CASH & CASH EQUIVALENTS Flashcards
Cash equivalents are
a. Short-term and highly liquid investments that are readily convertible into cash.
b. Short-term and highly liquid investments that are readily convertible into cash with
remaining maturity of three-months.
c. Short-term and highly liquid investments that are readily convertible into cash and
acquired three months before maturity.
d. Short-term and highly liquid marketable equity securities
c. Short-term and highly liquid investments that are readily convertible into cash and
acquired three months before maturity.
Which is false concerning measurement of cash & cash equivalents?
a. Cash is measured at face value.
b. Cash in foreign currency is measured at the current exchange rate.
c. If a bank or financial institution holding the funds of the company is in bankruptcy or
financial difficulty, cash should be written down to estimated realizable value.
d. Cash equivalents should be measured at maturity value, meaning face value plus
interest.
d. Cash equivalents should be measured at maturity value, meaning face value plus
interest.
A compensating balance:
a. Must be included in cash and cash equivalent.
b. Which is legally restricted and related to a long-term loan is classified as current
asset.
c. Which is legally restricted and related to a short-term loan is classified separately
as current asset.
d. Which is not legally restricted as to withdrawal is classified separately as current
asset.
c. Which is legally restricted and related to a short-term loan is classified separately
as current asset.
Which is considered cash?
a. Certificate of deposit
b. Checking account
c. Money market saving certificate
d. PDC
b. Checking account
Unreleased checks (check drawn before the end of reporting period but held for later
delivery to creditors)
a. Shall be treated as outstanding checks.
b. Shall be restored to the cash balance.
c. Shall be treated as outstanding checks if the date is shortly after the end of reporting
period.
d. Shall be treated as outstanding checks if they are ultimately encashed.
b. Shall be restored to the cash balance.
Which item should be excluded from cash and cash equivalents in the current year-end
statement of financial position?
a. The minimum cash balance in the entity’s current account which is maintained to
avoid service charges.
b. A check issued by the entity on December 27 of the current year but dated January
15 of next year.
c. Time deposit which matures in one year.
d. A customer’s check dominated in a foreign in a foreign currency.
c. Time deposit which matures in one year.
Petty cash fund is
a. Separately classified as current asset.
b. Money kept on hand for making minor disbursements of coin and currency rather
than by writing checks.
c. Set aside for the payment of payroll.
d. Restricted cash.
b. Money kept on hand for making minor disbursements of coin and currency rather
than by writing checks.
The petty cash fund account under the imprest fund system is debited
a. Only when the fund is created.
b. When the fund is created and every time it is replenished.
c. When the fund is created and when the size of the fund is increased.
d. When the fund is created and when the fund is decreased.
c. When the fund is created and when the size of the fund is increased.
Which of the following statements is not true?
a. Adjustment of the petty cash account is made at the end of the period to avoid
understatement of expenses and overstatement of cash.
b. Entries are made to the petty cash account to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end.
c. The imprest petty cash system in effect adheres to the rule of disbursements by
check.
d. The petty cash account is debited when the fund is replenished.
d. The petty cash account is debited when the fund is replenished.
A cash short and over account is
a. A contra account to cash.
b. Debited when the petty cash fund proves out over.
c. Debited when the petty cash fund proves out short.
d. Not generally accepted.
c. Debited when the petty cash fund proves out short.
Balance sheet date is December 31, 2019. Which of the following is not a cash
equivalent?
a. 12-month BSP treasury note due February 15, 2020 (date of purchase:
November 30, 2019)
b. 6-month BSP treasury note due January 15, 2020 (date of purchase:
October 1, 2019)
c. 3-month BSP treasury bill due March 15, 2020 (date of purchase: December
31, 2019)
d. 1-month money market placement
b. 6-month BSP treasury note due January 15, 2020 (date of purchase:
October 1, 2019)
Which is FALSE concerning measurement of cash and cash equivalents?
a. Cash is measured at face value.
b. Cash in foreign currency is measured at the current exchange rate.
c. If a bank or financial institution holding the funds of the company is in bankruptcy
or financial difficulty, cash should be written down to estimated realizable value.
d. Cash equivalents should be measured at maturity value, meaning face
value plus interest.
d. Cash equivalents should be measured at maturity value, meaning face
value plus interest.
