FAR 3 Module 1 Flashcards
Components of Simple Reconciliations
BINS
What is a Bank draft?
Is it a Cash equivalent?
A bank draft is a type of payment where a bank guarantees the money will be paid to someone.
Yes because it is a payment method that is as good as cash
Checking vs Deposit Account
Checking account: A a bank account for everyday spending
Deposit Account: A bank account for Saving money
Which of the following is a cash and cash equivalent?
How long are cash and cash equivalents?
Cash equivalents must mature in 90 DAYS / 3 MONTHS or less at the date of purchase
Cash and cash equivalents require immediate liquidity and availability
What is a sinking fund?
What type of a account?
NON CURRENT ASSET
A sinking fund is a reserved account where a company sets aside money over time to repay a debt or replace an asset.
restricted asset or special-purpose account, depending on its use
Are the following considered Cash and Cash equivalents? and Why?
Marketable Equity Security
Marketable Debt Security
NO, Because these are both classified as investments
Marketable equity security: (Such as stocks) are generally not considered cash equivalents
Marketable debt security: Classified as investments and would be included in the investment line
What is included as a Cash and Liability for the following Bank account?
The Operating is cash because it has to be NETTED with all accounts
The Sedona is a Liability on the balance sheet because of the negative balance (OVERDRAFT)
What is a money market?
Are they considered Cash and Cash equivalents?
Treasury Bills (T-Bills)
Certificates of Deposit (CDs)
Financial market for short-term borrowing and lending, typically with maturities of one year or less.
Money markets are considered cash equivalents because they are highly liquid
How are post dated checks from the Balance sheet date treated when calculating cash?
Post-dated checks from the balance sheet date are NOT INCLUDED in the cash balance because they don’t represent available funds at that point in time.
How would the following be used to calculate cash?
Since the check is not disbursed as of 12/31/Y1, it should be added back to the check book balance
How are the following accounts treated when determining net cash?
We are determining the Net Cash:
Bank Balance - Checks outstanding + Deposits in Transit
Reconciling items like service charges, NSF checks, credit memos, interest income, and company errors AFFECT ONLY the books or general ledger balance, which is not provided here.
What are deposits in transit and check outstanding?
Deposits in Transit:
Money you’ve deposited into the bank but hasn’t shown up on the bank statement yet.
Outstanding Checks:
Checks you’ve written and recorded in your books but haven’t been cashed or cleared by the bank yet.
What would be the total Cash and Cash equivalents for the following:
9,000 BANK DRAFT ONLY
T-Bill and CDs had an ORIGINAL maturity date of greater than 90 days. Even though are are maturing less than 90 days, it is not included! Hi.
