Cash

Question 1

TRUE OR FALSE: An accountant must prepare a journal entry for every petty cash transaction.

Answer 1

FALSE

Question 2

TRUE OR FALSE: Cash Equivalents are the same as Cash

Answer 2

FALSE

Question 3

The person who is in charge of the company’s petty cash.

Answer 3

Petty Cash Custodian

Question 4

What are the 2 ways of Accounting for Petty Cash Fund?

Answer 4

1. Imprest System

2. Fluctuating fund System

Question 5

What are the 2 requirements for an item to be considered as Cash?

Answer 5

1. It must be unrestricted.

2. It can be immediately used for current operations of business.

Question 6

TRUE OR FALSE: Cash allotted for Non-Current Assets must NOT be reported as Cash in the Statement of Financial Position

Answer 6

TRUE

Question 7

What do you call the person who is entitled to encash the check?

Answer 7

Payee

Question 8

2 requirements for a check to be reported as Cash in the Balance Sheet

Answer 8

1. It must be received on or before the Balance Sheet Date.

2. The date should be on or before the Balance Sheet Date.

Question 9

TRUE OR FALSE: Traveler’s check must undergo the clearing process.

Answer 9

FALSE

Question 10

What is a manager’s check?

Answer 10

It is a check made by the manager of a bank ensuring that they are ready to give the amount to the payee of the check.

Question 11

CASE: We gave a check to our supplier. Today is December 28, 2020 but the date on the check was January 10, 2021.
Initial journal entry is as follows:

Accounts Payable xx
Cash in Bank xx

Question #1: What kind of check is this?
Question #2: What is the correct journal entry for this as of December 28, 2020?

Answer 11

1. Post-dated check
2. Dr Cash in Bank xx
   Cr Accounts Payable xx

Question 12

How many months must it take before a check can be considered a stale check?

Answer 12

6 months

Question 13

TRUE OR FALSE: A bank overdraft is considered as Cash.

Answer 13

FALSE

Note: A BANK DRAFT is considered as Cash.

Question 14

In situations like foreign currency, we should use the exchange rate during…

Answer 14

The Balance Sheet Date.

Question 15

If a bank loan has a maturity date within one year, what do we call that kind of loan?

Answer 15

Short Term Loan

Question 16

If a bank loan has a maturity date within one year, the compensating balance must be reported as…

Answer 16

a Current Asset

Question 17

If a bank loan is a non-current liability, the compensating balance must be reported as…

Answer 17

a Non-Current Liability

Question 18

A company has P200 000 in a bank. We will apply for a vehicle loan amounting to P1 000 000 from this bank but it has a 1% compensating balance policy.

QUESTION:
If the compensating balance of P10, 000 is not legally restricted, how much is its Cash, Current Asset, and Non-Current Asset?

Answer 18

Cash = P200 000
Current Assets = P200 000
Non Current Assets = 0

Since it is not legally restricted, it can still withdraw the P10 000 compensating balance in its P200 000 account. Therefore, this will be considered as BOTH Cash and Current Asset.

Question 19

A company has P200 000 in a bank. We will apply for a vehicle loan amounting to P1 000 000 from this bank but it has a 1% compensating balance policy.

QUESTION:
If the compensating balance of P10, 000 is legally restricted and the auto loan is payable within one year from the date of its receipt, how much is its Cash, Current Asset, and Non-Current Asset?

Answer 19

Cash = P190 000
Current Asset = P200 000
Non-Current Asset = 0

We will take out the P10 000 from Cash compensating balance since this is legally restricted. The P10 000 will be reported as a current receivable since the loan is payable within a year, and this is also the reason why we still have P200 000 in our current assets.

Question 20

A company has P200 000 in a bank. We will apply for a vehicle loan amounting to P1 000 000 from this bank but it has a 1% compensating balance policy.

QUESTION:
If the compensating balance of P10, 000 is legally restricted and the auto loan is payable within 5 years from the date of its receipt, how much is its Cash, Current Asset, and Non-Current Asset?

Answer 20

Cash = P190 000
Current Asset = P190 000
Non-Current Asset = P10 000

We will take out the P10 000 from Cash compensating balance since this is legally restricted. The P10 000 will be reported as a non-current asset since the loan is payable beyond 1 year, and this is also the reason why we still have P190 000 in our current assets.

Question 21

TRUE OR FALSE: If a business receives a post-dated check from a customer, an accountant must prepare a journal entry as proof that the customer is already paid.

Answer 21

FALSE

Question 22

Can we report our cash in a closed bank as Cash for reporting purposes?

Answer 22

No, because it’s already restricted.

Question 23

A company has P1 000 000 in SHS Bank. Due to a financial crisis, the bank began to lose money. Before losing all of its resources they filed for bankruptcy. They released a statement saying that they can return 20% of the savings of all their clients, and the remaining 80% will be paid back once SHS Bank liquidates all of its resources.

QUESTION:
How much can be reported as Cash?