What happens when a petty cash is in use?
a. Expenses paid with petty cash are recorded when the fund is
replenished.
b. Most small amounts are paid from cash receipts before they are deposited.
c. Petty cash is debited when the fund is replenished.
d. Petty cash is credited when the fund is replenished.
a. Expenses paid with petty cash are recorded when the fund is
replenished.
Bank reconciliation are normally prepared on a monthly basis to identify adjustments
needed in the depositor’s records and to identify bank errors. Adjustments on the part
of the depositor should be recorded for
a. All items except bank errors, outstanding checks and deposits in transit.
b. Bank errors, outstanding checks and deposits in transit.
c. Book errors, bank errors, deposits in transit and outstanding checks.
d. Outstanding checks and deposits in transit.
a. All items except bank errors, outstanding checks and deposits in transit.
In preparing a bank reconciliation, interest paid by the bank on the depositor’s account
is
a. added to the bank balance.
b. added to the book balance.
c. subtracted from the bank balance.
d. subtracted from the book balance.
b. added to the book balance.
Which of these items would not accompany a monthly bank statement?
a. Depositor’s checks paid by the bank during the month
b. Copies of outstanding checks at the end of the month
c. Copies of bank debit memos issued during the month
d. Copies of bank credit memos issued during the month
b. Copies of outstanding checks at the end of the month
Compensating balance
a. If legally restricted is reported as part of the regular cash account
b. If legally restricted is reported as cash held as compensating balance and
classified as current asset if related to a short term loan
c. if legally restricted is reported as cash held as compensating balance and classified as
current asset if related to long-term loan
d. if not legally restricted is reported separately in the current asset section of the
statement of financial position
b. If legally restricted is reported as cash held as compensating balance and
classified as current asset if related to a short term loan
n petty cash fund replenishment under imprest system
a. Expense accounts are credited
b. Cash in bank is debited
c. Cash in bank is credited
d. No journal entry
c. Cash in bank is credited
Which of the following is false when the petty cash fund proves out short?
a. Cash short and over account is debited
b. Cash short and over account is credited
c. Miscellaneous Expense may be debited to close cash short/over account
d. Receivable from custodian may be debited to close cash/over account
b. Cash short and over account is credited
At year end, petty cash fund is adjusted for any unreplenished petty cash
a. In order to avoid understatement of cash and overstatement of expenses
b. In order to avoid overstatement of cash and understatement of expenses
c. In order to determine whether cash shortage or overage exists
d. In order to make the petty cash custodian liable for the shortage
b. In order to avoid overstatement of cash and understatement of expenses
Bank statement may provide information about all of the following except
a. Total checks paid by the bank
b. Total deposits acknowledged by the bank
c. Deposit in transit
d. Bank service charge
c. Deposit in transit
In preparing monthly bank reconciliation, which of the following items would be
deducted from the bank balance in order to arrive at the correct cash balance for
balance sheet purposes?
a. Bank service charge
b. Deposit in transit
c. Erroneous bank charge
d. Erroneous bank credit
d. Erroneous bank credit
If the cash balance shown in the company’s accounting records is more than the correct
cash balance and neither the bank nor the depositor has made any errors, there must
be
a. Bank credit memo not yet recorded by the depositor
b. Outstanding checks not yet recorded by the bank
c. Bank charges not yet recorded by the depositor
d. Deposit in transit not yet recorded by the bank
c. Bank charges not yet recorded by the depositor
If the cash balance shown in the bank’s record is less than the correct cash balance and
neither the bank nor the depositor has made any errors, there must be
a. Bank credit memo not yet recorded by the depositor
b. Outstanding checks not yet recorded by the bank
c. Bank charges not yet recorded by the depositor
d. Deposit in transit not yet recorded by the bank
d. Deposit in transit not yet recorded by the bank
