PETTY CASH FUND

Problem 1
The auditor for SAMANTHA, INC. examined the petty cash fund immediately after the close of business, July 31, 2014, the end of
the company’s natural business year. The petty cash custodian presented the following during the count:
Currency P 1,650
Petty cash vouchers:
Postage 420
Office Supplies Expense 900
Transportation expense 340
Computer repairs 800
Advances to office staff 1,500
A check drawn by Samantha, Inc. payable to the petty cash custodian 7,200
Postage stamps 300
An employee’s check, returned by bank, marked NSF 1,000
An envelope containing currency of P1,890 for a gift for retiring employee 1,890
P 16,000

The general ledger shows an imprest petty cash fund balance of P16,000

1. How much is the petty cash shortage or overage?

a. P 2,190 overage b. P 2,190 shortage c. P 1,890 shortage d. P1,890 overage

Solution:
Currency 1, 650
Petty cash Vouchers (420+900+340+800+1,500) 3, 960
Replenishment check 7, 200
Employee’s NSF check 1, 000
Petty cash accounted 13,810

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Petty cash fund per ledger (16,000)

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Petty cash shortage ( 2,190)

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2.
a. P 10,740
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What is the adjusted balance of the petty cash fund at July 31, 2014?
b. P 3,540 c. P7,200 d. P8,850

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Solution:
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Currency P1,650
Replenishment check 7,200
Adjusted petty cash balance P8,850
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Problem 2:
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On January 1, TANYA CO. established a petty cash account and designates Orly Reyes as a petty cash custodian. The original amount
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included in the petty cash fund is P10,000. The following disbursements are made from the fund:
Office suppliers P3,460
Postage 2,240
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Entertainment 840
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The balance in the petty cash box is P3,200.

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1. The person responsible, at all times, for the amount of the petty cash fund is the
a. Chairman of the Board of Directors
b. President of the Company
c. Petty cash custodian
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d. General Cashier
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Answer: C

2. The following are appropriate procedures for controlling the petty cash fund, except
a. To monitor variations in different types of expenditures, the petty cash custodian files petty cash vouchers by category of
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expenditure after replenishing the fund.

b. To replenish the fund, the general cashier issues a company check to the petty cash custodian, rather than cash.
c. To determine that the fund is being accounted for satisfactorily, surprise counts of the fund are made from time to time
by the internal auditor or other responsible auditor.
d. Each individual to whom petty cash is paid is required to present signed receipts to the petty cash custodian.

Answer: A

3. The entry to replenish the fund is

a. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash 6,540

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 PETTY CASH FUND

b. Office supplies expense 3,460

Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Petty Cash 6,800

c. Office supplies expense 3,460

Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Cash 6,800

d. Office supplies expense 3,460

Postage expense 2,240
Entertainment expense 840
Petty Cash 6,800

Answer: C

4. The objective of establishing a petty cash fund is to

a. Cash checks for employees
b. Account for all cash receipts and disbursements
c. Account for cash sales
d. Facilitate payment of small, miscellaneous items

Answer: D

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5. What is the effect of not replenishing the petty cash at year-end and not making the appropriate adjusting entry?

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a. A detained audit is essential

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b. The petty cash custodian should turnover the petty cash to the general cashier
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c. Cash will be overstated and expensed understated
d. Expenses will be overstated and cash will be understated

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Answer: C
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Problem 3:
In connection with your audit of the financial statements of BENJAMIN CORP. for the year ended December 31, 2014, you conducted
a surprise count of the company’s petty cash fund and Undeposited collections at 8:20 am on January 3, 2015. Your count disclosed
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the following:
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Bills and Coins

Bills Coins
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P 100.00 5 pieces 5.00 18 pieces

50.00 40 pieces 1.00 206 pieces
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20.000 48 pieces 0.25 32 pieces

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Postage stamps (unused) – P365

Checks
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Date Payee Maker Amount

Dec. 30 Cash Custodian P 1,200
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Dec. 30 Benjamin Corp. SLV, Inc. 14,000

Dec. 31 Benjamin Corp. Mario Lansang, sales manager 1,680
Dec. 31 Benjamin Corp MSU Corp. 17,800
Dec. 31 Benjamin Corp Ateneo, Inc. 8,300
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Dec.31 Taiwan Corp. Benjamin Corp. 27,000

Unreimbursed vouchers
Date Payee Maker Amount
Dec. 23 Mario Lansang, sales manager Advance for trip to Tagaytay City P 20,000
Dec. 28 Central Post Office Postage Stamp 1,620
Dec. 29 Messengers Transportation 150
Dec. 29 Byte, Inc. Computer repair 800

Other items found inside the cash box

1. Unclaimed pay enveloped of Juan MacDonut. Indicated on the pay slip is his net salary of P7,500. Your inquiry revealed that
Juan’s salary is mingled with petty cash fund.
2. The sales manager’s liquidation report for this Tagaytay City trip.
Cash advance received on Dec, 23 P 20,000
Less: Hotel accommodation, meals, etc. P 16,000
Bus fare for two 1,200
Cash given to Pablo, salesman 1,000 18,200
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 PETTY CASH FUND

Accounted for as follows:

Cash returned by Pablo to the sales manager P 120
Personal check for the sales managers 1,680
Total P 1,800

Additional Information:
1. The custodian is not authorized to cash checks.
2. The last official receipt included in the deposit on December 30 is No. 4351 and the last official receipt issued for the current
year is No. 4355. The following official receipts are all dated December 31, 2014.
OR No. Amount Form of Payment
4352 P13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check
3. The petty cash balance per general ledger if P25,000. The last replenishment of the fund was made on December 22, 2014.

