Chapter 1: Cash & Cash Equivalents

Question 1

Is the Standard medium of exchange in business transactions. Refers to currency and coins.

Answer 1

Money

Question 2

What are the cash items that are included in Cash?

Answer 2

1. Cash on Hand
2. Cash in Bank
3. Cash Fund

Question 3

T/F

Equity investments cannot qualify as cash equivalents

Answer 3

True

Question 4

PAS 7 defines ________________ as short-term and highly liquid investments that can be acquired three months before maturity.

Answer 4

Cash Equivalents

Question 5

If the term is three month or less such investments are ______

Answer 5

Cash Equivalents

Question 6

If the term is beyond three months or more but within a year, such investments are ________

Answer 6

short-term or temporary investments

Question 7

If the term is more than one year, such investments are

Answer 7

Long-term investments or nocurrent.

Question 8

Measurement of Cash

Answer 8

Face Value

Question 9

T/F

When an entity is in bankruptcy or financial difficulty the cash should be written down to estimated realizable value.

Answer 9

True

Question 10

T/F

Deposit in foreign countries which are not subject restriction should be included as cash. (Vice Versa)

Answer 10

True

Question 11

If the cash fund is set aside for current operations it is classified as current assets.

Answer 11

True

Question 12

T/F

If the cash fund is set aside for noncurrent purpose it is shown as long-term or noncurrent investment.

Answer 12

True

Question 13

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.

Answer 13

Bank Overdraffts; Current Liability

Question 14

T/F

Postdated checks cannot be considered as cash because it is unacceptable by the bank.

Answer 14

True

Question 15

T/F

Cash includes checks, money orders, and bank drafts.

Answer 15

True

Question 16

Generally takes the form of minimum checking or demand deposit account balance

Answer 16

Compensating Balance

Question 17

T/F

If the deposit is not legally restricted because of an informal compensating balance is included as part of cash.

Answer 17

True

Question 18

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

Answer 18

True

Question 19

T/F

If the the related loan is long-term, the compensating balance is classified as noncurrent investment.

Answer 19

True

Question 20

Is one that is merely drawn and recorded but not given to the payee before the end of the reporting period.

Answer 20

Undelivered or unreleased Check

Question 21

Is a check drawn, recorded and already given to the payee but it bears a date subsequent to the end of reportting period.

Answer 21

Postdated chcek delivered

Question 22

Is a check not encashed by the payee within a relatively long period of time

Answer 22

Stale Check

Question 23

T/F

If the amount of stale check is immaterial, it is simply accounted for liability (accounts payable).

Answer 23

False

Question 24

T/F

If the amount of stale check is material, it is simply accounted for miscellaneous income

Answer 24

False

Question 25

Is only a temporary or suspense account. When FS are prepared the same should be adjusted.

Answer 25

Cash short or over

Question 26

Is a system of control of cash which requires that all cash receipts should be deposited intact and all cash disbursements should be made by means of check.

Answer 26

Imprest System

Question 27

Is a money set aside to pay small expenses which cannot be paid conveniently by means of check.

Answer 27

Petty Cash Fund

Question 28

Two Methods of handling petty cash

Answer 28

1. Imprest fund System
2. Fluctuating fund System

Question 29

Is the one who usually followed in handling petty cash transactions.

Answer 29

Imprest Fund System

Question 30

The checks drawn to replenish the fund do not necessarily equal the petty cash disbursements.

Answer 30

Fluctuating Fund System