Pamantasan ng Cabuyao

Katapatan Subd., Banay Banay, City of Cabuyao

Accounting Review III - Practical Accounting I (ACCTG100C) P1 - 01

CASH AND CASH EQUIVALENTS

1. As contemplated in accounting, cash includes

A. Money only
B. Money and any other negotiable instruments
C. Any negotiable instruments
D. Money and any other negotiable instrument that is payable in money and acceptable by bank for deposit and immediate
credit.
2. Which of the following statement is false?
A. Not all items included in cash constitute a legal tender
B. Cash may be offset against a liability if the deposit of funds in restricted account clearly constitutes the legal discharge of
the liability.
C. Legally restricted bank deposit held as compensating balance should be segregated from the cash account and reported
under the same caption.
D. One-year BSP treasury bills with remaining maturity of three months on the balance sheet date may be shown as part of
“cash and cash equivalents” provided this is disclosed.
3. To be reported as “cash and cash equivalents”, the cash and cash equivalent must be
A. Unrestricted in use for current operation.
B. Available for the purchase of property, plant and equipment.
C. Set aside for the liquidation of long-term debt.
D. Deposited in bank.
4. Cash equivalent are
A. Short-term and highly liquid investments that are readily convertible into cash.
B. Short- term and highly liquid investments that are readily convertible into cash with
remaining maturity of three months.
C. Short- term and highly liquid investments that are readily convertible into cash and acquired three months before maturity.
D. Short-term and highly liquid marketable securities.
5. Which of the following is not considered as a cash equivalent for the purpose of cash flow statement?
A. A three-year treasury note maturing on May 30, of the current year, purchased by the enterprise on April 15, of the
current year.
B. A three-year treasury note maturing on May 30, of the current year, purchased by the enterprise on January 2 of the
current year.
C. A 90-day T-Bill.
D. A 60-day money market placement.
6. Which is false concerning valuation of cash and cash equivalents?
A. Cash is valued at face value.
B. Cash in foreign currency is valued at the current exchange rate.
C. If a bank or financial institution holding the funds of the company is in bankruptcy or financial difficulty, cash should be
written down to estimated realizable value.
D. Cash equivalents should be valued at maturity value, meaning face value plus interests.
7. The following statement relates to cash. Which statement is true?
A. The term cash equivalents refer to demand credit instruments such as money order and bank drafts.
B. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover all normal operating expenses for
a period of time.
C. Classification of restricted cash balance as current or noncurrent should parallel the classification of the related obligation
for which it is related.
D. Compensating balance required by a bank should always be excluded from “cash and cash equivalent”.
8. If material, deposits in foreign bank which are subject to foreign exchange restriction should be classified
A. Separately as current asset, with appropriate disclosure.
B. Separately as noncurrent assets with appropriate disclosure.
C. Be written off as an extraordinary loss.
D. As part of cash and cash equivalent.
9. Bank overdraft
A. Is a debit balance in cash in a bank account.
B. Is offset against a demand deposit account in another bank.
C. Which cannot be offset is classified as current liability.
D. Which cannot be offset is classified as noncurrent liability.
10. A compensating balance
A. Must be included in cash and cash equivalent.
B. Which is legally restricted and related to long-term loan is classified as current asset.
C. Which is legally restricted and related to short-term loan is classified separately as current asset.
D. Which is not legally restricted as to withdrawal is classified separately as current asset.
11. Unreleased checks (check drawn before balance sheet date but held for later delivery to creditors).
A. Should be treated as outstanding checks.
B. Should be restored to cash balance.
C. Should be treated as outstanding checks if the date is shortly after the balance sheet date.
D. Should be treated as outstanding checks as if they are ultimately encashed.
12. Which of the following should not be considered cash for financial accounting purpose?
A. Petty cash fund and change fund.
B. Money orders, certified checks and personal checks.
C. Coins, currencies and available funds.
D. Postdated checks and IOUs.
13. Which of the following is usually considered cash?
A. Certificated of deposit.
B. Checking accounts
C. Money market savings certificates
D. Postdated checks
14. 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 writing checks
C. Set aside for payment of payroll
D. Restricted cash
15. 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 every time 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 size of the fund is decreased.
16. The internal control feature that is specific to petty cash is
A. Separation of duties
B. Assignment of responsibility
C. Proper authorization
D. Imprest system
17. What is the major purpose of an imprest petty cash fund?
A. To effectively plan cash inflows and outflows.
B. To ease the payments to cash vendors.
C. To determine the honesty of the petty cashier.
D. To effectively control cash disbursement.
18. What happens when a petty cash is in use?
A. Expenses with the petty cash are recorded when the fund is replenished.
B. Most small amounts are paid from cash receipts before they are deposited.
C. Petty cash is debited when the fund is replenished.
D. Petty cash is credited when the fund is replenished.
19. When petty cash fund is used, which of the following is true?
A. The balance of the petty cash fund should be reported on the statement of financial position as long-term investment.
B. The petty cashier’s summary of petty cash payments serves as 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 cash account should be recorded at the payments from petty cash fund are made.
