Cash & Cash Equivalents

d

Float refers to: a. the number of days that a bank will allow a corporation to hold a negative balance in its checking account before charging fees for the negative balance. b. the companies bank balance in excess of its working capital needs. c. the receivable balance on the books of the corporation. d. checks issued but not yet paid by a bank.

b

For effective eternal control over the disbursement of payroll checks, an enterprise makes a specific amount of cash available in a checking account for this limited purpose. The type of account used for this purpose is called a(n) a. General checking account c. Lockbox account b. Imprest bank account d. Compensating balance

d

If material, deposit in foreign countries which are subject to foreign exchange restriction should be shown separately as a. Current asset with no disclosure of the restriction. b. Non-current asset with no disclosure of the restriction. c. Current assets with disclosure of the restriction. d. Non-current asset with disclosure of the restriction.

d

If the balance shown on a company's bank statement is less than the correct cash balance, and neither the company nor the bank has made any errors, there must be a. deposits credited by the bank but not yet recorded by the company. b. outstanding checks. c. bank charges not yet recorded by the company. d. deposits in transit.

a

If the cash balance shown in a company's accounting records is less than the correct cash balance, and neither the company nor the bank has made any errors, there must be a. deposits credited by the bank but not yet recorded by the company. b. deposits in transit. c. outstanding checks. d. bank charges not yet recorded by the company.

d

A bank reconciliation is a. A formal financial statement that list all of the bank account balances of an enterprise. b. A merger of two banks that previously were competitors. c. A statement sent by the bank to depositor on a monthly basis. d. A schedule that accounts for the differences between an enterprise's cash balance as shown on its bank statement and the cash balance shown in its general ledger.

c

A device not normally prepared on a regular basis but is a very useful tool during fraud audits regarding defalcation of cash a. Lapping statement c. Proof of cash b. Bank reconciliation d. Cash requirements report

d

A petty cash system is designed to a. cash checks for employees. b. handle cash sales. c. account for all cash receipts and disbursements. d. pay small miscellaneous expenses.

c

A proof of cash would be useful for a. Discovering cash receipts that have not been recorded in the journal. b. Discovering time lag in making deposits. c. Discovering cash receipts that have been recorded but have not been deposited. d. Discovering an inadequate separation of incompatible duties of employees. ​

c

A reconciliation that includes proof of receipts and disbursements that is useful in discovering possible discrepancies in handling cash over a certain period of time. a. Bank statement c. Proof of cash b. Bank reconciliation d. Cash requirements report

b

A voucher system is used in connection with transactions that involve only a. The receipt of cash b. The payment of cash c. The purchase and sale of merchandise d. Revenue and expense

a

Adjusting and correcting entries in the books of the company are necessary for a. Book reconciling items c. Errors committed by the bank b. Bank reconciling items d. a and c

b

After vouchers are recorded, they are filed in an "unpaid vouchers file" a. Numerically c. Chronologically b. In the order of payment d. No particular order

a

Alaking received cash to be held in trust for Ambit under an escrow agreement. Such cash should be presented in Alaking's financial statements as a. part of cash b. a liability c. an asset and a liability d. an off-balance sheet item but disclosed in the notes

c

Bank overdraft a. Is a debit balance in a cash in bank account. b. Is offset against demand deposit account in another bank. c. Which cannot be offset is classified as current liability. d. Which cannot be offset is classified as non-current liability.

d

Bank overdrafts, if material, should be a. reported as a deduction from the current asset section. b. reported as a deduction from cash. c. netted against cash and a net cash amount reported. d. reported as a current liability.

b

Bank reconciliations are normally prepared a. on "as needed" basis b. on a monthly basis c. every time financial statements are prepared d. only at year-end

d

Bank statements provide information about all of the following except a. checks cleared during the period c. bank charges for the period b. NSF checks d. errors made by the company

b

Cash in foreign currency is valued at a. Face value b. Current exchange rate c. Current exchange rate reduced by allowance for expected decline in peso d. Estimated realizable value

d

Compensating balance agreements that do not legally restrict the amount of funds shown on the balance sheet should: a. be reported in the current asset section b. be reported in the Long-term investment section c. be reported in the other asset section d. be reported in the footnotes

d

Consider the following statements. I. The voucher system refers to the complete use of the voucher check and of subsidiary records of vouchers payable, voucher register and check register II. The simplest and most satisfactory method of handling purchase discounts under the voucher system is to deduct the purchase discount on the face of the voucher and enter this discount in a special column in the check register III. Entries in the voucher register are made in the same sequence as the numbering of the checks - that is, in the order in which payments are made. a. true, true, false c. false, false, false b. true, false, false d. true, true, true

c

Del Co. prepares a four-column bank reconciliation. Check no. 8859 was written for P5,670 on the books, but the check was written and cleared the bank for the correct amount, P6,570. The correct treatment on the reconciliation would be: a. on the bank side, deduct P900 from payments and add P900 to ending balance b. on the book side, deduct P900 from payments and add P900 to ending balance c. on the book side, add P900 to payments and deduct P900 from ending balance d. on the bank side, add P900 to receipts and add P900 to ending balance

d

Deposits held as compensating balances a. usually do not earn interest. b. if legally restricted and held against short-term credit may be included as cash. c. if legally restricted and held against long-term credit may be included among current assets. d. none of these.

