Lesson 5

Question 1

What is cash

Answer 1

It comprises any legal tender that is immediately negotiable and free of any restrictions. I5 includes coins, notes, credit cards, vouchers, postal orders and any deposits on demand at financial institutions

Question 2

What is cash equivalents

Answer 2

Short+term, highly liquid investments that are readily convertible into cash and are subjected to significant risk relatingto the value thereof. Treasury bond (shares) and bankers acceptances

Question 3

In a business what happens when the cash inflow surpasses the out flow

Answer 3

A cash surplus is created that should be invested
To earn a return in the form of interest

Question 4

In a business what happens when the cash outflow exceeds the cash inflow

Answer 4

The business will need to borrow money, on which interest is paid to cover the shortage

Question 5

What are cash transactions that occur ina normal operation cycle of a business

Answer 5

1. Cash receipts
2. Cash payments
3. Depositing cash into bank accounts
4. Withdrawals and payments from bank accounts

Question 6

Why is internal control of cash in a business necessary

Answer 6

1. To ensure that cash that should be paid to an entity has been received and recorded
2. To ensure that cash that should be deposited has been deposited
3. And cash payments have been authorized and verified
4. Cash is most vulnerable to theft and fraud
5. Cash can easily be concealed and moved and can easily be converted into other assets

Question 7

What is trade receivable

Answer 7

Debtors that owe us money and expected to pay back within the 12 month period
In financial statements recorded under current assets

Question 8

What is trade payable

Answer 8

Creditors we owe money and expected to pay back within the 12 month period
In financial statements is record under liabilities