Answer 23

P200 000

Question 24

A company has P1 000 000 in SHS Bank. Due to a financial crisis, the bank began to lose money. Before losing all of its resources they filed for bankruptcy. They released a statement that they can return 20% of the savings of all their clients, and the remaining 80% will be paid back once SHS Bank liquidates all of its resources.

QUESTION:
How much is the remaining 80% and how should the company classify that account?

Answer 24

P800 000 worth of receivables.

Question 25

NSF stands for...

Answer 25

No Sufficient Funds

Question 26

DAIF means...

Answer 26

Drawn Against Insufficient Funds

Question 27

DAUD means...

Answer 27

Drawn Against Unclear Deposits

Question 28

TRUE OR FALSE: NSF Checks must not be reported as Cash

Answer 28

TRUE

Question 29

Under Imprest system of cash control, the cash that we have...

Answer 29

Must be deposited to the bank.

Question 30

If the check that was given to us was a stale one, what is the remedy for the payment of the service we have done to them?

Answer 30

Ask the customer to write a new check.

Question 31

What is the journal entry for the initial funding, replenishment, and increasing the allocated funds for Petty Cash Fund?

Answer 31

Dr Petty Cash Fund xx | Cr Cash in Bank xx

Question 32

When creating a check to fund Petty Cash, who should be the payee?

Answer 32

The Petty Cash Custodian

Question 33

What duties should be segregated in terms of handling Cash?

Answer 33

1. Custody 2. Authorization 3. Recording

Question 34

SPH Company has a policy of having P20 000 for its Petty Cash Fund. In the next 3 days, it has only P2 000 left in its drawer. QUESTION: What is the first journal entry to record the expenses incurred by the company?

Answer 34

Dr Operating Expenses 18 000 | Cr Petty Cash Fund 18 000

Question 35

SPH Company has a policy of having P20 000 for its Petty Cash Fund. In the next 3 days, it has only P2 000 left in its drawer. Assuming that the accountant has recorded the expenses already, determine the amount that should be put in to replenish the Petty Cash Fund.

Answer 35

Dr Petty Cash Fund 18 000 | Cr Cash in Bank 18 000

Question 36

What journal entry must one do to decrease the allocated funds for Petty Cash Fund?

Answer 36

Dr Cash in Bank xx | Cr Petty Cash Fund xx

Question 37

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. QUESTION: Which journal entry/ies is/are appropriate for this transaction? ``` a. Dr Petty Cash Fund 9 500 Cr Cash in Bank 9 500 b. Dr Operating Expenses 500 Cr Petty Cash Fund 500 c. Both entries should be done. ```

Answer 37

B Note: You don't need to replenish this because the company only spent P500 on its Petty Cash Fund.

Question 38

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. QUESTION: Assuming that the right journal entry has been recorded, it was found out that that the company has only P8 500 bills and coins in it. How should an accountant record such cash shortage?

Answer 38

Dr Cash Short or Over 1 000 | Cr Petty Cash Fund 1 000

Question 39

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. QUESTION: Assuming that the right journal entry has been recorded, it was found out that that the company has only P7 900 worth of bills and coins in it. Assuming that the journal entry for cash shortage was already done, it was revealed in CCTV footage that the Petty Cash Custodian stole the missing amount. How should we record this in the book of original entry?

Answer 39

Dr Receivable from Custodian 1 600 | Cr Cash Short or Over 1 600

Question 40

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. QUESTION: Assuming that the right journal entry has been recorded, it was found out that that the company has only P7 900 worth of bills and coins in it. Assuming that the journal entry for cash shortage was already done, there was no proof that anyone stole anything from the drawer. How should we record this in the book of original entry?

Answer 40

Dr Miscellaneous Expense 1 600 | Cr Cash Short or Over 1 600

Question 41

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. Assuming that the right journal entry has been recorded, it was found out that that the company has P10 000 worth of bills and coins in it. Question: Is there an overage in this transaction? What's the appropriate journal entry for this transaction? a. Dr Cash in Bank 500 Cr Cash Short or Over 500 b. Dr Petty Cash Fund 500 Cr Cash Short or Over 500 c. No entry necessary.

Answer 41

A

Question 42

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. Assuming that the right journal entry has been recorded, it was found out that that the company has P10 000 worth of bills and coins in it. The right journal entry was done for overage, and it was found out that the excess amount was a payment from a customer who settled the remainder of his bill last month. Question: What is the correct journal entry for this transaction?

Answer 42

Dr Cash Short or Over 500 | Cr Accounts Receivable 500

Question 43

SPH Company has a policy of having P10 000 for its Petty Cash Fund. At the end of its accounting period, P500 was only drawn against it. This is because the company needed to purchase office supplies. Assuming that the right journal entry has been recorded, it was found out that that the company has P10 000 worth of bills and coins in it. The right journal entry was done for overage, and the source of the excess amount cannot be traced. Question: What is the correct journal entry for this transaction?

Answer 43

Dr Cash Short or Over 500 | Cr Miscellaneous Income 500