Cash and Cash Equivalents and Balance Sheet

Question 1

Current Asset

Answer 1

are assets that will be used up or converted into cash within one year or the operating cycle whichever is longer.

Question 2

Balance sheet

Answer 2

reports the effect of transactions at a point in time

Question 3

Current Liabilities

Answer 3

liabilities that will be settled within one year or the operating cycle whichever is longer.

Question 4

Cash Equivalent

Answer 4

a financial instrument that is both

1) Easily convertible into a know amount of cash(highly liquid)
2) Originally maturity of 3 months or less.

Question 5

Examples of cash and cash equivalents

Answer 5

1) Coin and currency on hand
2) Money market accounts
3) Unmailed checks
4) Saving accounts
5) CDs with original maturity of 3 months or less
6) Negotiable paper(Bank checks, travelers checks, money orders)
7) Negotiable paper(bank checks, travelers check, money orders)

Question 6

Items Excluded from cash and cash equivalent

Answer 6

1) Any financial instruments with a total term exceeding 3 months
2) An investment that has been excluded from cash equivalent because of a term exceeding 3 months will not be reclassified to cash equivalents as it approaches the maturity date.
3) Compensating balances
4) Postdated checks or NSF
5) Overdraft protection
6) Restricted cash
7) Postage stamps

Question 7

Compensating balances

Answer 7

Legally restricted deposits that are either a current assets or a non-current assets but considered part of a cash. e.g minimums balance that need to maintain in you account or pay for a fees

Question 8

postdated checks or NSF

Answer 8

considered to be receivable.

Question 9

overdraft protection

Answer 9

1) if in same bank, net them, if positive then show it as cash, if negative, show it as a current liabilities.
2) If in different bank, show the positive as an asset and the negative as a current liabilities.

Question 10

Restricted cash - Current

Answer 10

restricted for a current asset or liability(segregated from cash)

Question 11

Restricted cash - non - current

Answer 11

restricted for a noncurrent asset or liability(either other assets or investments)

Question 12

Postage Stamps

Answer 12

are considered Supplies(prepaid expense)

Question 13

Bank Reconciliation

Balance on Bank statement(Formula)

Answer 13

+Deposits in Transit
-Outstanding checks
+/- errors made by bank
=Corrected balance

Question 14

Bank Reconciliation
Checkbook balance (Formula)

Answer 14

+Amounts collected by bank
-Unrecorded bank charges
+/- Errors made in recording transactions
= Corrected Balance

Question 15

GAAP

Statement of earning + Comprehensive Income

Answer 15

ON-TIDE-N-OC

Operating income(Sales- COGS-SGA-Dpr)(0)

Non operating(N) or Other Income (e.g. either unusual or infrequent)

Taxes(Deferred/Current)(T)

Income Continuing Operations(I)

Discontinued component Unit(D)

Extraordinary Gain/Loss(both unusual and infrequent)(E)

Net Income(N)

Other Comprehensive income(DENT)(OCI)

Comprehensive income(C)

Question 16

Asset is classified as current when( 2condition)(IFRS)

Answer 16

1. the entity expects to realize the asset or to consume or sell it within 12 months or the normal operating cycle or
2. the entity holds the asset primarily for the purpose of trading.

Question 17

Liability is classified as current when( 3 condition)(IFRS)

Answer 17

1 The entity expects to settle the liability within the normal operating cycle.

2. the liability will be settled within 12 months after the reporting period or
3. The entity holds the liability for the purpose of trading.

Question 18

Define Financial Instrument(IFRS)

Answer 18

any contract that gives results in a financial asset of one entity and a financial liability or equity instrument of another entity.

Question 19

Define Financial asset(IFRS)

Answer 19

1)Cash
2)An equity instrument of another entity
3) A contractual right:
To receive cash or another financial asset from another entity or
To exchange financial assets or financial liabilities with another entity on potentially favorable terms
4) A contract that will be settled in the entity own equity instruments.

Question 20

Define Financial liability(IFRS)

Answer 20

1)A contractual obiligation:
to deliver cash or another financial asset to another entity or
To exchange financial assets or financial liabilities with another entity on potentially unfavorable term
2) A contract that will be settled in the entity own equity instruments.
3) Are measured at amortized costs but may be measured at fair value, with unrealized gains or losses recognize in come.

Question 21

Financial assets are measured at amortized cost only if two conditions are met:(IFRS)

Otherwises, all other financial assets are measured at fair value.

Answer 21

1) The entity business model is to hold the asset to collect schedule cash flows.
2) The terms of the instrument call for cash flows that are exclusively payment of principal and interest on specified dates.