FAR 2 - Cash & Cash Equivalents & Balance Sheet Flashcards

1
Q

Cash Equivalent

A

Is a security that is easily converted into cash with an original maturity of 90 days or less

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2
Q

Cash & Cash Equivalent Examples

A

Coin & currency on hand (petty cash)

Money market accounts

Unmailed checks

Savings accounts

CDs with matury of 3 months or less

Bank checks, travelers checks, money orders

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3
Q

What are some items excluded from cash? (5)

A

1. Compensating Balances

  • Restricted deposits:
    • Legally restricted = NOT part of cash
    • NOT Legally restricted = part of cash

2. Postdated cheks or NSF

3. Overdraft protection

  • If in same bank, balances of accounts are netted
  • If in different banks, show balances separately as as an asset if positive balance & a liability if negative balance

4. Restricted cash

5. Postage stamps

  • Supplies not cash
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4
Q

Bank Reconcilitiaon

(Balance on Bank Statement - “Bank to Book”)

A

Balance on Bank Statement

+ Deposits in transit

  • Outstanding Checks

+/- Errors made by bank

= Corrected balance

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5
Q

Bank Reconciliation

(Checkbook Balance - “Book to Bank”)

A

Checkbook Balance

+ Amounts collected by bank

  • Unrecorded bank charges

+/- Errors made in recording transactions

= Corrected Balance

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6
Q

Statement of Earnings & Comprehensive Income

Income Statement

ON-TIDE-N-OC

A

Operating Income

Non-Operating Income

Tax

= Income from Continuing Operations

Discontinued Component Unit

Extraordinary Loss

= Net Income

Other Comprehensive Income (DENT)

= Comprehensive Income

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7
Q

“Bank statement error in (client’s) favor”

Bank Reconciliation (Bank to Book)

A

“Bank statement error in (client’s) favor” - means that the bank mistakenly added funds to the clients account and need to be taken subtracted out as a reconciliation item.

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8
Q

Under IFRS, how are financial assets & financial liabilities measured?

A

Financial Assets:

  1. Amortized Cost if TWO conditions are met
    a. ) Asset is held to collect scheduled cash flows (interest)
    b. Terms of the instrument calls for cash flows that are exclusively payments of principal & interest.
  2. All other are measured at Fair Value

Financial Liabilities:

  1. Measured at Amortized Cost
  2. At Fair Value, when it will result in more relevant information
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9
Q

How are Bonds reported in the Balance Sheet?

A

Amortized Cost

Bond NET OF Discount/Premium

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10
Q

Current Assets on BS (6)

A
  1. Cash & Cash Equivalents
  2. Trading Securities
  3. Receivables (NRV)
  4. Inventories (LCM)
  5. Prepaid Expenses
  6. Current Deferred Taxes
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