Chapter 1: Cash & Cash Equivalents Flashcards
To understand the concepts, items and accounting treatment.
Is the Standard medium of exchange in business transactions. Refers to currency and coins.
Money
What are the cash items that are included in Cash?
- Cash on Hand
- Cash in Bank
- Cash Fund
T/F
Equity investments cannot qualify as cash equivalents
True
PAS 7 defines ________________ as short-term and highly liquid investments that can be acquired three months before maturity.
Cash Equivalents
If the term is three month or less such investments are ______
Cash Equivalents
If the term is beyond three months or more but within a year, such investments are ________
short-term or temporary investments
If the term is more than one year, such investments are
Long-term investments or nocurrent.
Measurement of Cash
Face Value
T/F
When an entity is in bankruptcy or financial difficulty the cash should be written down to estimated realizable value.
True
T/F
Deposit in foreign countries which are not subject restriction should be included as cash. (Vice Versa)
True
If the cash fund is set aside for current operations it is classified as current assets.
True
T/F
If the cash fund is set aside for noncurrent purpose it is shown as long-term or noncurrent investment.
True
When the cash in bank account has a credit balance it is called as ________ and classified as _______ and should not be offset against other bank accounts.
Bank Overdraffts; Current Liability
T/F
Postdated checks cannot be considered as cash because it is unacceptable by the bank.
True
T/F
Cash includes checks, money orders, and bank drafts.
True
Generally takes the form of minimum checking or demand deposit account balance
Compensating Balance
T/F
If the deposit is not legally restricted because of an informal compensating balance is included as part of cash.
True
T/F
If the deposit is legally restrictred becaus of formal compensating balance it is classified separately as cash held as compensating balance under current assets if the related loan is short-term
True
T/F
If the the related loan is long-term, the compensating balance is classified as noncurrent investment.
True
Is one that is merely drawn and recorded but not given to the payee before the end of the reporting period.
Undelivered or unreleased Check
Is a check drawn, recorded and already given to the payee but it bears a date subsequent to the end of reportting period.
Postdated chcek delivered
Is a check not encashed by the payee within a relatively long period of time
Stale Check
T/F
If the amount of stale check is immaterial, it is simply accounted for liability (accounts payable).
False
T/F
If the amount of stale check is material, it is simply accounted for miscellaneous income
False
