Podcast
Questions and Answers
What are credit memos typically categorized as in bank reconciliation?
What are credit memos typically categorized as in bank reconciliation?
- Errors committed by the bank
- Adjustments due to outstanding checks
- Additions made to the depositor's account (correct)
- Deductions made by the bank
Which item is NOT a typical example of a debit memo?
Which item is NOT a typical example of a debit memo?
- Collections made by the bank (correct)
- Payment of loans
- NSF/DAIF checks
- Bank service charges
How would you categorize errors caused by the depositor in bank reconciliation?
How would you categorize errors caused by the depositor in bank reconciliation?
- Credit memos
- Bank errors
- Debit memos
- Book errors (correct)
Which of the following statements is true regarding outstanding checks?
Which of the following statements is true regarding outstanding checks?
What does the term 'balance per books, end' refer to in the reconciliation process?
What does the term 'balance per books, end' refer to in the reconciliation process?
Under what condition can an overdraft be offset against another account?
Under what condition can an overdraft be offset against another account?
How should cash in foreign currency be measured for accounting purposes?
How should cash in foreign currency be measured for accounting purposes?
What is the accounting entry when there is a cash shortage due to employee fault?
What is the accounting entry when there is a cash shortage due to employee fault?
Which statement is true regarding cash in closed banks?
Which statement is true regarding cash in closed banks?
What are unreplenished vouchers classified as?
What are unreplenished vouchers classified as?
What is the purpose of the 'Petty Cash Fund' establishment entry in an imprest system?
What is the purpose of the 'Petty Cash Fund' establishment entry in an imprest system?
In a fluctuating fund system, what is the entry for replenishing petty cash?
In a fluctuating fund system, what is the entry for replenishing petty cash?
Which of the following is NOT counted as petty cash impurities?
Which of the following is NOT counted as petty cash impurities?
What should be included in the computation of petty cash accountabilities?
What should be included in the computation of petty cash accountabilities?
How should excess amounts in the cash account be treated?
How should excess amounts in the cash account be treated?
What is the recommended treatment when cash in a bankrupt bank remains unreplenished in petty cash?
What is the recommended treatment when cash in a bankrupt bank remains unreplenished in petty cash?
What is the purpose of the adjusted petty cash fund balance computation?
What is the purpose of the adjusted petty cash fund balance computation?
Which of the following is NOT considered an item in the varied petty cash entries?
Which of the following is NOT considered an item in the varied petty cash entries?
What does a pro forma bank reconciliation statement compare?
What does a pro forma bank reconciliation statement compare?
Which of these items is included when computing the adjusted PCF balance?
Which of these items is included when computing the adjusted PCF balance?
What represents petty cash impurities?
What represents petty cash impurities?
What is the purpose of a proof of cash?
What is the purpose of a proof of cash?
Which item indicates cash transactions that have been credited to the book but not yet to the bank?
Which item indicates cash transactions that have been credited to the book but not yet to the bank?
What does an overstatement of cash receipts (CR) imply in a proof of cash?
What does an overstatement of cash receipts (CR) imply in a proof of cash?
If an NSF (Non-Sufficient Funds) check is recorded, what does it signify?
If an NSF (Non-Sufficient Funds) check is recorded, what does it signify?
What does the adjusted balance reflect in the context of cash and cash equivalents?
What does the adjusted balance reflect in the context of cash and cash equivalents?
Which of the following is not included in cash and cash equivalents?
Which of the following is not included in cash and cash equivalents?
What action should be taken if there is a recorded understatement of cash disbursements (CD)?
What action should be taken if there is a recorded understatement of cash disbursements (CD)?
Which of the following best describes a debit memo in the context of banking?
Which of the following best describes a debit memo in the context of banking?
What is the first step in computing petty cash shortage or overage?
What is the first step in computing petty cash shortage or overage?
Which item is NOT considered part of petty cash accountabilities?
Which item is NOT considered part of petty cash accountabilities?
Which type of check is dated after the reporting date and cash count date?
Which type of check is dated after the reporting date and cash count date?
What does the term 'unexpended employees’ contributions' refer to in petty cash accounting?
What does the term 'unexpended employees’ contributions' refer to in petty cash accounting?
Which of the following is included in the computation of petty cash as accounted for?
Which of the following is included in the computation of petty cash as accounted for?
How is a petty cash fund replenished according to the provided information?
How is a petty cash fund replenished according to the provided information?
Which of the following best describes stale checks?
Which of the following best describes stale checks?
What would be classified as a cash collection of accounts receivable?
What would be classified as a cash collection of accounts receivable?
Study Notes
Current Liabilities and Cash Management
- Current liabilities generally include bank overdrafts unless specific criteria for offsetting are met.
- Overdrafts can be offset if multiple accounts are maintained in the same bank and the other accounts are unrestricted.
- Overdrafts can also be offset if associated with cash management practices, such as in a zero-balance checking account.
Measurement of Cash
- Cash is recorded at face value, reflecting its nominal value.
- Foreign currency cash must be translated to Philippine Peso at the reporting date using the closing or spot rate.
- Cash in closed banks or those in bankruptcy is measured at estimated realizable value and included as noncurrent assets if recoverable amounts are below face value.
Accounting for Cash Shortages and Overages
- Cash shortages are recorded as debits to "Cash Short or Over," eventually closed to "Receivable" or "Loss" based on investigation results.
- Cash overages are credited to "Cash Short or Over," then closed to "Payable" or "Loss," depending on the related investigation.
Petty Cash Fund Management
- The Imprest Fund System requires specific journal entries for establishing, paying expenses, replenishment, adjusting unreplenished expenses, increasing, or decreasing the fund.
- Memo entries for expenses paid from the petty cash fund do not affect the financial statements directly.
Computation of Petty Cash Balances
- Petty cash shortages and overages are calculated based on accounted petty cash minus accountabilities.
- Items such as coins, unexpended employee contributions, checks for deposit, and stale checks contribute to the computation of petty cash accountabilities.
Bank Reconciliation Process
- The bank reconciliation statement reflects discrepancies between the book balance and bank balance, addressing credit memos, debit memos, and errors from both sides.
- Reconciling items include transactions not recorded by either the depositor or the bank, which can affect cash balances at month-end.
Proof of Cash
- The proof of cash summarizes cash movement, adjusting for credit and debit memos to reconcile the adjusted cash balance between the bank and the books.
- It highlights any errors, such as overstatements or understatements of cash receipts (CR) and cash disbursements (CD).
Handling NSF Checks
- NSF (Non-Sufficient Funds) checks must be tracked as they represent payments that could not be processed due to insufficient balances, affecting cash flow and financial statements.
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Description
This quiz covers the general rules regarding current liabilities, with a focus on cash management practices, exceptions for offsetting accounts, and the measurement of cash and foreign currency. Understand the nuances of managing financial accounts effectively in various scenarios.