a

Devin Co.'s cash balance in its balance sheet is P1,300,000, of which P300,000 is identified as a compensating balance. In addition, Devin has classified cash of P250,000 that has been restricted for future expansion plans as "other assets". Which of the following should Devin disclose in notes to its financial statements? (Item #1) Compensating balance; (Item #2) Restricted cash a. Yes, Yes b. Yes, No c. No, Yes d. No, No

d

In an imprest system, it is the fund set aside for small disbursements a. Pretty cash fund c. Payroll fund b. Dividends fund d. Petty cash fund

a

In most situations, the petty cash fund is reimbursed just prior to the year end and an adjusting entry is made to avoid a. the overstatement of cash and the understatement of expenses. b. the understatement of cash and the overstatement of expenses. c. the misstatement of revenues. d. the understatement of cash with the appropriate statement of expenses.

c

In preparing a bank reconciliation, interest paid by the bank on the account is a. added to the bank balance c. added to the book balance b. subtracted from the bank balance d. subtracted from the book balance

c

In preparing a monthly bank reconciliation, which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance? a. Outstanding checks b. Bank service charge c. Deposits in transit d. A customer's note collected by the bank on behalf of the depositor

a

In preparing the bank reconciliation using the adjusted balance method, errors to be included in reconciling the balance per books to the adjusted balance include a. only the errors committed by the company b. only the errors committed by the bank c. both the errors committed by the company and the bank d. choice (c) if both errors affect the balance per books

c

In preparing the bank reconciliation using the adjusted balance method, the first item listed in the bank reconciliation report for reconciling the balance of cash in bank per bank statement to the adjusted balance is the a. Balance of cash in bank per books as of the end of the month b. balance of cash in bank per books as of the beginning of the month c. balance of cash in bank per bank statement as of the end of the month d. balance of cash in bank per bank statement as of the beginning of the month

a

In preparing the bank reconciliation using the adjusted balance method, the first item listed in the bank reconciliation report for reconciling the balance of cash in bank per books to the adjusted balance is the a. balance of cash in bank per books as of the end of the month b. balance of cash in bank per books as of the beginning of the month c. balance of cash in bank per bank statement as of the end of the month d. balance of cash in bank per bank statement as of the beginning of the month

b

In preparing the bank reconciliation, certified checks should be excluded from outstanding checks. The rationale for this treatment is a. the bank, when certifying checks, draws the check in its account b. the bank, when certifying checks, automatically debits the company's account c. the bank, when certifying checks, automatically credits the company's account d. the bank, when certifying checks, assumes the obligation to pay the drawee when the check is presented for payment

c

In reconciling a business cash book with the bank statement, which of the following items could require a subsequent entry in the cash book? 1. Checks presented after date. 2. A check from a customer which was dishonored. 3. An error by the bank. 4. Bank charges. 5. Deposits credited after date. 6. Standing order entered in bank statement. a. 2, 3, 4 and 6 b. 1, 2, 5 and 6 c. 2, 4 and 6 d. 1, 3 and 5

b

It is the business paper which a company makes for every cash payment. a. Check b. Voucher c. Journal d. Official receipt

c

On January 1, 20x1, UFC Co. established a petty cash fund of P400. On December 31, 20x1, the petty cash fund was examined and found to have receipts and documents for miscellaneous expenses amounting to P364. In addition, there was cash amounting to P44. What entry would be required to record replenishment of the petty cash fund on December 31, 20x1? a. Petty Cash...........................364 Cash Short and Over................8 Cash in bank...........................356 b. Miscellaneous Expense...364 Cash Short and Over................8 Petty Cash...............................356 c. Miscellaneous Expense...364 Cash Short and Over................8 Cash in bank...........................356 d. Miscellaneous Expense...356 Cash Short and Over..............8 Cash in bank................... .....364

a

On October 31, 2003, Dingo, Inc. had cash accounts at three different banks. One account balance is segregated solely for a November 15, 2003 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingo's October 31, 2003 classified balance sheet? a. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability. b. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current liability. c. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset net of the overdraft. d. The segregated and regular accounts should be reported as current assets net of the overdraft.

