A. CASH AND CASH EQUIVALENTS

Question 1

_{A. CASH AND CASH EQUIVALENTS}

What are Cash and Cash Equivalents?

Answer 1

• Cash and cash equivalents are assets that are readily available and unrestricted.
• A business might have cash that is restricted for use, such as for a bond sinking fund, and that would not be included under “cash” on the balance sheet.

Question 2

_{A. CASH AND CASH EQUIVALENTS}

Examples of cash: (5)

Answer 2

• Cash
• Coins or currency
• Cash in bank
• Negotiable instruments like checks
• Money orders

Question 3

_{A. CASH AND CASH EQUIVALENTS}

Reconciling Book Balance and Bank Balance: Info

Answer 3

These problems are pretty simple; you just have to think through them about what items would already be included in the book balance/bank balance and what outstanding items would affect each account.

Make sure to check dates the problem is asking about, and dates on items listed.

For example, if it’s asking what would be included in the balance sheet at year end, and then a few of the items listed didn’t happen until January, you can leave those items out.

Question 4

_{A. CASH AND CASH EQUIVALENTS}

To reconcile bank balance to book balance, the format will be:

Answer 4

Bank balance

Add: Deposits in transit

Less: Outstanding checks

+/- Bank errors

+/- Errors on ledgers

= Book balance

Note: If a company has multiple bank accounts and one bank account has a negative balance, remember that it would be listed as a liability/payable instead of just being netted against the other bank accounts.