 When a company writes a check for more than the amount in its cash account.
o Generally reported as a current liability.
o Offset against cash account only when available cash is present in another account in the
same bank on which the overdraft occurred.
o By virtue of a BSP Circular, not allowed in the Philippines

Item Classification Description
Coins and currencies Cash
Cash in Bank Cash If unrestricted, report as cash
If restricted, identify and classify as current and non-current
Petty Cash Fund Cash
Short-term paper Cash Equivalent Investment with maturity of less than 3 months from the date of
Short-term paper Short-term investments Investment with maturity of more than 3 months but less than 12
Postdated checks from Receivables Assumed to be collectible
Postdated/Undelivered Cash Credit accounts payable
checks from entity
IOU’s and travel Receivables Assumed to be collectible or deductible from the salaries
Postage on hand Prepaid Expenses May also be classified as office supplies inventory
Bank Overdraft Current Liability Generally, not allowed in the Philippines
Compensating Balance Cash separately Classify as current or non-current in the statement of financial
classified as deposit position. Disclose separately in the notes details of the
maintained as arrangements
compensating balance
Accounting for Petty Cash Fund – Coins and Currencies
Imprest Fund System Fluctuating Fund System
Establishment PCF xx PCF xx
CIB xx CIB xx
Usage No Entry Expenses xx
Receivable xx
PCF xx
Replenishment Expenses xx PCF xx
Receivable xx CIB xx
CIB xx
Increase in the PCF xx PCF xx
maintaining CIB xx CIB xx

Accounting for Cash in Bank – at adjusted amount

Cash Record Balance per Bank Cash Record Balance per Book
(Per Bank Statements) (Per General Ledger)
Establishment Customer Deposit (Liability) Cash in Bank (Asset)
and Operations Withdrawal Deposits/ Deposits/ Withdrawal
Collection Collection
At period end: Deposit in Transit – deposits Debit Memo (Bank is the issuer) – Services
Due to timing recorded by the bank but not yet charges, taxes, NSF checks deposited
difference recorded by the bank Credit Memo (Bank is the issuer) -
Outstanding Checks – checks Collection made by the bank, interest
already issued by the company but income
not yet cashed by the bank.

< End of Lecture >

2219 C.M. Recto, Ave. Sampaloc Manila Tel Nos. 735-5602, 735-5471 loc. 332/331

Practical Accounting 1/Theory of Accounts M. B. Guia

Accounting for Cash and Cash Equivalent (Practice Problems)

Problem 1: The controller for Bataan Corporation is attempting to determine the amount of cash to be
reported on its December 31, 2010, balance sheet. The following information is provided.
1. Commercial savings account of P 1,200,000 and a commercial checking account balance of P
1,800,000 are held at Philippine National Bank.
2. A money market fund account of P 10,000,000, held at HDMF (a mutual fund organization) permits
Bataan Corporation to write checks on this balance.
3. Travel advances of P 360,000 for executive travel for the first quarter of next year (employee to
reimburse through salary reduction).
4. A separate cash fund in the amount of P 3,000,000 is restricted for the retirement of long-term debt.
5. Petty cash fund of P 2,000.
6. An I.O.U. from E. Dela Cruz, a company customer, in the amount of P 380,000.
7. A bank overdraft of P 220,000 has occurred at one of the banks the company uses to deposit its cash
receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates of deposit, each totaling P 1,000,000. These CDs have a maturity of
120 days.
9. Bataan has received a check that is dated January 12, 2011, in the amount of P 250,000.
10. Bataan has agreed to maintain a cash balance of P 1,000,000 at all times at Philippine National Bank
to ensure future credit availability.
11. Bataan has purchased P 4,200,000 of commercial paper of Bulacan Co. which is due in 60 days.
12. Currency and coin on hand amounted to P 15,400.
Required: Compute the amount of cash to be reported on Bataan Corporation’s balance sheet at December
31, 2010.

Problem 2: Presented below are a number of independent situations.

