Cash and Cash Equivalents

Question 1

Cash and Cash equivalents

Answer 1

Cash & Cash equivalents are company assets that are either in cash form or can be quickly converted to cash.

Inclusions in cash & Cash equivalents
- currency
- cash in checkable accounts
- Negotiable instruments
- Short-term investments (original maturity < 3 months)
- Investments with (purchase date to maturity < 3 months)
- Non-restricted compensating balances

Exclusions from cash & Cash equivalents
- Postage stamps
- Overdrafts
- Postdated checks
-Short term investments (Original maturity > 3 months)
- Investments with (purchase date to maturity > 3 months)
- Restricted compensating balances
- restricted cash

Question 2

Bank Reconciliation statement (BRS)

Answer 2

• A bank reconciliation statement (BRS) is a statement prepared by a company to reconcile the balance of cash in the bank account as per the company’s accounting records with the balance shown on the banks statement.
• Reconciling items are differences between the accounting records of a company and the corresponding information on a bank statement

Question 3

Bank Reconciliation statement (BRS): Reconciling items requiring adjustment on balance as per bank

Answer 3

Balance as per bank
Add: Uncleared checks/ deposits in transit
Less: Unpresented checks/ payments in transit
add/less: Bank Errors
Adjusted balance as per bank

Question 4

Bank Reconciliation statement (BRS): Reconciling items requiring on balance as per book

Answer 4

Balance as per book
Less: Unrecorded Bank Charges
Add: Interest income
Less: Direct debit/ standing instructions adjustment
Add: Direct credit
Add/Less: Book errors
Less: Unrecorded returned NSF
Adjusted balance as per books

Question 5

Bank Reconciliation Statement (BRS): Template

Answer 5

Balance as per bank
Add: uncleared checks/ deposits in transit
Less: unpresented checks/ payments in transit
Add/Less: Bank errors
=Adjusted balance as per bank

Balance as per Bank
Less: Unrecorded Bank Charges
Add: Interest income
Less: Direct debit/ standing instructions adjustment
Add: Direct credit
Add/Less: Books errors
Less: Unrecorded returned NSF
= Adjusted balance as per books