20. In reimbursing the petty cash fund, which of the following is true?
A. Cash is debited
B. Petty cash is debited
C. Petty cash is credited
D. Expense accounts are credited
21. 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 funds proves out short.
D. Is a contra account to cash.
22. Postage stamps and IOUs found in petty cash drawer should be reported as
A. Supplies and receivables
B. Cash because they represent the equivalent of money
C. Petty cash
D. Investments
23. The following statements pertain to accounting for petty cash fund. Which statement is false?
A. Each disbursement from petty cash should be supported by a petty cash voucher.
B. The creation of petty cash funds 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.
24. The following statements pertain to the cash short or over account. Which statement 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 cash short or over account should be considered a liability because the short-changed customer will
demand return of this amount.
25. Cash controls are the methods and procedures used to ensure
A. That current obligations are met
B. That excess cash does not exist
C. The safeguarding of cash
D. That unused cash is invested
26. A bank reconciliation is
A. A formal 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 statement and the
cash balance shown in its general ledger.
27. Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with
the 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
28. Which of the following must be deducted from bank statement balance in preparing a bank reconciliation which ends with the
adjusted cash balance?
A. Deposit in transit
B. Outstanding checks
C. Reduction of loan charged to the account of the depositor
D. Certified check
29. If the balance shown on the company’s bank statement is less than the correct cash balance and neither the company nor the
bank has made any error, there must be
A. Deposits credited by the bank but not yet recorded by the company
B. Outstanding checks
C. Deposits in transit
D. Bank charges not yet recorded by the company
30. If the cash balance shown on a company’s accounting records is less than the correct cash balance and neither the company
nor the bank made any error, 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
31. Which will not require an adjusting entry on the depositor’s books?
A. NSF check from customer
B. Check in payment of an account payable amounting to P50,000 is recorded by the depositor as P5,000.
C. Deposit of another company is credited to the account of our enterprise
D. Bank service charge
32. Which statement 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. Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank, all other
things being equal.
C. An error made by the bank by charging an amount to the depositor account requires a correcting entry in the depositor’s
own records.
D. The cash amount shown in the statement of financial position must be the balance reported in the bank statement.
33. Which of the following statements is false?
A. A certified check is a liability by the bank certifying it.
B. A certified check will be accepted by many persons who would not otherwise accept personal check.
C. A certified check is one drawn by bank upon itself.
D. A certified check should not be included on the outstanding checks.
34. A proof of cash
A. Is a physical count of currencies on hand on balance sheet date.
B. Is a formal statement showing the cash receipts during the year.
C. Is a four-column bank reconciliation showing the reconciliation of cash balances per book and per bank statement at the
beginning and at the end of the current month and reconciliation of cash receipts and cash disbursement of the bank and
the depositor during the month.
D. Is a summary of cash receipts and cash payments.
35. A proof of cash would be useful for
A. Discovering 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
36. On December 31, 2017, the cash account of Gummy Company shows the following composition:
Petty cash fund, P30,000; Cash in bank (payroll fund), P2,000,000; Travel fund, P150,000; interest and dividend fund,
P250,000; tax fund, P120,000; cash in bank (current account), P3,000,000; certificate of deposit (terms 90 days), P1,000,000;
Certificate of deposit (terms 180 days), P1,500,000; cash in foreign bank-restricted, P500,000; money market funds (6
months), P900,000; Customer’s check dated January 15, 2014, P60,000. Customer’s check dated December 31, 2017
returned for lack of funds, P40,000; A 30-day BSP treasury bill, P1,000,000; A 3 year BSP treasury bill acquired three months
prior to maturity, P1,200,000; Sinking fund cash, P800,000; Preferred Redemption fund, P400,000; Contingent fund,
P300,000; Insurance fund, P200,000: Fund for the acquisition of a long-lived asset, P500,000; traveler’s checks, P60,000; and
cashier’s checks, P100,000.
What is the correct cash and cash equivalents balance to be reported by Gummy Company on December 31, 2017?
A. P7,810,000 C. P9,410,000
B 8,210,000 D. 9,610,000
37. On December 31, 2017, Everlasting Company’s “cash” account balance per ledger of P3,600,000 includes:
Demand deposit, P1,500,000; Certificate of deposit-30 days, P500,000; NSF check of customer, P20,000; Money market
placement (due date: June 30, 2018), P1,000,000; Savings deposit in closed bank, P50,000; IOU from an employee, P30,000;
Pension fund, P400,000; Petty cash fund, P10,000; Customer’s check dated January 31, 2018, P60,000; Customer’s check
outstanding for 18 months, P30,000.
Additional information:
• Check of P100,000 in payment of accounts payable was recorded on December 31, 2017 but mailed to creditors on
January 15, 2018.
• Check of P50,000 dated January 31, 2018 in payment of accounts payable was recorded and mailed December 31,
2013.
• The company uses the calendar year. The cash receipts journal was held open until January 15, 2018, during which
time, P200,000 was collected and recorded on December 31, 2017.
How much “cash and cash equivalents” should be shown on the December 31, 2017 balance sheet?
A. P1,960,000 C. P2,160,000