1. Checking account balance P 111,000; savings account balance P 212,000; cash advance to subsidiary
of P 500,000; utility deposit paid to electric company P 100.
2. Checking account balance P 111,000; an overdraft in special checking account at same bank as normal
checking account of P 5,000; cash held in a bond sinking fund P 1,200,000; petty cash fund P 500;
certified check from customer P 1,500.
3. Checking account balance P 205,000; postdated check from customer P 10,000; cash restricted due to
maintaining compensating balance requirement of P 100,000; postage stamps on hand P 123. Cash
advance of P 5,000 to company executive, payable on demand.
4. Checking account balance at bank P 61,000; money market balance at mutual fund (has checking
privileges) P 275,000; NSF check received from customer P 1,600.
5. Checking account balance P 171,000; cash restricted for future plant expansion P 1,200,000; short-
term Treasury bills P 200,000; cash advance received from customer P 900 (not included in checking
account balance); refundable deposit of P 50,000 paid to federal government to guarantee performance on
construction contract
Required: For each individual situation, determine the amount that should be reported as cash. If the
item(s) is not reported as cash, explain the rationale.

Problem 3: Tarlac, Inc. decided to establish a petty cash fund to help ensure internal control over its small
cash expenditures. The following information is available for the month of April.
1. On April 1, it established a petty cash fund in the amount of P 10,000.
2. A summary of the petty cash expenditures made by the petty cash custodian as of April 10 is as
Delivery charges paid on merchandise purchased P 3,000
Supplies purchased and used 1,250
Postage expense 1,650
I.O.U. from employees 850
Miscellaneous expense 1,800
The petty cash fund was replenished on April 10. The balance in the fund was P 1,350.
3. The petty cash fund balance was increased P 5,000 to P 15,000 on April 20.
Required: Prepare the journal entries to record transactions related to petty cash for the month of April.
Problem 4: The petty cash fund of Glen’s Dress Shop, a sole proprietorship, contains the following.
Coins and currency P 465.00
Postage stamps 129.00
An I.O.U. from Jake, an employee, for cash advance 250.00
Check payable to Willy’s Auto Repair from Gregory,
an employee, marked NSF 120.00
Vouchers for the following:
Stamps 400.00
Printer toner cartridge 611.50
TOTAL P 1,975.50
The general ledger account Petty Cash has a balance of P 2,000.
Required: Prepare the journal entry to record the reimbursement of the petty cash fund

Problem 5: Wang Company deposits all receipts and makes all payments by check. The following
information is available from the cash records.
June 30 Bank Reconciliation
Balance per bank P 14,000
Add: Deposits in transit 3,080
Deduct: Outstanding checks (4,000)
Balance per books P 13,080

Month of July Results

Per Bank Per Books
Balance July 31 P 17,300 P 18,500
July Deposits 10,000 11,620
July Checks 8,000 6,200
July note collected (not included in July deposits) 2,000 —
July bank service charge 30 —
July NSF check from a customer, returned by the
bank (recorded by bank as a charge) 670 —
(a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash
(b) Prepare the general journal entry or entries to correct the Cash account.

Problem 6: Elfen Company has just received the October 31, 2012, bank statement, which is summarized
Banco de Oro Disbursements Receipts Balance
Balance, October 1 P 21,361
Deposits during August P 47,200 68,561
Note collected for depositor, including P40 interest 2,040 70,601
Checks cleared during October P 54,501 16,100
Bank service charges 10 16,090
Balance October 31 16,090
The general ledger Cash account contained the following entries for the month of October.
Balance, October 1 P 17,801 Disbursement in October P 40,000
Receipts during October 45,000

Deposits in transit at October 31 are P 4,800, and checks outstanding at October 31 total P 1,550. Cash on
hand at October 31 is P 250. The bookkeeper improperly entered one check in the books at P 210.00
which was written for P 240.00 for supplies (expense); it cleared the bank during the month of October.
(a) Prepare a bank reconciliation dated October 31, 2012, proceeding to a correct balance.
(b) Prepare any entries necessary to make the books correct and complete.
(c) What amount of cash should be reported in the October 31 balance sheet?

Problem 7: Nayak Company has recorded the following items in its financial records.
Cash in bank P 43,594
Cash in plant expansion fund 102,415
Cash on hand 8,635
Highly liquid investments 31,145
Petty Cash 577
Receivables from customers 92,666
Stock investment 61,887
The cash in bank is subject to a compensating balance of $5,278. The highly liquid investments had
maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6
to 12 months. The plant expansion project will begin in 3 years.
Required: What amount should Nayak report as “Cash and cash equivalents” on its balance sheet?

