MODULE 1: CASH AND CASH EQUIVALENT PROBLEM SET

Instructions: Print a copy of this problem set. The first question per topic will be answered by the instructor in class. The second question will be
answered by a volunteer or assigned member of the class. The answer sheet shall include answers and solutions to both questions per topic.

I. Identification of Cash and Cash Equivalent Items

A. ABC Co. has the following cash-related items:
Customer’s Check P10,000.00
Cashier’s Check 10,000.00
Manager’s Check 10,000.00
Traveler’s Check 10,000.00
Postdated Check from Customer 10,000.00
Postdated Check to Supplier 10,000.00
Stale Check 10,000.00
NSF Check from Customer 10,000.00
Bank Draft 10,000.00
Money Order 10,000.00
IOU from Customer 10,000.00
IOU to Supplier 10,000.00
Petty Cash Fund 10,000.00
Checking Account – BPI (with legally restricted compensating balance of P100,000.00) 1,000,000.00
Savings Account – BPI (with non-legally restricted compensating balance of P100,000.00 1,000,000.00
Payroll Fund – BPI 1,000,000.00
Dividend Fund – BDO 1,000,000.00
Sinking Fund – BDO 1,000,000.00
Cash Fund for Acquisition of PPE – BDO 1,000,000.00
Savings Account – BDO (Overdraft) (100,000.00)
Foreign Demand Deposits (current exchange rate: 1USD = P60.00 USD 100,000.00
3-month Time Deposit P100,000.00
6-month Time Deposit 100,000.00
2-year Time Deposit 100,000.00
1-year BSP treasury bill purchased 3 months before maturity 100,000.00
1-year BSP treasury bill purchased 1 year ago but maturing in less than 3 months 100,000.00
Investments in Equity Securities 100,000.00
Redeemable Preferred Shares acquired 3 months before redemption date 100,000.00

1. How much should be reported as “Cash”?

2. How much should be reported as “Cash Equivalents”?
3. How much should be reported as “Cash and Cash Equivalents”?

B. DEF Co. reported P10,000,000.00 in its 2025 Statement of Financial Position as Cash and Cash Equivalents. Upon perusal of the books, you
found that the following items are included in the Cash and Cash Equivalents account:
• Check payable to DEF Co. dated January 03, 2026, in payment of a sale amounting to P100,000.00
• Check payable to the entity and deposited on December 31, 2025 but was returned on January 03, 2026 stamped with “NSF” on its
face with the amount of P100,000.00
• Check drawn on the entity’s account dated December 31, 2025 but is not mailed to the supplier until January 03, 2026 amounting to
P100,000.00
• Check drawn on the entity’s account dated January 03, 2026 mailed to the supplier on December 25, 2025 amounting to P100,000.00
• Check payable to the entity dated May 01, 2025 but is yet to be deposited or encashed with the bank as of December 31, 2025
amounting to P100,000.00
• Cash and Currencies in the petty cash box amounting to P10,000.00
• The cash receipts journal was held open until January 03, 2026 during which P1,000,000.00 is collected on sales and pre-existing
accounts receivable
• The company maintains a savings account and a checking account with BPI. The savings account statements shows a credit of
P1,500,000.00 as of December 31, 2025 while the checking account shows a P100,000 debit account as of December 31, 2025.
• The company invested P1,000,000.00 in the shares of ABC Co. on November 30, 2025. It expects to be able to sell the investment
by January 31, 2026 at P1,500,000.00.
• A 10-year BSP Treasury bill with maturity date on January 31, 2026 was purchased on December 01, 2025 amounting to
P2,000,000.00.
II. Accounting for Petty Cash Fund and Cash Shortage/Overage
A. GHI Co. had the following transactions related to its petty cash fund:
• On December 01, 2025, it established a petty cash fund of P10,000.00.
• On December 15, 2025, the following items were found in its petty cash box:
o Currency and Coins, P1,000.00
o Postage Stamps, P500.00
o Vouchers for (1) telephone expenses paid, P4,000.00, (2) transportation expenses, P2,000.00, and (3) miscellaneous
expenses, P500.00
o IOUs from employees, P1,000.00
o Currency in envelope marked “collections for christmas party”, P1,000.00
• On December 15, 2025, the fund was replenished.
• On December 16, 2025, the fund was increased to P15,000.00.
• On December 31, 2025, the following items were found in its petty cash box:
o Currency and Coins, P1,500.00
o Postage Stamps, P1,000.00
o Unreplenished Expenses Vouchers, P8,500.00
o IOUs from employees, P2,000.00
o Currency in envelope marked “collections for new year’s party” but it was open containing P1,000.00
o Credit memo for payment of accounts payable, P2,000.00

1. Show the proper journal entries using the imprest fund system.
2. Show the proper journal entries using the fluctuating fund system.