B 2,050,000 D. 2,360,000
38. Pakwan, Inc. had the following account balances at December 31, 2017:
Cash in bank - Bank A P 50,000
Cash in bank - Bank B (closed by BSP) 60,000
Saving deposit – Bank C 150,000
Petty cash fund, including unreplenished December 2017 petty
cash expenses vouchers for P5,000 and an accommodated
employee’s check for P3,500 dated January 28, 2018 10,000
Treasury bills purchased December 10, 2017 and due March 10, 2018 1,000,000
Time deposits, one year, due March 31, 2018 2,000,000
The amount to be shown as “Cash and Cash Equivalents” on Pakwan’s balance sheet at December 31, 2017 is
A. P1,201,500 C. P1,210,000
B. 3,201,000 D. 1,206,500
39. On December 31, 2017, cash account of Tonette Company showed the following details:
Undeposited collections P 60,000
Cash in Bank – RCBC checking account 500,000
Cash in Bank – PNB (overdraft) (50,000)
Undeposited NSF check received from customer, dated December 1, 2017 15,000
Undeposited check from a customer, dated January 15, 2018 25,000
Cash in Bank- RCBC (fund for payroll) 150,000
Cash in Bank – RCBC (saving deposit) 100,000
Cash in Bank – RCBC (money market instrument, 90 days) 2,000,000
Cash in foreign bank, restricted 100,000
IOUs from officers 30,000
Sinking fund cash 450,000
Listed shares held as trading investment 120,000
The statement of financial position on December 31, 2017 should show “cash and cash equivalents” at
A. P2,660,000 C. P2,770,000
B. 2,810,000 D. 810,000
40. Santol Corporation’s checkbook balance on December 31, 2017 was P180,000. In addition, Santol held the following items in
its safe on December 31
Check payable to Santol, dated January 2, 2018, not included
in December 31, 2017 checkbook balance P 45,000
Check payable to Santol, 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, 2018 and was cleared January 7. 46,000
Postage stamps received from mail order customers 2,000
Check drawn on Santol’s account, payable to vendor, dated and
recorded December 31, but not mailed until January 15, 2018 63,000
 The proper amount to be shown on as Cash on Santol’s balance sheet at December 31, 2017 is
A. P244,000 C. P242,000
B. 208,000 D. 197,000
Question 41 and 42 are based on the following information:
The petty cash fund of the Mangga, Co., immediately after the close of business on September 30, 2017, the end of the
company’s fiscal year is composed of the following:
Currency and coins P15,000
Unused postage stamps 500
Petty cash vouchers:
Delivery Expenses P1,500
Postage stamps 800
Office supplies 500
Repairs of office equipments 750
Advances to employees 1,750 5,300
A check drawn by the company payable to the order of
Ms. Policarpia Malagunaw, petty cash custodian
representing her salary 14,000
An employee’s check returned by the bank for insufficiency
of funds 4,000
A sheet of paper with names of several employees together with their
contribution for a departing employee. Attached to the sheet of
paper is currency of 5,000
P43,800
The petty cash fund has an imprest balance of P40,000.
41. The petty cash overage (shortage) is
A. P1,700 C. P3,800
B. (1,700) D. (3,800)
42. What is the amount of petty cash fund that should be shown on the balance sheet as of September 30, 2017?
A. P15,000 C. P29,000
B. 34,000 D. 27,000
Question 43 and 44 are based on the following information:
Avocado Corp. keeps all of its cash in a checking account. An examination of the company’s accounting records and bank
statement for the month ended December 31, 2017 revealed bank statement balance of P80,344 and book balance of
P88,404.
A deposit of P 47,500 on December 29, 2017 does not appear on the bank statement. Checks outstanding on December 31,
2017 amounted to P113,500.
The bank statement shows that on December 26, 2017, the bank collected a note for Avocado Corp. and credited the
proceeds of P46,750 to the company’s account. The proceeds included P1,750 interest, all of which Avocado Corp. earned
during the current period. Avocado Corp. has not yet recorded the said collection.
Avocado Corp. discovered that check number 021261 written in December 2017 for P9,150 in payment of an account had
been recorded in the company’s records as P1,590.
Included with the December 31, 2017 bank statement was an NSF check for P112,500 that Avocado Corp. had received from
Buko Company on December 22, Avocado Corp. has not yet recorded the returned check. The bank statement shows a P750
service charge for December 2017.
43. What is the adjusted cash balance for December 31, 2017?
A. P12,594 C. P14,344
B. 21,904 D. 15,904
44. The journal entry to adjust the cash balance as of December 31, 2017 is
A. Net debit to cash of P74,060 C. Debit to cash of P66,000
B. Net credit to cash of P74,060 D. Credit to cash of P46,750
45. The bank statement received by Guyabano, Inc. from Pasig Bank showed a balance of P547,800 at June 30, 2013. Upon
Comparing the statement with cash records, the following facts were determined:
• Customer’s check for P30,000 was originally recorded on the books for P45,000.
• A customer’s note dated March 25 was discounted on April 12. The note was dishonored on June 29 (maturity date).
The bank charged Guyabano’s account for P142,650.
• The deposit on June 24 was recorded on books as P28,950 but was actually a deposit of P27,000.
• Outstanding checks totaled P98,950 as of June 30.
• There were bank charges for June of P2,100 not yet recorded on the books.
• Guyabano’s account had been charged on June 26 for a customer NSF check of P12,960.
• Guyabano properly deposited on June 30 P6,000 but was not yet recorded by the banks.
• Receipts of June 30 for P134,250 were recorded by bank on July 2.
• A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been collected on June 27, and
the bank charges a P360 collection fee.
What is the cash balance on the books at June 30, 2017?
A. P689,520 C. P687,570
B. 587,160 D. 583,640
 Questions 46 through 48 are based on the following information:
The reconciliation of Durian Company’s bank account at May 31, 2017 is shown below:
Balance per bank statement P1,050,000
Deposit in transit 150,000
Outstanding checks (15,000)
Correct cash balance P1,185,000