Problem 8: Bulacan Corporation has the following items at December 31, 2012:
Checking Account at PNB P (20)
Checking Account at BDO 350
Philippine Treasury Bonds 650
Payroll Account 100
Sales Tax Account 150
Foreign Bank account – restricted (in equivalent pesos) 750
Postage stamps 22
Employee’s postdated check 30
IOU from president’s brother 75
Credit memo from a vendor for a purchase return 87
Traveler’s check 50
Not-sufficient funds customer’s check 18
Petty Cash Fund (P16 in currency and expense receipts for P84) 100
Money Order 36
1. What amount would be reported as cash and cash equivalent on the statement of financial
2. Of the items that were not considered as part of cash and cash equivalent, what is the total amount
of the items that will be classified as current asset,

Problem 9: The balance of P 147,000 in the cash account of Velasco Inc. consists of these items:
Petty Cash Fund P 600
Receivable from an employee 300
Cash in bond sinking fund 13,500
Cash in a foreign bank unavailable for withdrawal 30,000
Cash in BDO 90,000
Currency on Hand 12,600
The balance in the short-term investment (trading securities) account consists of:
Philippine Treasury Bonds (Purchased November 1, maturing January 31) P 31,260
Voting Stocks of a subsidiary company (70% interest) 366,000
Advances to a subsidiary company (no maturity date specified) 90,000
A note receivable from a customer 30,000
The company’s own shares held as treasury shares 15,000
Stock of Republic Telephone Co. 42,000
1. How much is Velasco’s cash and cash equivalent at December 31?
2. How much is the short-term investment (trading securities) at December 31?
2219 C.M. Recto, Ave. Sampaloc Manila Tel Nos. 735-5602, 735-5471 loc. 332/331

Practical Accounting 1/Theory of Accounts M. B. Guia

Accounting for Cash and Cash Equivalent (Quizzer)

