INTAC - CHAPTER 1

Question 1

Which of the following should not be considered cash?

a. Petty cash fund
b. Money order
c. Coin and currency
d. IOU

Answer 1

d. IOU

Question 2

Which of the following is usually considered cash?

a. Certificate of deposit
b. Checking account
c. Money market certificate
d. Postdated check

Answer 2

b. Checking account

Question 3

Which of the following should not be included in cash?

a. Travel cash advance
b. Certified check
c. Personal check
d. Manager check

Answer 3

a. Travel cash advance

Question 4

All of the following may be included in cash, except

a. Currency
b. Money market instrument
c. Checking account balance
d. Saving account balance

Answer 4

b. Money market instrument

Question 5

Under IFRS, which of the following statements is true about reporting bank overdraft?

a. Overdraft typically cannot be offset against positive balance in other cash account but reported as current liability.

b. Generally, cash overdraft is not allowed.

c. Overdraft can be offset against other bank account when payable on demand and often fluctuates from positive to overdrawn as an integral part of cash

d. All of these statements are true about bank overdraft.

Answer 5

d. All of these statements are true about bank overdraft.

Question 6

Technically, cash may not include

a. Foreign currency
b. Money order
c. Restricted cash
d. Undeposited customer check

Answer 6

c. Restricted cash

Question 7

Restricted deposits in foreign bank are classified as

a. Current asset with appropriate disclosure.
b. Noncurrent asset with appropriate disclosure.
c. Be written off as loss.
d. As part of cash and cash equivalents.

Answer 7

b. Noncurrent asset with appropriate disclosure.

Question 8

What is a compensating balance?

a. Saving account balance
b. Demand deposit account balance
c. Temporary investment as collateral for loan
d. Minimum deposit required to be maintained in connection with a borrowing arrangement

Answer 8

d. Minimum deposit required to be maintained in connection with a borrowing arrangement

Question 9

Compensating balance represents

a. Fund in a bank account that cannot be spent
b. Balance in a payroll checking account
c. Account that is subject to bank service charge
d. Account on which a bank pays interest

Answer 9

a. Fund in a bank account that cannot be spent

Question 10

A compensating balance.

a. Must be included in cash and cash equivalent.

b. Which is legally restricted and related to a long-term loan is classified as current asset.

c. Which is legally restricted and related to a short-term loan is classified separately as current asset.

d. Which is not legally restricted as to withdrawal is classified separately as current asset.

Answer 10

c. Which is legally restricted and related to a short-term loan is classified separately as current asset.

Question 11

A cash equivalent is a short-term, highly liquid investment readily convertible into known amount of cash and

a. Is acceptable as a means to pay current liability

b. Has a greater current fair value

c. Bears a prime interest rate

d. Is so near maturity that it presents insignificant risk of change in interest rate

Answer 11

d. Is so near maturity that it presents insignificant risk of change in interest rate

Question 12

Highly liquid investments are cash equivalents if the maturity is 90 days or less

a. From the date the investments are acquired

b. From the end of reporting period

c. From the date of issue of financial statements

d. From the beginning of reporting period

Answer 12

a. From the date the investments are acquired

Question 13

All of the following can be classified as cash and cash equivalents, except

a. Redeemable preference shares due in 60 days
b. Commercial papers due for repayment in 90 days
c. Equity investments
d. A bank overdraft

Answer 13

c. Equity investments

Question 14

Cash equivalents do not include

a. Money market funds
b. High grade marketable equity investments
c. BSP treasury bills
d. Commercial papers

Answer 14

b. High grade marketable equity investments

Question 15

Cash equivalents are

a. Treasury bills and money market instruments.

b. Investments with original maturity of three months or less.

c. Readily convertible into known amount of cash.

d. All of these are features of cash equivalents.

Answer 15

d. All of these are features of cash equivalents.

Question 16

The internal control feature specific to petty cash is

a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

Answer 16

d. Imprest system

Question 17

What is the major purpose of an imprest petty cash fund?

a. To effectively plan cash inflows and outflows

b. To ease the payment of cash to vendors

c. To determine the honesty of the petty cashier

d. To effectively control cash disbursements

Answer 17

d. To effectively control cash disbursements

Question 18

The imprest petty cash fund account is debited

a. Only when the fund is created.

b. When the fund is created and everytime it is replenished.

c. When the fund is created and when the size of the fund is increased.

d. When the fund is created and when the size of the fund is decreased.

Answer 18

c. When the fund is created and when the size of the fund is increased.

Question 19

A cash over and short account

a. Is not generally accepted.
b. Is debited when the petty cash fund proves out over.
c. Is debited when the petty cash fund proves out short.
d. Is a contra account to cash.

Answer 19

c. Is debited when the petty cash fund proves out short.

Question 20

Petty cash fund is

a. Separately classified as current asset

b. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks

c. Set aside for the payment of payroll

d. Restricted cash

Answer 20

b. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks