Cash Flashcards
TRUE OR FALSE: An accountant must prepare a journal entry for every petty cash transaction.
FALSE
TRUE OR FALSE: Cash Equivalents are the same as Cash
FALSE
The person who is in charge of the company’s petty cash.
Petty Cash Custodian
What are the 2 ways of Accounting for Petty Cash Fund?
- Imprest System
2. Fluctuating fund System
What are the 2 requirements for an item to be considered as Cash?
- It must be unrestricted.
2. It can be immediately used for current operations of business.
TRUE OR FALSE: Cash allotted for Non-Current Assets must NOT be reported as Cash in the Statement of Financial Position
TRUE
What do you call the person who is entitled to encash the check?
Payee
2 requirements for a check to be reported as Cash in the Balance Sheet
- It must be received on or before the Balance Sheet Date.
2. The date should be on or before the Balance Sheet Date.
TRUE OR FALSE: Traveler’s check must undergo the clearing process.
FALSE
What is a manager’s check?
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.
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?
- Post-dated check
- Dr Cash in Bank xx
Cr Accounts Payable xx
How many months must it take before a check can be considered a stale check?
6 months
TRUE OR FALSE: A bank overdraft is considered as Cash.
FALSE
Note: A BANK DRAFT is considered as Cash.
In situations like foreign currency, we should use the exchange rate during…
The Balance Sheet Date.
If a bank loan has a maturity date within one year, what do we call that kind of loan?
Short Term Loan
If a bank loan has a maturity date within one year, the compensating balance must be reported as…
a Current Asset
If a bank loan is a non-current liability, the compensating balance must be reported as…
a Non-Current Liability
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?
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.
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?
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.
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?
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.
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.
FALSE
Can we report our cash in a closed bank as Cash for reporting purposes?
No, because it’s already restricted.
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?
P200 000
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?
P800 000 worth of receivables.
NSF stands for…
No Sufficient Funds
DAIF means…
Drawn Against Insufficient Funds
DAUD means…
Drawn Against Unclear Deposits
TRUE OR FALSE: NSF Checks must not be reported as Cash
TRUE
Under Imprest system of cash control, the cash that we have…
Must be deposited to the bank.
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?
Ask the customer to write a new check.
What is the journal entry for the initial funding, replenishment, and increasing the allocated funds for Petty Cash Fund?
Dr Petty Cash Fund xx
Cr Cash in Bank xx
When creating a check to fund Petty Cash, who should be the payee?
The Petty Cash Custodian
What duties should be segregated in terms of handling Cash?
- Custody
- Authorization
- Recording
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?
Dr Operating Expenses 18 000
Cr Petty Cash Fund 18 000
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.
Dr Petty Cash Fund 18 000
Cr Cash in Bank 18 000
What journal entry must one do to decrease the allocated funds for Petty Cash Fund?
Dr Cash in Bank xx
Cr Petty Cash Fund xx
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.
B
Note: You don’t need to replenish this because the company only spent P500 on its Petty Cash Fund.
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?
Dr Cash Short or Over 1 000
Cr Petty Cash Fund 1 000
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?
Dr Receivable from Custodian 1 600
Cr Cash Short or Over 1 600
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?
Dr Miscellaneous Expense 1 600
Cr Cash Short or Over 1 600
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.
A
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?
Dr Cash Short or Over 500
Cr Accounts Receivable 500
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?
Dr Cash Short or Over 500
Cr Miscellaneous Income 500
