032 Cash

Question 1

Define “monetary assets”.

Answer 1

An asset with fixed nominal value.

Question 2

Define “compensating balance”.

Answer 2

A minimum balance that must be maintained by the firm in relation to a borrowing. Classified as current or non-current based on related loan classification.

Question 3

List the items that are not included in cash.

Answer 3

1 COD; 2 Legally restricted compensating balances; 3 Restricted cash funds; 4 Post-dated checks received; 5 Checks written but not sent; 6 Advances to employees; 7 Postage stamps.

Question 4

Describe bank overdraft rules.

Answer 4

Overdrafts can be offset against cash in the same bank, but if the bank has insufficient cash at the same bank, it is reported as a current liability.

Question 5

List the items included in cash.

Answer 5

Coin and currency, petty cash, cash in bank, and negotiable instruments such as ordinary checks, cashier’s checks, certified checks, and money orders.

Question 6

Define “cash equivalents”.

Answer 6

Treasury obligations (bills, notes, and bonds), commercial paper (very short-term corporate notes), and money market funds.

Question 7

What does separation of duties accomplish?

Answer 7

Makes it more difficult for employees to perpetrate fraud and gain access to the firm’s cash.

Question 8

What effect do overdrafts have in International Financial Reporting Standards (IFRS)?

Answer 8

They can be subtracted from cash, rather than classified as a liability.