b

On an entity's December 31, 20x1 statement of financial position which of the following items should be included in the amount reported as cash? I. A check payable to the enterprise, dated January 2, 20x2, in payment of a sale made in December 20x1. II. A check drawn on the enterprise's account, payable to a vendor, dated and recorded in the company's books on December 31, 20x1 but not mailed until January 10, 2002. a. I only b. II only c. I and II only d. Neither I nor II

a

Regarding the preparation of a proof of cash, an erroneous book credit committed in the previous month which is corrected this month a. is an addition to previous month's balance per books and a deduction to receipts in current month b. is a deduction to previous month's balance per books and a deduction to receipts in current month c. is an addition to current month's balance per books and a deduction to receipts in previous month d. is an addition to previous month's balance per bank statement and a deduction to receipts in current month

d

The amount reported as "Cash" on a company's balance sheet normally should exclude a. postdated checks that are payable to the company b. cash in a payroll account c. undelivered checks written and signed by the company d. petty cash

d

The effect of compensating balance is a. to provide greater security for the borrower b. to decrease the yield on the loan to the lender c. to increase the yield on the loan to the borrower d. to increase the yield on the loan to the lender.

b

The principal purpose of a voucher system is to provide assurance that a. All cash receipts are deposited intact in the bank b. All cash disbursements are approved before a check is issued c. All cash receipts are recorded in the accounting records d. All purchase invoices are supported by debit memoranda

d

These are short-term, highly liquid investments that are so near their maturity that they represent insignificant risk of changes in value due to changes in interest rates. a. Cash and Cash equivalents c. Treasury notes b. Treasury bills d. Cash equivalents

a

This document is a bank statement prepared a few days after month-end. Its purpose is to help auditors verify reconciling items on the year-end bank reconciliation. a. Cut-off bank statement b. Bank reconciliation c. Bank transfer schedule d. Proof of cash

c

This document shows the dates of all transfers of cash among the various bank accounts. Its primary purpose is to help auditors detect kiting. a. Cut-off bank statement c. Bank transfer schedule b. Bank reconciliation d. Proof of cash

c

This internal control for cash requires that cash collections are deposited intact and cash disbursements are made through check. a. Segregation of duties c. Imprest system b. Voucher system d. Bank reconciliation

b

This occurs when cash shortage is concealed by overstating the balance of cash. This is performed by exploiting the float period (the time it needs for a check to clear at the bank it was drawn). a. Lapping b. Kiting c. Window dressing d. Fraud

a

This occurs when collection of receivable from one customer is misappropriated and then concealed by applying a subsequent collection from another customer. a. Lapping b. Kiting c. Window dressing d. Fraud

c

This refer to measures taken by management to make a business look as strong as possible in its statement of financial position, statement of profit or loss and other comprehensive income, and statement of cash flows. It occurs when books are not closed at year-end and transactions in the subsequent period are deliberately recorded in current period in order to improve the entity's financial performance or financial ratios. a. Lapping b. Kiting c. Window dressing d. Fraud

b

Unless otherwise stated, reconciling items are presumed to have been taken up in the books or taken up by the bank a. during the month the bank statement is prepared b. in the immediately following month c. in the immediately preceding month d. in the immediately following or preceding reporting period, on a case-to-case basis

c

When making payments to suppliers, an entity normally credits this account. a. Cash c. Cash in bank b. Vouchers payable d. Accounts payable ​

b

When preparing a proof of cash, the correction for an overstatement of cash in the previous month a. is an addition to previous month's balance per books and a deduction to receipts in current month b. is a deduction to previous month's cash balance and a deduction to current month's disbursements c. is an addition to previous month's balance per bank statement and a deduction to receipts in current month d. is an addition to previous month's balance per bank statement and a deduction to current month's disbursements

a

When presenting a bank reconciliation statement prepared using the book to bank method, which of the following is as a deduction in order to compute for the cash balance per bank? a. Deposit in transit c. Credit memo b. Error d. Outstanding checks

d

When the bank receives cash from a depositor, the cash should be credited to a. Cash c. Accounts payable b. Cash in bank d. Deposit liability

b

Which is not a key element of internal control over cash receipts? a. daily recording of all cash receipts in the accounting records b. daily entry in a voucher register c. immediate counting by the person opening the mail or using the cash register d. daily deposit intact

c

Which of the following best describes a voucher? a. A supporting document prepared for each cash receipt and disbursement b. A promise to pay an amount owed within a discount period c. A written authorization prepared for each check written d. A written record sent to a payee along with the signed check

c

Which of the following best qualifies as a "cash equivalent?" a. A firm's investment in "held to maturity" government treasury bonds that mature in 5 years. b. A firm's equity investment in an unconsolidated subsidiary of a privately held firm. c. A firm's investment in government treasury bills. d. All of these answers.