1. Cash consists of all of the following except:
a. Bank drafts. c. Certified checks
b. Money orders d. Money market funds
2. The minimum cash amounts that banks often require customers to whom they lend money to
maintain in checking accounts is called:
a. Bank drafts c. Cash Equivalents
b. Compensating Balances d. Money Market Funds
3. An example of a cash equivalent is:
a. Cashier’s Check c. Certificates of Deposit
b. Bank overdrafts d. Treasury Bills
4. Which of the following might be classified as a cash equivalent?
a. Cash in checking account c. 30-day treasury bill
b. Money orders waiting to be deposited d. 120-day treasury bill
5. The replenishment of a petty cash fund might include which of the following?
a. A debit to cash c. A debit to petty cash fund
b. A debit to office supplies expense d. A credit to petty cash fund
6. A credit balance in the Petty Cash “Cash Over and Short” account is reported as a(n)
a. Asset. c. Liability.
b. Miscellaneous expense. d. Miscellaneous revenue.
7. A petty cash fund should be replenished
a. Every day.
b. At the end of every accounting period or when the cash amount is low.
c. Once a year.
d. As soon as an expense is paid from the fund
8. All of these involve a direct debit to the firm’s bank account, except
a. A bank service charge c. A dishonored customer’s check.
b. The charge for issuing checks d. Interest earned by the business.
9. Assuming a positive bank balance, on a bank reconciliation, outstanding deposits are
a. Added to the bank statement balance c. Deducted from the bank statement balance.
b. Added to the ledger balance d. Deducted from the ledger balance.
10. If a cheque, correctly written and paid by the bank for P 438, is incorrectly recorded in the firm's
books for P 483, the appropriate treatment in the bank reconciliation is to
a. Add P 45 to the bank statement balance in the reconciliation
b. Add P 45 to the ledger bank balance.
c. Deduct P 45 from the bank statement balance in the reconciliation.
d. Deduct P 45 from the ledger bank balance.
11. When reconciling the bank account each of the following must be adjusted in the ledger, except
a. Bank fees c. Direct credits arranged with the bank
b. Dishonored customer’s checks d. Unpresented checks
12. Cash that is restricted for a special purpose, example is used as a payroll bank account, should be
a. Reported as a current asset in the statement of financial position separately from other
b. Reported in the statement of financial position as a non-current asset.
c. Reported as part of cash only if it is being maintained for current purposes.
d. Reported in the statement of financial position as a reduction of cash.
13. Cash equivalents are highly liquid investments that can be converted into a specific amount of
cash. They have maturities of
a. 1 month or less after the balance sheet date
b. 3 months or less after the balance sheet date
c. 6 months or less when purchased, but 3 months or less after the balance sheet date
d. 3 months or less when purchased.
14. Which of the following is false concerning the valuation of cash and cash equivalents?
a. Cash is valued at face value
b. Cash in foreign currency is valued at the exchange rate at balance sheet date
c. Cash equivalents should be valued at maturity value, meaning face value plus
d. If a bank or financial institution holding the funds of the company is in bankruptcy or
financial difficulty, cash should be written down to net realizable value.
15. An item that should be excluded from cash and cash equivalent on the December 31, 2011
statement of financial position of Homer Company is
a. A customer’s check denominated in a foreign currency.
b. A check issued by Homer Company on December 30, 2011, but dated January 10, 2012
c. A P1,000,000 time deposit which matures in 4-months.
d. A P100,000 balance in the company’s current account maintained as a payroll fund.
16. 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
17. Travel advances should be reported as
a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
18. In which account are post-dated checks received classified?
a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.
19. Under which section of the statement of financial position is "cash restricted for plant
expansion" reported?
a. Current assets.
b. Non-current assets.
c. Current liabilities.
d. Equity.
20. 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
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
21. The following data pertain to Angat Corporation on December 31, 2012:
Current account at Metrobank P2,000,000
Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000
Treasury bills, due 3/31/13 (purchased 12/31/12) 200,000
Treasury bills, due 1/31/13 (purchased 1/1/12) 300,000
Based on the above information, compute for the cash and cash equivalent that would be reported on
the December 31, 2012 balance sheet.
a. P 2,784,000 b. P 2,790,000 c. P 3,084,000 d. P 2,704,000
22. The following data pertain to Balagtas Corporation on December 31, 2012:
Checkbook balance P10,000,000
Bank statement balance 15,000,000
Check drawn on Balagtas’ account, payable to supplier, dated and
recorded on Dec. 31, 2012, but not mailed until Jan. 15, 2013 3,000,000
Cash in sinking fund 4,000,000
Money market, three months due January 31, 2013 5,000,000
On December 31, 2012, how much should be reported as “cash and cash equivalents”?
a. P 13,000,000 b. P 18,000,000 c. P 12,000,000 d. P 17,000,000
23. On December 31, 2012, Baliuag Company had the following cash balances:
Cash in Bank P 15,000,000
Petty Cash Fund (all funds were reimbursed on December 31, 2012 50,000
Time deposit 5,000,000
Saving deposit 2,000,000
Cash in bank includes P500,000 of compensating balance against short term borrowing
