Chapter 7

Question 1

Types of cash

Answer 1

• currency (e.g., coin)
• certified checks
• demand deposits

Question 2

Suppose you receieve a postdated (later date) check today. Are they cash or accounts receivables?

Answer 2

A/R

Question 3

Suppose you receieve a check and its dated before the current date. Is it cash or A/R?

Answer 3

Cash

Question 4

What are NSF?

Answer 4

A check not paid by a bank because there are insufficient funds in the bank account of the customer who wrote the check

Question 5

Suppose you received an NSF check. Are they cash or accounts receivables?

Answer 5

A/R

Question 6

Are banks overdrafts assets of liabilities?

Answer 6

Liabilites

Question 7

As at the end of the fiscal year, if the use of cash is restricted for more than a year, it is a current or non current asset?

Answer 7

Non-current

Question 8

What is bank reconciliation?

Answer 8

It ensures that any differences between a company’s accounting records for cash and the bank records are identified and explained

Question 9

When does bank reconciliation happen on the bank balance?

Answer 9

• Deposits in transit (+)
  -Outstanding cheques (-)
  -Bank errors (+/-)
  (Company knows but bank does not know)

Question 10

When does bank reconciliation happen to the book balance?

Answer 10

• EFT collections and other deposits (+)
• Service charges and other payments or NSF check (-)
  -Company errors (+/-)
  (Company does not know but bank knows)

Question 11

When should cash balance per bank from bank statement be equal to cash balance per a firm’s book

Answer 11

After adjustment

Question 12

Journal entry of collection recivable by bank, but firm unaware

Answer 12

(Dr) Cash (Cr) Notes receivable

Question 13

Journal entry for bank service charges but the firm is unaware

Answer 13

(Dr) Miscellaneous expense

(Cr) Cash

Question 14

Journal entry for NSF check but the firm through it was a good check

Answer 14

(Dr) A/R (Cr) Cash