Balance per book P1,186,000

Bank service charge (1,000)
Correct cash balance P1,185,000

June data are as follows:

Bank Book
Checks recorded P1,150,000 P1,180,000
Deposits recorded 810,000 900,000
Collection by bank (P200,000 note plus interest) 210,000
NSF check returned with June 30 bank statement 5,000
Balances 915,000 905,000
46. What is the total outstanding checks at June 30, 2017?
A. P15,000 C. P30,000
B. 45,000 D. 0
47. How much is the deposit in transit at June 30, 2017?
A. P 90,000 C. P 60,000
B 630,000 D. 240,000
48. What is the adjusted cash balance at June 30, 2017?
A. P1,110,000 C. P1,120,000
B. 630,000 D. 730,000
Questions 49 and 50 are based on the following information:
The cash account in the ledger of Pinya, Inc. shows a balance of P936,000 at September 30, 2017. The bank statement,
however, shows a balance of P840,000 at the same date. The only reconciling items consists of a bank service charge of
P1,000, a large number of outstanding checks, and a deposit in transit of P245,000.
49. What is the adjusted cash balance at September 30, 2017?
A. P785,000 C. P937,000
B. 690,000 D. 935,000
50. The total outstanding checks at September 30, 2017 should be?
A. P150,000 C. P246,000
B. 350,000 D. 151,000
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wep/ACCTG100C/cash&cashequivalents