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Presentation
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
assets
Petty Cash Fund Cash
Short-term paper Cash Equivalent Investment with maturity of less than 3 months from the date of
purchase
Short-term paper Short-term investments Investment with maturity of more than 3 months but less than 12
months.
Postdated checks from Receivables Assumed to be collectible
customers
Postdated/Undelivered Cash Credit accounts payable
checks from entity
IOU’s and travel Receivables Assumed to be collectible or deductible from the salaries
advances
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
balance
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 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
follows.
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
Problem 6: Elfen Company has just received the October 31, 2012, bank statement, which is summarized
below.
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.
Cash
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.
Instructions
(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
Required:
1. What amount would be reported as cash and cash equivalent on the statement of financial
position?
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
Required:
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?
UE CENTER for REVIEW and SPECIAL STUDIES_
2219 C.M. Recto, Ave. Sampaloc Manila Tel Nos. 735-5602, 735-5471 loc. 332/331