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CONTROLLING CASH

Exercises
1. The following data pertaining to the cash transactions and bank accounts of Pound Company for
July 2012 are as follows:
Cash balance per accounting records, July 31, 2012, P17,194.
Cash balance per bank statement, July 31, 2012, P31,948.
Bank service charge for July, P109
Debit memo for printed checks delivered by the bank; the charge has not been recorded in the
accounting records, P125.
Outstanding checks, July 31, 2012, P6,728.
Deposit of July 31 not recorded by the bank until August 1, P4,880.
Proceeds of a bank loan on July 31 not recorded in the accounting records, net of P300 interest,
P5,700.
Proceeds from customers promissory note, principal amount, P8,000 collected by the bank, not
taken up in the books, with P100 interest, P8,100
Check #1210 payable to a supplier entered in the accounting records as P2,100 deducted in the
bank statement the erroneous amount of P1,200.
Stolen check lacking an authorized signature deducted from Pounds account by the bank in error,
P800.
Customers check returned by the bank marked DAIF, indicating that the customers balance was
not adequate to cover the check. No entry has been made in the accounting records to record
the returned check, P760.
A. What is the correct cash balance as of July 31, 2012?
B. Prepare the necessary adjusting entries at July 31, 2012.
2. In comparing the balance per books of Bench Company with the bank statement from the bank,
together with the canceled checks and other memoranda at December 31, 2012, you observe the
following:
a. Balance per bank statement
b. Balance per books
c. Outstanding checks, 12/31/2012
d. Receipts of 12/31/2012 deposited on 01/02/2013
e. Service charge for December
f. Proceeds of bank loan, 12/15/2012 omitted from company records (discounted for 3
months at 12% per year)
g. Deposit of 12/23/2012 omitted from the bank statement
h. Check of Rome Products Co. charged back on 12/22/2012 for lack of counter
signature. Redeposited on 01/05/2013. No entry was made for the change back or
the redeposit.
i. Error on bank Statement in entering deposit of 12/16/2012: Corect amount
P31,824. Entered in the statement P31,814
j. Check #3917 of Birch Company charged in error to the companys account
k. Proceeds of note of J. Sumera & Co. collected by the bank on 12/01/2012 not enter
on books: Principal P20,000. Interest P400
l. Erroneous debit memo of 12/23/2012 to charge companys account with settlement
of bank loan which was paid by check #4020 on same date
m. Error on bank statement in entering deposit of 12/01/2012. Entered as - P48,171.
Correct amount P48,071
n. Deposit of Birch Company on 12/07/2012 credited in error on the companys

P892,346.
30
590,884.6
0
333,788.2
0
53,172.00
225.00
97,000.00
28,924.10
8737.40

10.00
26,900.00
20,350.00
50,000.00
100.00
18,192.00

account.
Determine the correct cash balance of bench company at December 31, 2012.
3. The bank statement of Amethyst Corporation for April, 2012 showed and ending balance of
P169,623. Deposit in transit on April 30 was P18,200. Outstanding checks as of April 30 were
P59435. During the month of April, the bank charged back NSF checks in the amount of P3,435 of
which P1,835 had been redeposited by April 30. The company mad no entry for the return and for
the redeposit of the checks.
On april 12, the bank charged Amethyst Corporations account for a P2,200 item which should have
been charged against the account of Ametite Corporation; the error was not detected by the bank.
During April, the proceeds from notes collected by the bank from Amethyst Corporation were
P7,548 and bank charges for this service were P180.
What is the unadjusted book balance for Cash of Amethyst Corporation at April 30, 2012?
4. In preparing the bank reconciliation at December 31, 2012, Silver Company had made available the
following information:
Balance per bank statement
Deposits in Transit
Outstanding Checks
Amount Erroneously credited by bank to Silvers account
Bank service charge for December
Check drawn, dated and recorded December 31, 2012, but not mailed until January
10, 2013 included in the total outstanding checks
Check of Silver Lining Company charged by bank in the account of Silver Company.

