F3 M1 Flashcards
Cash equivalents: Checking/saving account, petty cash, certificates of deposit (if less
than 90 days until maturity), deposits held as compensating balances that are not legally
restricted
Info about restricted cash should be disclosed in the FN
Bank recs are made to find the differences between the book and bank balance (the
goal is to find the true balance which is the adjusted book balance)
Two types of bank recs: Simple reconciliation and reconciliation of cash receipts and
disbursements
Two adjustments made by bank: Deposits in transit (add to bank balance) and
outstanding checks (subtract from bank)
Four adjustments made by comp: Service charges (subtract; bank charges it and it is
automatically taken out of bank balance, so books are overstated), bank collections
(add, bank balance added some direct deposits that have not been recorded by the
comp yet), non-sufficient funds (subtract; the bank has already subtracted it from the
customer’s account), and interest income (add; bank has already added it)
Errors must be corrected by bank and/or comp
A check payable to a comp on Jan 2 of the following year should NOT be included in the
comp’s balance (subtract it if it was)
A check that is payable to a supplier that was recorded in the Dec 31 balance but IS
NOT mailed until Jan 2 should be added back to check balance (this is an error and will
be subtracted when it is actually mailed)
ONLY SUBTRACT A CHECK PAID TO A SUPPLIER WHEN IT IS MAILED
If a problem says that a comp “voided one of their checks on a date in the beg of the
following year,” then this would be added back to the comp balance even though it was
voided in the following year (this would mean that they wrote a check either to the wrong
person or for the wrong amt)