B. JKL Co. uses the imprest fund system to manage its petty cash of P20,000.00. As of year-end, the petty cash box contains the following items:
• 2 pieces of P1,000 bills
• 3 pieces of P500 bills
• 5 pieces of P100 bills
• 15 pieces of P20 coins
• 20 pieces of P10 coins
• Expense voucher stating that “Utilities expense, P2,500.00”
• Memorandum stating “borrowed P3,000.00 as employee vale”
• Credit memo from supplier stating “acknowledgement of payment, P4,500.00
• An envelope containing P2,500.00 marked as “collections for employee’s birthday”. The envelope was tightly sealed.
• Mr. A, JKL’s petty cash cashier, admitted that he got money from the petty cash box but forgot to record it.

1. How much should be included in Cash and Cash Equivalent?

2. How much should be included in Expenses?
3. How much should be included in Receivables?
4. How much is the cash shortage/overage to be recorded? Show the proper entry.
III. Bank Reconciliation
A. MNO Co. has the following information relating to their cash in bank:
• The bank statement at the end of the month shows P10,000.00
• Deposits not yet reflected in the bank statement, P84,000.00
• Checks issued but not yet encashed by the holders that are already recorded in the ledger, P65,000.00.
• The bank made an error of debiting the account of MNO Co. which actually a debit for MON, Co., P4,000.00
• The cash ledger at the end of the month shows P12,000.00
• Notes Receivable collected by the bank for MNO, P16,000.00
• Interest earned by MNO for keeping their cash in the bank, P5,000.00
• Bank service charges, P1,000.00
• NSF Check received by MNO but returned by the bank P7,000.00
• The bookkeeper erroneously recorded a cash sale as a sale on account, P8,000.00

1. Show Bank Reconciliation using the Adjusted Balance Method.

2. Show Bank Reconciliation using the Book to Bank Method.
3. Show Bank Reconciliation using the Bank to Book Method.

B. PQR’s cash ledger shows the following

Cash Receipts Ledger Cash Disbursement Ledger
Dec. 1 P60,000.00 Dec. 6 Check No. 111 P5,000.00
Dec. 13 20,000.00 Dec. 7 Check No. 112 10,000.00
Dec. 25 30,000.00 Dec. 10 Check No. 113 18,000.00
Dec. 31 40,000.00 Dec. 14 Check No. 114 2,000.00
Dec. 28 Check No. 115 37,000.00
Dec. 32 Check No. 116 28,000.00
Total P150,000.00 P100,000.00

PQR’s Bank Statement in STU Bank shows the following

Date Check No. Debit Credit Balance
Dec. 1 P60,000.00 P60,000.00
Dec. 8 Check No. 111 P5,000.00 55,000.00
Dec. 11 Check No. 112 10,000.00 45,000.00
Dec. 12 Check No. 113 18,000.00 27,000.00
Dec. 14 20,000 47,000.00
Dec. 17 Check No. 114 2,000.00 45,000.00
Dec. 26 30,000.00 75,000.00
Dec. 27 15,000.00 CM 90,000.00
Dec. 30 5,000.00 RT 85,000.00
Dec. 31 1,000.00 SC 84,000.00

1. How much is the unadjusted book and bank balance?

2. How much is the deposits in transit and outstanding checks?
3. How much is the total adjustments for the books?
4. How much is the correct adjusted balance of cash?
5. Show the adjusting entries to be recorded in the ledger.
IV. Proof of Cash
A. VWX Co. shows the following data:
• Cash in Bank per Ledger as of January 31, P50,000.00
• Book Debits for February, P200,000.00 (including January CM for note of 15,000.00)
• Book Credits for February, P180,000.00 (including NSF Check of 15,000.00 and service charge of P1,000.00)
• Bank Statement balance as of January 31, P84,000.00
• Bank Credits for February. P170,000.00 (including CM for note collected P20,000.00 and January deposits in transit of P40,000.00)
• Bank Debits for February, P130,000.00 (including NSF check of P10,000.00 and January outstanding check of P65,000.00)

Show the proof of cash.

B. XYZ Co. shows the following data

Nov. 30 Dec. 31
Book Balance P1,900,000.00 P900,000
Total Cash Receipts per Book 1,400,000.00
Total Cash Disbursement per Book 2,400,000.00
Bank Balance 2,100,000.00
Total Debits in Bank Statements 2,500,000.00
Total Credits in Bank Statements 1,200,000.00
NSF Check 60,000.00 40,000.00
Collections directly by the Bank, recorded only on the succeeding month 30,000.00 50,000.00
Overstatement of Check in payment of salaries 90,000.00 120,000.00
Deposits in Transit 130,000.00 260,000.00
Outstanding Checks 270,000.00 30,000.00

1. How much is the adjusted balance for Nov. 30?

2. How much is the adjusted receipts?
3. How much is the adjusted disbursements?
4. How much is the adjusted balance for Dec. 31?