arrangement at December 31, 2012. The compensating balance is legally restricted as to
withdrawal by Baliuag. A check of P300,000 dated January 15, 2013 in payment of accounts
payable was recorded and mailed on December 31, 2012. In the current assets section of the
December 31, 2012 balance sheet, what amount should be reported as “cash and cash
a. P21,850,000 b. P 21,800,000 c. P 16,850,000 d. P 14,850,000
24. Bocaue Company had the following account balances on December 31, 2012.
Petty Cash Fund P 50,000
Cash in Bank – current account 10,000,000
Cash in Bank – payroll account 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant additions, expected to be disbursed
in 2013 4,000,000
Treasury bills, due February 15, 2013 3,000,000
The petty cash fund includes un-replenished December 2012 petty cash expense vouchers of
P20,000 and employee IOUs of P10,000. The cash on hand includes a P100,000 check payable to
Bocaue dated January 15, 2013. What should be reported as “cash and cash equivalents” on
December 31, 2012?
a. P12,420,000 b. P15,420,000 c. P19,420,000 d. P15,450,000
25. Bulacan Corporation's checkbook balance on December 31, 2012, was P800,000. In addition,
Bulacan held the following items in its safe on December 31:
Check payable to Bulacan Corporation, dated January 2, 2013, not included in
December 31 checkbook balance P200,000
Check payable to Bulacan Corporation, deposited December 20, and included
in December 31 checkbook balance, but returned by bank on December 30,
stamped "NSF." The check was redeposited January 2, 2013, and cleared
January 7 40,000
Post-dated checks 15,000
Check drawn on Bulacan Corporation's account, payable to a vendor, dated
and recorded December 31, but not mailed until January 15, 2013 100,000
The proper amount to be shown as cash on Bulacan's balance sheet at December 31, 2012, is
a. P760,000 b. P860,000 c. P800,000 d. P975,000
26. You noted the following composition of Hagonoy Company’s “cash account” as of December 31,
Demand deposit account P2,000,000
Time deposit – 30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2013) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer check dated January 1, 2013 50,000
Customer check outstanding for 18 months 40,000
Total P7,760,000
Additional information follows:
a) Check of P200,000 in payment of accounts payable was recorded on December 31, 2012
but mailed to suppliers on January 5, 2013.
b) Check of P100,000 dated January 15, 2013 in payment of accounts payable was recorded
and mailed on December 31, 2012.
c) The company uses the calendar year. The cash receipts journal was held open until
January 15, 2013, during which time P400,000 was collected and recorded on December
31, 2012.
The cash and cash equivalents to be shown on the December 31, 2012 balance sheet is
a. P3,310,000 b. P 1,910,000 c. P 2,910,000 d. P 4,410,000
27. The following information pertains to Bustos Company as of December 31, 2012:
Cash balance per general ledger P 15,000,000
Cash balance per bank statement 14,550,000
Checks outstanding (including certified check of P 100,000) 1,000,000
Bank service charge shown in December bank statement 50,000
Error made by Bustos in recording a check that cleared the
bank in December (check was drawn in December for
P500,000 but recorded at P700,000 200,000
Deposit in transit 1,500,000
At the December 31, 2012 balance sheet cash in bank should be
a. P15,150,000 b. P14,250,000 c. P14,650,000 d. P14,550,000
28. The bookkeeper of Calumpit Company recently prepared the following bank reconciliation on
December 31, 2012:
Balance per bank statement 20,000,000
Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Calumpit in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000
Calumpit has P1,000,000 cash on hand on December 31, 2012. The amount to be reported as
cash on the balance sheet as of December 31, 2012 should be
a. P19,600,000 b. P20,600,000 c. P18,600,000 d. P19,750,000
29. The petty cash fund of Guiguinto Company on December 31, 2012 is composed of the following:
Coins and currencies P 14,000
Petty cash vouchers
Gasoline payments 3,000
Supplies 1,000
Cash Advances to employees 2,000
Employee’s check returned by bank marked NSF 5,000
Check drawn by the company payable to the order of Kristine
Cruz, petty cashier, representing her salary 20,000
A sheet of paper with names of employees together with
contribution for a birthday gift of a co-employee in the
mount of 8,000
The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of
petty cash on December 31, 2012?
a. P34,000 b. P39,000 c. P14,000 d. P42,000
30. The Plaridel Corporation was organized on January 3, 2012 with an authorized capital stock of
P5,000,000. At December 31, 2012 of the same year, the general ledger of said Company
showed the following accounts and balances:
Accounts receivable P 200,000
Merchandise inventory 250,000
Land 1,200,000
Building 1,600,000
Furniture and fixtures 400,000
Accounts payable 420,000
Notes payable – bank 500,000
Common stock 1,500,000
Additional paid capital 100,000
Sales 5,800,000
Expenses paid (excluding purchases) 725,000
Your review of the bank statement for December disclosed the following information:
Bank balance, December 31, 2012 P 524,500
Bank service charge 6,000
Deposits in transit 62,500
Total checks not returned by the bank 128,000
Your review also revealed that the cash received of P62,500 on December 31, 2012 was
deposited on January 2, 2013. The company’s mark up on sales is 40%. How much is the
adjusted cash balance as of December 31, 2012?
a. P459,000 b. P39,000 c. P536,000 d. P1,619,000
31. Reconciliation of Malolos Corporation’s bank account at November 30, 2012 follows:
Balance per bank statement P3,150,000
Deposits in transit 450,000
Checks outstanding (45,000)
Correct cash balance P3,555,000

