(C1) CASH & CASH EQUIVALENTS Flashcards
It is the standard medium of exchange in business transactions.
Money
This includes money and other negotiable instruments that are payable in money and accepted by the bank for deposit and immediate credit.
Cash
TRUE OR FALSE? Cash includes checks, bank drafts, and money orders.
TRUE
TRUE OR FALSE? Postdated checks are considered cash.
FALSE. They are not cash yet because they are unacceptable by the bank for deposit or immediate credit.
TRUE OR FALSE. For an item to be reported in cash, it must be unrestricted in use.
TRUE
TRUE OR FALSE? Cash must be readily available to pay current obligations and not subject to restrictions.
TRUE
Includes undeposited collections and other cash items awaiting deposit such as customer’s, manager’s, traveler’s check, bank draft, and money order.
Cash on Hand
Includes demand deposit or checking account and saving deposit which are unrestricted as to withdrawal.
Cash in Bank
A fund set aside for current purposes such as petty cash fund and dividend fund.
Cash Fund
These are short-term and highly liquid investments that are readily convertible into cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rate.
Cash Equivalents
How many months does the standard require for an item to be considered as cash equivalent?
THREE months BEFORE maturity.
TRUE OR FALSE? A four-month BSP Treasury Bill is a Cash Equivalent?
FALSE. Items are only categorized as cash equivalence if they are dated three months before maturity.
TRUE OR FALSE? Equity securities qualify as cash equivalents.
FALSE. Because shares do not have a maturity date.
TRUE OR FALSE? Preference shares with specified redemption date and acquired 3 months before redemption date can qualify as cash equivalents.
TRUE
TRUE OR FALSE. The entity must maintain sufficient cash for use in current operations.
TRUE
TRUE OR FALSE. Excess cash may be invested in time deposits, money market instruments, and treasury bills for the purpose of earning interest income.
TRUE
WHAT IS THE CLASSIFICATION?
If the term is 3 months or less.
CASH EQUIVALENTS
WHAT IS THE CLASSIFICATION?
If the term is more than 3 months but within 1 year.
SHORT-TERM FINANCIAL ASSETS REPORTED AS CURRENT ASSETS
WHAT IS THE CLASSIFICATION?
If the term is more than one year.
LONG-TERM INVESTMENTS REPORTED AS NON-CURRENT ASSETS
WHAT IS THE CLASSIFICATION?
If the item will become due within one year from the end of the reporting period.
They are reclassified as TEMPORARY INVESTMENTS REPORTED AS CURRENT ASSETS
How do we measure cash?
AT FACE VALUE
How do we measure cash that is in foreign currency?
At current exchange rate
TRUE OR FALSE. If a bank or financial institution holding the funds of an entity is in bankruptcy or financial difficulty, cash should be written down to its estimated realizable value if the amount recoverable is estimated to be lower than the face value.
TRUE
The caption cash in cash equivalents is usually on what number of line under current assets?
First line item
TRUE OR FALSE. The details comprising the cash and cash equivalents are not required to be disclosed in the notes to financial statements.
FALSE. It needs to be reported to the notes of financial statements.
If the cash fund is set aside for use in current operations or for the payment of current obligation it is considered as?
Curren Asset
If the cash fund is set aside for non-current purposes or payment of non-current obligation it is classified as?
Non-Current Assets
TRUE OR FALSE. The classification of a cash fund as current or non-current should parallel the classification of the related liability.
TRUE
When the cash in bank account has a credit balance it is said to be a?
Bank Overdraft
TRUE OR FALSE. A bank overdraft is considered as a current liability.
TRUE
TRUE OR FALSE. Bank overdrafts can be offset against other bank accounts with debit balances.
FALSE. It is not possible.
TRUE FALSE. Bank overdrafts are permitted in the Philippines.
FALSE. It is not permitted here in the Philippines.
TRUE OR FALSE. Deposits in foreign countries which are not subject to any foreign exchange restrictions are included in cash.
TRUE
TRUE OR FALSE. Deposits in foreign banks which are subject to foreign exchange restrictions, if material, should be classified separately among the current assets and the restriction clearly indicated.
TRUE
TRUE OR FALSE. There is no exemption when it comes to overdrafts.
FALSE
TRUE OR FALSE. When an entity maintains two or more accounts in one bank and one account results in an overdraft, such overdraft can be offset against the other account with a debit balance. This shows the net of Bank overdraft.
TRUE