1BDC CPA REVIEW INSTITUTE myadong, cpa;

O SQUARE ACCOUNTING SERVICES lacordova, cpa

3/F Fuentes Bldg., Marasbaras, Tacloban City

Mobile No.: 0927-981-6331; 0919-340-7505
E-mail: dargelaluser@gmail.com

THEORY OF ACCOUNTS TA-1004Q1: CASH AND CASH EQUIVALENTS

1. One of the following is least likely classified as cash for financial reporting purposes.
a. Bank drafts and money orders
b. Stale checks issued to creditors
c. Postdated checks from customers
d. Undelivered checks to trade suppliers

2. Under PAS 7, cash equivalents are short-term and highly liquid investments that are
a. classified as available-for sale securities
b. Readily convertible into cash and acquired one year before maturity
c. Readily convertible into cash and acquired six months before maturity
d. Readily convertible into cash and acquired three months before maturity

3. Balance sheet date is December 31, 2008. Which of the following is not a cash equivalent?
a. 12-month BSP treasury note due February 15, 2009 (date of purchase: November 31, 2008)
b. 6-month BSP treasury note due January 15, 2009 (date of purchase: October 1, 2008)
c. 3-month BSP treasury bill due March 15, 2009 ( date of purchase: December 15, 2008)
d. 1-month money market placement

4. Cash deposited in a bank experiencing financial difficulty is written down to

a. Present value c. Estimated realizable value
b. Maturity value d. Value in use

5. Cash denominated in foreign currency shall be translated to Philippine peso using

a. Closing rate c. Historical rate
b. Average rate d. Passing rate

6. Significant deposits in a foreign bank subject to foreign exchange restriction should be classified
a. as cash and cash equivalents with appropriate disclosure
b. as non-trade receivables with appropriate disclosure
c. as held-to-maturity securities with appropriate disclosure
d. as part of non-current assets with appropriate disclosure

7. A material credit balance in the cash in bank account (BANK OVERDRAFT)

a. Is treated as an error
b. Is treated as a current liability
c. Is netted against cash and net cash amount is reported
d. May be offset against a demand deposit account maintained in another bank

8. Checks drawn before the balance sheet date but held later delivery ( UNDELIVERED CHECKS)
a. Should be treated as trade receivable
b. Should be regarded as cash equivalents
c. Should be restored back to cash balance
d. Should be treated as outstanding checks for bank reconciliation purposes

9. Deposits held as compensating balances

a. Usually do not earn interest
b. If legally restricted and held against short-term credit may be included as cash
c. If legally restricted and held against long-term credit may be included among current assets
d. If unrestricted as to withdrawal may be included as cash

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10. The payment of accounts payable made after the close of the accounting period are recorded as if it were made at the
end of the current period.
a. Window dressing c. Kiting
b. Lapping d. Fishing

11. All of the following are necessary components of internal control over cash, except:
a. Daily deposit of all receipts in the companys bank account
b. Bank reconciliation
c. Petty cash system
d. Cash reserve

12. Which of the following is an incorrect application of the Imprest system of cash control?
a. Cash receipt must be deposited on a regular basis
b. Cash disbursements must be made in the form of checks, regardless of the amount
c. Material cash disbursements must be made in the form of checks
d. Insignificant cash disbursements must be made out of the petty cash fund.

13. Petty cash fund is

a. Restricted cash
b. Set aside for the payment of payroll
c. Separately classified as current asset
d. Money kept on hand for making minor disbursements of coins and currency

14. What is the major purpose of an Imprest petty cash fund?

a. To ease the payment of cash to vendors
b. To effectively control cash disbursements
c. To effectively plan cash inflows and outflows
d. to determine the honesty of the petty cashier

15. Under the Imprest fund system, the petty cash fund account 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 abolished and when the size of fund is decreased

PETTY CASH ACCOUNTING

For purposes of replenishing the petty cash fund, assume the following amounts;
Petty cash fund: P10,000 (representing the size of the fund)
Petty cash vouchers: P5,000 (representing various minor expenses for the period)\
CASE Coins and Currencies Amount of Replenishment Petty Cash Replenishment Journal
Check entry
1 Expenses 5,000
P5,000 P5,000 Cash in Bank 5,000
2 18.)
P4,000 17.) 19.)
20.)
3 22.)
P7,000 21.) 23.)
24.)

25. The entry to replenish the petty cash fund of P1,000 of various minor expenditures would include a :
a. Debit to cash c. debit to petty cash fund
b. credit to cash d, credit to petty cash fund

26. IOUs found in the petty cash drawer at the time of replenishment should be reported as part of
a. Cash and cash equivalents c. Trading securities
b. Receivables d. Prepare the petty cash voucher

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27. An employee asks for an authorized reimbursement of transportation charges out of the Imprest petty cash fund. To
document this transaction, the petty cashier should
a. Debit transportation expense c. credit cash
b. debit receivable from employee d. Prepare the petty cash voucher

28. The cash Short or Over account

a. is a real account
b. Is a contra-cash account
c. Is debited upon reimbursement when the petty cash fund proves out over
d. Is debited upon reimbursement when the petty cash fund proves short

29. A debit balance (i.e., shortage) in the Cash Short or over account at the end of the period that can be attributed to the
fault of the petty cashier is treated as a
a. Receivable from employee c. Miscellaneous expense
b. Payable to employee d. Miscellaneous income

30. A bank reconciliation is

a. A merger of two previously competing banks currently in the process of reconciliation
b. A statement sent by bank to depositor on a monthly basis
c. A formal financial statement that lists all of a firms bank account balances and previously closed bank accounts
d. A schedule that accounts for the differences between a firms bank statement balance (balance per bank) and the balance
shown in its general ledger ( balance per books)

31. This is normally added to the cash balance per ledger in order to determine the correct cash balance.
a. Note receivable collected by bank in favor of the depositor and credited to depositors account
b. Service charge
c. NSF customer check
d. Erroneous bank debit

32. This is normally deducted from the bank statement in preparing bank reconciliation
a. Certified check
b. Deposit in transit
c. Outstanding check
d. Reduction of loan charged to the account of the depositor

33. Balance per bank is LESS the correct balance. No error was committed. There must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding check
c. Deposits in transit
d. Bank charges not yet recorded by the company

34. Balance per book is MORE than correct balance. No error was committed. 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

35. Which will not require an adjusting entry in the depositor?

a. Bank service charge

b. NSF check from customer
c. Deposit of another company is credited to the account of the depositor
d. Check in payment of account payable for P2,000 is recorded by the depositor as P20

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