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Part I. Multiple Choice Theories


Which of the following is not an acceptable major asset classification?

a. Current assets
c. Intangible assets
b. Investments
d. Deferred charges


Which of the following does not appear on a statement of retained earnings?

a. Net loss
c. Preference share dividends
b. Prior period adjustments
d. Other comprehensive income


Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
c. Coin, currency and available funds
d. Postdated checks and I.O.U.s


The term cash refer to

a. Currency and coins which are in the circulation and legal tender
b. Money and any other negotiable instrument that is payable in money
c. Checks, including those which are unacceptable by bank for outright encashment
d. Both a and b


What is a compensating balance?

a. Saving account balances
b. Margin accounts held with brokers
c. Temporary investments serving as collateral for outstanding loans
d. Minimum deposits required to be maintained in connection with a borrowing arrangement


The statement of financial position is useful for analyzing all of the following except:
a. Liquidity
c. Solvency
b. Profitability
d. Financial flexibility


It comprises items of income and expenses, including reclassification adjustments that are
not recognized in profit or loss as required or permitted by PFRS.
a. Comprehensive Income
c. Other comprehensive income
b. Profit or Loss
d. Retained Profit


Which of the following statement is true?

a. Kitting occurs when a collection from one customer is misappropriated then conceals
this defalcation by applying a subsequent collection made from another customer.
b. Lapping is a practice of opening books of accounts beyond the close of the reporting
period for the purpose of showing a better financial position and performance.
c. In banking practice, a check becomes stale if not encashed within six months from the
time of issuance.



Window dressing a practice that occurs when a check is drawn against a first bank and
depositing the same check in a second bank to cover shortage in the latter bank.

In financial accounting, gains may be defined as

a. Total receipts of cash
b. It is becoming obsolete

c. Total disbursements
d. Total increase in net assets other
Other than revenues

10. Travel advances should be reported as

a. Supplies
b. Cash because they represent the equivalent of money
c. Investments
d. None of the above

11. Which item is no longer allowed to be shown on the face of the income statement?
a. Finance cost
c. Extraordinary item
b. Tax expense
d. Share of income and loss of associates

12. Which of the following is an example of the expense recognition principle of associating
cause and effect?
a. Depreciation of Property
c. Allocation of insurance cost
b. Sales commission
d. Officers salaries

13. Expense is recognized when

a. It has been paid for
b. It is probable that economic benefit can be measured reliably
c. It is probable that an outflow of economic benefit has occurred
d. Both B and C

14. It refers to the economic benefits in the form of an increase in assets or decrease in
liabilities resulting in increase in equity other than contributions from owners.
a. Asset
c. Gain
b. Income
d. Liability

15. Which of the following is an essential characteristic of an asset?

a. An asset is tangible
b. An asset is obtained at cost
c. An asset provides future economic benefits
d. The claims to an assets benefits is enforceable

16. The following are examples of cash and cash equivalents, except:
a. One year BSP treasury purchased 3 months before maturity
b. Three month BSP treasury bill
c. Two month money market instrument
d. Three month BSP treasury bill purchased one year ago

17. Which of the following is considered as a Credit Memo?

a. NSF check


18. All

Unauthorized check
Note collected by bank
Bank service charge

of the following are considered as Debit memo, except;

Bank charges
NSF check
Reduction of Loan
Interest earned

19. The imprest system of a petty cash fund

a. Requires that all cash receipts should be deposited intact
b. Requires that all cash disbursements should be made by means of check
c. Is a system of control of cash
d. All of the above

20. In fluctuating fund system,

a. Petty cash disbursements are immediately recorded
b. The establishment of the petty cash fun includes debit to cash in bank and credit petty
cash fund
c. No adjustment entry is necessary
d. Both a and c are correct

Part II. Short Problems

(Compute the following requirements with supporting solutions in your yellow paper)

The following data are selected information on BojosKee Company for the year 2016:
Total liabilities, December 31
Accounts Receivable, December 31
Cash balances, December 31
Total Assets, December 31
Total Assets, January 1
Stockholders Equity, January 1
Collections from customers
Accounts receivable, January 1
Cash Balance, January 1
BojosKees net income for 2016 would be



On January 1, 2016, Benj Company established a petty cash fund of 100,000. On

December 31, 2016, the petty cash fund was examined and found to have receipts and
disbursements for miscellaneous general expenses amounting to P81,200. In addition,
there was a cash amounting to 15,000.

Required: What is the amount of petty cash shortage or overage?

3. In your audit of Infante Company for the year ended December 31, 2016, you gathered the

Treasury bills, due January 31 2017 (purchased Feb. 1, 2016)

Current account at BDO


Current account at DBP


Payroll account


Money Order


Foreign bank account Restricted

$ 10,000,000

Postage Stamps


Employees post-dated check


IOU from controller


Travelers Check


Insufficient funds check


Compute for the cash and cash equivalents that will be reported on the December 31,
2016 statement of financial position.
4. The Cash account in the ledger of Doloso Company had a balance of 844,800 at December 31,
2016. An examination of the account, however disclosed the following:

The sales book was left open up to January 5, 2017, and cash sales totaling 120,000 were
considered as sales in December.
Checks of 74,000 in payment of liabilities were prepared before December 31, 2016, recorded
in the books, but not mailed or delivered to payees.
Post-dated checks totaling 62,400 are being held by the Cashier as part of cash. The
companys experience shows that post-dated checks are eventually realized.
Customers check for 12,000 deposited with but returned by bank, NSF on December
The cash account includes 320,000 earmarked for the purchase of personal computers which
will soon be delivered.

The cash balance to be shown on the statement of financial position at December 31, 2016
should be__________________

5. The following are balances of Mitch Corporation at December 31, 2016

Undeposited collection (in currency and coins)


Checking Account
Time Deposits (expected use in Feb 2017)
Money Order
Money Market Placement


Compute for the cash balance of Mitch Corporation

6. The Bank statement for the current account of Capasar Co. showed a December 31, 2015, balance
of 585,284. Information that might be useful in preparing a bank reconciliation is as follows:

a) Outstanding checks were 52,810

b) The December 31, 2015, cash receipts of 23,000 were not deposited in the bank until
January 2, 2016.
c) One check written in payment of rent 8,940 was correctly recorded by the bank but was
recorded by Capasar Co. as 9,840 disbursement.
d) In accordance with our prior authorization, the bank withdrew 18,000 directly from the current
account as payment on a mortgage note payable. The interest portion of that payment was
14,000. Capasar Co. has made no entry to record the automatic payment.
e) Bank service charges of 740 were listed on the bank statement.
f) A deposit of 35,000 was recorded by the bank on December 12, but it did not belong to
Capasar Co.
g) The bank statement included a charge of 3,400 for a non-sufficient fund check. The company
will seek payment from the customer.
h) Capasar Co. maintains an 8,000 petty cash fund that was appropriately reimbursed at the end
of December
i) According to instructions from Capasar Co. on December 30, The bank withdrew 400,000 from
the account and purchased treasury bills for Capasar Co. The company recorded the
transaction in its books on December 31, when it received notice from the bank. Half of the
treasury bills mature in three months and the other half in six months.

Requirement: Compute for the balance of the following


Total Debit Memo given by the bank

Total Credit Memo given by the bank
Cash in bank per books on December 31, 2015
Adjusted cash balance on December 31, 2015
Total Cash and cash equivalents