P380,750
52,000
67,500
4,000
750
9,000
12000

What is the amount shown as Cash on Silvers December 31, 2012 statement of financial position?
5. In reconciling the book and bank balances of the Cash account of Pearl Corporation, you discover
the following for the month of December 2012.
Balance per bank statement
Balance per books
Receipts of 12/31/2012 not yet deposited
Bank service charges for December
A paid check for P40,000 was recorded in the cash cook as P4,000
Customers check returned by bank marked DAIF

P400,000
387,000
100,000
1,000
22,000

Assuming no errors except as noted, what is the amount of the outstanding checks at December
31, 2012?
6. The bank statement of Taurus Companys checking account with Equitable Bank show:
Balance March 1
Deposits
Less: Checks deducted
Service Charges
Balance, March 31

P86,400
24

P59,604
87,360
P146,424
86424
P60,000

The following additional data are available:


a. A credit memorandum included with the bank statement indicated the collections of a note by
the bank for the Taurus Company, P4,800
b. An NSF check in the amount of P2,208 was returned by the bank and included in the total of
checks deducted on the bank statement

c. Deposits in transit as of March 31 totaled P12,000, and as of February 28, P5,760


d. Checks outstanding as of February 28, all of which cleared the bank in March, amounted to
P8,160; checks outstanding as of March 31were P19,600
e. Balance per ledger account as of March 31 was P45,585.60
f. The bank added the P10,400 deposit of another company to Taurus account in error.
g. The bank deducted one of Taurus checks as P7,200 instead of the correct amount of P720
h. Deposit of March 21 was recorded by the company as P1,223.80 and by the bank at the actual
amount of P1,320.20. The receipts for the day were from collections on account.
i. The deposits amount shown on the bank statement includes a P240 of interest earned by Taurus
on its checking account with the bank.
A. Prepare bank reconciliation as of March 31, of the current year for Taurus Company.
B. Prepare any journal entries needed at March 31, of the current year.
MULTIPLE CHOICE
7. Which of the following is not a basic characteristic of a 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
d. Internal audits at irregular intervals
8. A petty cash system is designed to
a. Cash checks for employees
b. Handle cash sales
c. Account for all small cash receipts and disbursements
d. Pay small miscellaneous expenses
9. In most situations, he petty cash fund is reimbursed just prior to the year and adjusting entry is to
be made to avoid
a. The overstatement of cash and understatement of expenses
b. The understatement of cash and overstatement of expenses
c. The misstatement of revenues
d. The misstatement of cash with the appropriate statement of expenses
10. In preparing the 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 customers note collected by bank on behalf of the depositor
11. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in
the depositors records and to identify bank errors. Adjustments should be recorded for
a. Bank errors, outstanding checks, and deposits in transits
b. All items except bank errors, outstanding checks, and deposits in transits
c. Book errors, bank errors, deposits in transits, and outstanding checks
d. outstanding checks and deposits in transit

12. A Cash Short and Over account is


a. Not generally accepted
b. Debited when the petty cash fund proves out over
c. Debited when the petty cash prove out short
d. A contra account to Cash
13. The journal entries for a bank reconciliation

a.
b.
c.
d.

Are taken from the balance per bank section only


May include a debit to office expense for bank service charges
May include a credit to accounts receivable for an NSF check
May include a debit to Accounts Payable for an NSF check

14. A bank may return a check to the maker for all of the following reasons except
a. The amount of the check is too small
b. The signature is missing
c. The check has been altered
d. The makers account has been closed
15. Which of the following is not true?
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 account Cash Short/Over, if debit balance, is presented as part of operating expenses.
16. Bank statements provide information about all of the following except
a. Checks cleared during the period
b. Errors made by the company
c. NSF Checks
d. Bank charges for the period
17. Seldom does the balance of the cash in bank account in the depositors account agree with the
balance appearing in the bank statement at a particular date because of
a. Bank secrecy requirements
b. Negligence by the bookkeeper
c. A tax avoidance scheme
d. Time-lapse differences
18. Which
a.
b.
c.
d.

of the following is not an aid to the effective control of cash disbursements?