Balance per books P3,558,000

Bank service charge (3,000)
Correct cash balance P3,555,000
December data are as follows:
Bank Books
Checks recorded P3,450,000 P3,540,000
Deposits recorded 2,430,000 2,700,000
Collection by bank (P600,000 plus interest) 630,000 -
NSF check returned with December bank statement 15,000 -
Balances 2,745,000 2,715,000
The checks outstanding on December 31, 2012 amount to
a. P45,000 b. P135,000 c. P90,000 d. P0
32. Consider the following: Cash in Bank – checking account of P 13,500, Cash on hand of P 500,
Post-dated checks received totaling P 3,500, and Certificates of deposit totaling P 124,000. How
much should be reported as cash in the statement of financial position?
a. P 13,500 b. P 14,000 c. P 17,500 d. P 131,500.
33. If a petty cash fund is established in the amount of P 250, and contains P 150 in cash and P 95 in
receipts for disbursements when it is replenished, the journal entry to record replenishment should
include credits to the following accounts
a. Petty Cash, P 75 c. Cash, P 95; Cash Over and Short, P 5.
b. Petty Cash, P 100 d. Cash, P 100
34. If the month-end bank statement shows a balance of P 36,000, outstanding checks are P 12,000, a
deposit of P 4,000 was in transit at month end, and a check for P 500 was erroneously charged by
the bank against the account, the correct balance in the bank account at month end is
a. P 27,500 b. P 28,500 c. P 20,500 d. P 43,500.
35. In preparing its bank reconciliation for the month of April 2012, Henke, Inc. has available the
following information.
Balance per bank statement 4/30/12 P 39,140
NSF check returned with 4/30/12 bank statement 450
Deposits in transit, 4/30/12 5,000
Outstanding checks, 4/30/12 5,200
Bank service charges for April 20
What should be the correct balance of cash at April 30, 2012?
a. P 39,370 b. P 38,940 c. P 38,490 d. P 38,470
36. Finley, Inc.’s checkbook balance on December 31, 2012 was P 21,200. In addition, Finley held
the following items in its safe on December 31.
 A check for P 450 from Peters, Inc. received December 30, 2012, which was not included
in the checkbook balance.
 An NSF check from Garner Company in the amount of P 900 that had been deposited at
the bank, but was returned for lack of sufficient funds on December 29. The check was to
be redeposited on January 3, 2013. The original deposit has been included in the
December 31 checkbook balance.
 Coin and currency on hand amounted to P 1,450.
The proper amount to be reported on Finley's statement of financial position for cash at December
31, 2012 is
a. P 21,300 b. P 20,400 c. P 22,200 d. P 21,750.
37. The cash account shows a balance of P 45,000 before reconciliation. The bank statement does not
include a deposit of P 2,300 made on the last day of the month. The bank statement shows a
collection by the bank of P 940 and a customer's check for P 320 was returned because it was
NSF. A customer's check for P 450 was recorded on the books as P 540, and a check written for P
79 was recorded as P 97. The correct balance in the cash account was
a. P 45,512 b. P 45,548. c. P 45,728. d. P 47,848.
38. In preparing its May 31, 2012 bank reconciliation, Catt Co. has the following information
Balance per bank statement, 5/31/12 P 30,000
Deposit in transit, 5/31/12 5,400
Outstanding checks, 5/31/12 4,900
Note collected by bank in May 1,250
The correct balance of cash at May 31, 2012 is
a. P 35,400 b. P 29,250 c. P 30,500 d. P 31,750
39. In preparing its August 31, 2012 bank reconciliation, Bing Corp. has available the
following information:
Balance per bank statement, 8/31/12 $21,650
Deposit in transit, 8/31/12 3,900
Return of customer's check for insufficient funds, 8/30/12 600
Outstanding checks, 8/31/12 2,750
Bank service charges for August 100
At August 31, 2012, Bing's correct cash balance is
a. $22,800 b. $22,200 c. $22,100 d. $20,500
40. Tresh, Inc. had the following bank reconciliation at March 31, 2012:
Balance per bank statement, 3/31/12 P 37,200
Add: Deposit in transit 10,300
Balance 47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/12 34,900
Data per bank for the month of April 2012 follow:
Deposits $46,700
Disbursements 49,700
All reconciling items at March 31, 2012 cleared the bank in April. Outstanding checks at April
30, 2012 totaled $6,000. There were no deposits in transit at April 30, 2012. What is the cash
balance per books at April 30, 2012?
a. $28,200 b. $31,900 c. $34,200 d. $38,500