Cash Flashcards
Types of Questions:
- What is included or excluded in cash?
- What is restricted cash?
- Include Overdrafts
- Restrictions (etc.)
Define Cash:
Coin or currency Petty Cash Cash in the Bank Negotiable Instruments (Checks, ordinary cashiers check) Cash equivalent
What is a cash equivalent?
Short-term, highly liquid. Readily convertible to cash, bears no risk from interest changes, 90 days only
Examples of short-term equivalent?
Treasury bill, commercial paper, and money market (as long as the ORIGINAL maturity is less than 90 days.
If there are only 30 days left in a 180 Day Security, could you classify this as a cash equivalent?
No! It is only maturities that were originally 30 days.
What is restricted cash?
Restricted cash that has restrictions on it (legal restrictions, compensating balances, bond sinking funds, other types of funds)
What is a bank overdraft?
When you write a check for more than what is your bank account. A bank overdraft is a liability unless there is another account at the same bank that covers the overdraft, then you have to report it as a liability.
What is the best internal control for cash?
Separate custody, recording, and reconciliation
IFRS Differences:
US GAAP only allows companies to offset an overdraft with other accounts with the same bank. IFRS allows a company to offset with other bank accounts.
When do you consider whether you have a bank overdraft on the date of the balance sheet?
If the check has been sent or mailed, you have to consider the deduction. If you still have possession of the checks, then you still have the cash.
Where should cash held for a bond sinking fund be classified on the balance sheet?
Noncurrent asset