Requiring all checks to be pre-numbered consecutively
Requiring all checks to be signed by one person and countersigned by another
Requiring approved supporting documents for each check issued
Requiring disbursements to be done in cash from daily receipts prior to making bank
deposits to minimize handling cash.

19. In a bank reconciliation that attempts to reconcile the bank balance to the correct cash balance, the
outstanding checks and deposits in transit affect reconciliation respectively in what way?
a. Added; Added
b. Deducted; Added
c. Added; Deducted
d. Deducted; Deducted
20. A good internal control system provides procedures for
a. Making payments from the days collections
b. Allowing one person to receive cash and to record cash receipts
c. Preparing regular bank reconciliation
d. Delaying the deposit of cahs collections because no one knows for sure the account to be
credited
21. If the cash balance shown in a companys accounting records is less than the correct cash balance,
and neither the company nor the bank 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 Transits

22. The petty cash fund is established in the amount of P5,000 and contains P4,000 in cash and P950 in
receipts for disbursements when it is replenished. The journal entry to record replenishment should
include credit/s to the following account/s
a. Petty Cash, P950
b. Petty Cash, P1,000
c. Cash In Bank, P950; Cash Over and Short, P50
d. Cash In Bank, P1,000
23. Eternity Company reported a balance of P43,000 in its cash account at the end of the month. There
were P20,000 deposits in transit and P15,000 outstanding checks. The bank statement showed a
balance of P50,000, service charges of P6,000 and the proceeds of note collected by the bank for
the company. The note had a face value of P15,000. The interest on the note collected by the bank
was
a. P12,000
b. P9,000
c. P6,000
d. P3,000
24. In preparing its August 31, 2012 bank reconciliation, Jade Company has available the following
information:
Balance per bank statement, 8/31/12
Deposit in Transit, 8/31/12
Return of customers NSF check, 8/31/12
Outstanding checks, 8/31/12
Bank service charges of August

P180,500
32,500
6,000
27,500
1,000

At August31, 2012, Jade Companys correct cash balance is


a. P192,500
b. P185,500
c. P179,500
d. P178,500

25. While checking the cash account of the Turquoise Company on December 31, 2012, you find the
following information:
Balance per books
Balance per bank statement
Deposit in bank closed by Bangko Sentral ng Pilipinas
Outstanding Checks
Deposit In Transit
Currency and coins counted
Petty cash fund (of which P4,500 is in the form of paid vouchers)
Bank charges not yet taken up in the books
Receivables from employees
Bond sinking fund cash
Error in recording a check in the books. The correct amount as paid by the bank is
P8,900 instead of P9,800 as recorded in the books, or difference of
The correct cash in bank balance for Turquoise Company on December 31, 2012
a. P554,150
b. P677,920
c. P702,290

P677,600
653,230
160,000
98,760
123,450
95,000
10,000
580
7,000
100,000
900

d. P837,920
26. The cash account shows a balance of P450,000 before reconciliation. The bank statement does not
include a deposit of P23,000 made on the last day of the month. The bank statement shows a
collection by the bank of P9,400 and a customers check for P3,200 was returned because it was
NSF. A customers check for P4,500 was recorded on the books at P5,400 and a check written for
P790 was recorded as P970.
The correct cash balance in the cash account was
a. P455,120
b. P455,480
c. P457,280
d. P478,480
27. In reconciling the book and bank balances of Pearl Corporation, you discover the following for the
month of December 2012:
Balance per bank statement
Balance per books
Receipts of December 31, 2012 not deposited until January 3, 2013
Bank service charges for December
DAIF check returned with the December bank statement

P45,000
34,000
10,000
300
3,200

A paid check for P4,000 was recorded in the cash register as P400
Customers check for P25,200 was recorded in the cash receipts journal as P22,500
Charges per bank statement included a check for Pear Company erroneously charged in the amount
of P8,000
Assuming no errors except as noted, the amount of outstanding checks is
a. P16,200
b. P29,600
c. P33,400
d. P63,000