I. What is the amount of shortage due from the sales manager?

a. P 240 b. P 1,800 c. P 120 d. P 0

Solution:
Cash advance P 20,000
Less: Actual cash disbursed
Hotel, meals, etc. P 16,000
Bus fare 1,200
Pablo (1,000 – 120) 880 18,080
Cash that should be returned P 1,920

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Cash actually returned 1,600
Shortage due from the sales manager P 240

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Answer: A
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II. What is the amount of undeposited collections on December 31, 2014?
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a. P 44,300 b. P 84,300 c. P 57,300 d. P 41,000
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Solution:
Collections per OR nos. 4352 – 4355 P 43,300
Unreceipted collection 14,000
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Total undeposited collections P 57,300

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Answer: C

III. The adjusting entries on December 31, 2014 should include a net debit to Travel expenses of
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a. P 17,320 b. P 18,320 c. P 18,200 d. P 18,080

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Solution:
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Travel expenses ( 16,000 + 1,200 + 880) P 18,080

Answer: D
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IV. The cash count should include total checks of

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a. P69,980 b. P 42,980 c. P 41,780 d. P 41,300

Answer: B

V. What is the total cash shortage?

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a. P 22,166 b. P 8,166 c. P 22,406 d. P 20,486

Solution:
Bills and coins:
Denomination Quantity Amount Total
P 100.00 5 P 500
50.00 40 2,000
20.00 48 960
5.00 18 90
1.00 206 206
0.25 32 8 P 3, 764

Checks:
Date Maker Amount
Dec. 30 Custodian P 1,200
Dec. 30 SLV, Inc. 14,000
Dec. 31 from [Link]
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 PETTY CASH FUND

Dec. 31 MSU Corp. 17,800

Dec. 31 Ateneo, Inc. 8, 300 42,980
Unreimbursed vouchers
Date Maker Amount
Dec. 23 Advances P20,000
Dec. 28 Postage . 1,620
Dec. 29 Transportation 150
Dec. 29 Repairs 800 22,750
Total cash Accounted P 69,314
Less: Accountabilities
Petty cash 25,000
Collections (per official receipt) 43,300
Unclaimed salary 7,500
Excess travel advance 1,680
Unreceipted collection from SLV, Inc 14,000 91,480
Cash Shortage (P 22,166)

Answer: A

Problem 4:
Anying Velasco is reviewing the cash accounting for ABX, Inc. Anying’s review will focus on the petty cash fund account and the
bank reconciliation for the month ended May 31, 2014. She has collected the following information for ABX’s bookkeeper for this
task.

Petty Cash Fund

1. The petty cash fund was established on May 2, 2014, in the amount of P10,000

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2. Expenditures from the fund by the custodian as of May 31, 2014, were evidence by approved petty cash vouchers for the

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following:
Various office supplies P 3, 920

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IOU from employees eH w 1, 200
Shipping charges 2, 298

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Miscellaneous expense 1, 526
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On May 31, 2014, the petty cash fund was replenish and increased to P12,000; currency and coin in the fund at the time totaled P 756.
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Bank Reconciliation
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Shore Bank
Bank Statement
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Disbursement Receipts Balance

Balance, May 1, 2014 P 350,760
Deposits P 1,120,000
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Note payment direct form

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customer (interest of P1,200) 37,200

Checks cleared during May P 1,246,000
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Bank service charges 1,080

Balance, May 31, 2014 260,880

ABX, Inc.’s Cash Account

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Balance, May 1, 2014 P 354,000

Deposits during May 2014 1,240,000
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Checks written during May 2014 1,273,400

Deposits in transit are determined to be P120,000 and checks outstanding at May 31 total P34,000. Cash on hand (besides petty cash)
at May 31, 2014, is P9,840.
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1. What is the amount of petty cash shortage?

a. P2,300 b. P11, 244 c. P 300 d. P 0

2. The journal entry to record the replenishment of and increase in the petty cash fund includes a credit to?
a. Cash of P10,944
b. Cash of P11,244
c. Petty cash fund of P10,944
d. Petty cash fund of P11,244

3. What amount of cash should be reported in the May 31, 2014 statement of financial position?
a. P368,720 b. P356,720 c. P368,420 d. P358,880

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 PETTY CASH FUND

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