b

Which of the following checks illustrate deposits/ transfers in transit at December 31, 2001? a. #101 and #202. c. #202 and #404 b. #101 and #303 d. #303 and #404

b

Which of the following checks might indicate kiting? a. #101 and #303. c. #101 and #404 b. #202 and #404 d. #202 and #303 ​

a

Which of the following is a key element of internal control over cash payments? a. periodically reconciling the cash account balance on the company's books to the bank statement balance b. making daily bank deposits c. requiring that all petty cash vouchers be approved by two signatures d. authorizing and verifying that all cash received is recorded daily

c

Which of the following is deducted from the cash balance per bank when computing for the cash balance reported in the books? a. Deposit in transit c. Credit memo b. Error d. Debit memo

c

Which of the following is least likely the purpose of preparing bank reconciliation? a. to bring the cash in bank balance per books and per bank statement in agreement b. as an internal control procedure for safeguarding assets c. to detect fraud d. to recognize items such as expenses and assets not recorded ​

b

Which of the following is not a basic characteristic of a system of cash control? a. Use of a voucher system b. Combined responsibility for handling and recording cash c. Daily deposit of all cash received d. Internal audits at irregular intervals

c

Which of the following is not a correct way of handling a voucher system? a. Purchases are recorded in the voucher register at gross by debiting purchases and crediting vouchers payable. b. Payment of purchases with discounts is recorded in the check register by debiting vouchers payable at gross and crediting respectively cash in bank and purchase discounts. c. In case there are purchase returns and allowances, there is no need to cancel the original voucher and the issuance of a new one for the lower amount because adjusting entries could later on be prepared. d. When installments or other payments are made on an invoice, a separate voucher is prepared for the amount of each check issued.

a

Which of the following is not an appropriate procedure for controlling the petty cash fund? a. The petty cash custodian files receipts by category of expenditure after their presentation to the general cashier so that variations in different types of expenditures can be monitored. b. Surprise counts of the fund are made from time to time by a superior of the petty cash custodian to determine that the fund is being accounted for satisfactorily. c. The petty cash custodian obtains signed receipts from each individual to whom petty cash is paid. d. Upon receiving petty cash receipts as evidence of disbursements, the general cashier issues a company check to the petty cash custodian, rather than cash, to replenish the fund.

d

Which of the following is not considered cash for financial reporting purposes? a. Petty cash funds and change funds b. Money orders, certified checks, and personal checks c. Coin, currency, and available funds d. Postdated checks and I.O.U.'s

d

Which of the following is/are true about "compensating balances?" I. They are reserve balances maintained for emergency spending requirements II. If compensating balances are legally restricted, they must be segregated on the balance sheet. III. Compensating balances are overstated if "floats" are included as part of the cash. a. II only b. I & III c. I, II & III d. II & III

c

Which of the following items would be added to the book balance on a bank reconciliation? a. Outstanding checks b. A check written for P63 entered as P36 in the accounting records c. Interest paid by the bank d. Deposits in transit

d

Which of the following may properly be included as part of cash to be reported in the December 31, 200A statement of financial position? a. Treasury bills maturing on March 31, 200B, acquired on December 1, 200A. b. Customer's check dated January 1, 200B and sent to bank for deposit on December 31, 200A. c. Shares of stocks to be sold on the first week of January 200B. d. Preference shares with mandatory redemption and acquired three months prior to redemption date.

c

Which of the following statements is false? a. Certified check is a liability of the bank certifying it. b. Certified check will be accepted by many persons who would not otherwise accept a personal check. c. Certified check is one drawn by the bank upon itself. d. Certified check should not be included in the outstanding check.

e

Which of the following statements is incorrect? a. Cash which is restricted and not available for use within one year of the reporting period should be included in noncurrent assets. b. Cash in a demand deposit account, being held specifically for the retirement of long-term debts not maturing currently, should be excluded from current assets and shown as a noncurrent investment. c. Investments which can be liquidated at once and with little risk of loss of principal may be classified as cash equivalent and included in the caption "Cash and Cash equivalents" d. Compensating balances are cash amounts that are not immediately accessible by the owner. e. Cash and cash equivalents is always presented first in statement of financial position when presenting current and non-current classifications.

d

Which of the following would not be classified as cash? a. Personal checks c. Cashier's checks b. Traveler's checks d. Postdated checks

c

Which one of the following statements is incorrect? a. The accounting function should be separated from the custodianship of a company's assets. b. Certain clerical personnel in a company should be rotated among various jobs. c. The responsibility for receiving merchandise and paying for it should usually be given to one person. d. A company's personnel should be given well-defined responsibilities.

d

Who is responsible, at all times, for the amount of the petty cash fund? a. The president c. The general cashier b. The general office manager d. The petty cash custodian

b

ded in the depositor's records and to identify bank errors. Adjustments should be recorded for a. bank errors, outstanding checks, and deposits in transit. b. all items except bank errors, outstanding checks, and deposits in transit. c. book errors, bank errors, deposits in transit, and outstanding checks. d. outstanding checks and deposits in transit.