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INTERMEDIATE ACCOUNTING 1 > (C1) CASH & CASH EQUIVALENTS > Flashcards

(C1) CASH & CASH EQUIVALENTS Flashcards

(90 cards)

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1
Q

It is the standard medium of exchange in business transactions.

A

Money

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2
Q

This includes money and other negotiable instruments that are payable in money and accepted by the bank for deposit and immediate credit.

A

Cash

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3
Q

TRUE OR FALSE? Cash includes checks, bank drafts, and money orders.

A

TRUE

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4
Q

TRUE OR FALSE? Postdated checks are considered cash.

A

FALSE. They are not cash yet because they are unacceptable by the bank for deposit or immediate credit.

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5
Q

TRUE OR FALSE. For an item to be reported in cash, it must be unrestricted in use.

A

TRUE

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6
Q

TRUE OR FALSE? Cash must be readily available to pay current obligations and not subject to restrictions.

A

TRUE

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7
Q

Includes undeposited collections and other cash items awaiting deposit such as customer’s, manager’s, traveler’s check, bank draft, and money order.

A

Cash on Hand

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8
Q

Includes demand deposit or checking account and saving deposit which are unrestricted as to withdrawal.

A

Cash in Bank

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9
Q

A fund set aside for current purposes such as petty cash fund and dividend fund.

A

Cash Fund

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10
Q

These are short-term and highly liquid investments that are readily convertible into cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rate.

A

Cash Equivalents

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11
Q

How many months does the standard require for an item to be considered as cash equivalent?

A

THREE months BEFORE maturity.

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12
Q

TRUE OR FALSE? A four-month BSP Treasury Bill is a Cash Equivalent?

A

FALSE. Items are only categorized as cash equivalence if they are dated three months before maturity.

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13
Q

TRUE OR FALSE? Equity securities qualify as cash equivalents.

A

FALSE. Because shares do not have a maturity date.

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14
Q

TRUE OR FALSE? Preference shares with specified redemption date and acquired 3 months before redemption date can qualify as cash equivalents.

A

TRUE

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15
Q

TRUE OR FALSE. The entity must maintain sufficient cash for use in current operations.

A

TRUE

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16
Q

TRUE OR FALSE. Excess cash may be invested in time deposits, money market instruments, and treasury bills for the purpose of earning interest income.

A

TRUE

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17
Q

WHAT IS THE CLASSIFICATION?
If the term is 3 months or less.

A

CASH EQUIVALENTS

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18
Q

WHAT IS THE CLASSIFICATION?
If the term is more than 3 months but within 1 year.

A

SHORT-TERM FINANCIAL ASSETS REPORTED AS CURRENT ASSETS

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19
Q

WHAT IS THE CLASSIFICATION?
If the term is more than one year.

A

LONG-TERM INVESTMENTS REPORTED AS NON-CURRENT ASSETS

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20
Q

WHAT IS THE CLASSIFICATION?
If the item will become due within one year from the end of the reporting period.

A

They are reclassified as TEMPORARY INVESTMENTS REPORTED AS CURRENT ASSETS

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21
Q

How do we measure cash?

A

AT FACE VALUE

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22
Q

How do we measure cash that is in foreign currency?

A

At current exchange rate

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23
Q

TRUE OR FALSE. If a bank or financial institution holding the funds of an entity is in bankruptcy or financial difficulty, cash should be written down to its estimated realizable value if the amount recoverable is estimated to be lower than the face value.

A

TRUE

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24
Q

The caption cash in cash equivalents is usually on what number of line under current assets?

A

First line item

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25
TRUE OR FALSE. The details comprising the cash and cash equivalents are not required to be disclosed in the notes to financial statements.
FALSE. It needs to be reported to the notes of financial statements.
26
If the cash fund is set aside for use in current operations or for the payment of current obligation it is considered as?
Curren Asset
27
If the cash fund is set aside for non-current purposes or payment of non-current obligation it is classified as?
Non-Current Assets
28
TRUE OR FALSE. The classification of a cash fund as current or non-current should parallel the classification of the related liability.
TRUE
29
When the cash in bank account has a credit balance it is said to be a?
Bank Overdraft
30
TRUE OR FALSE. A bank overdraft is considered as a current liability.
TRUE
31
TRUE OR FALSE. Bank overdrafts can be offset against other bank accounts with debit balances.
FALSE. It is not possible.
32
TRUE FALSE. Bank overdrafts are permitted in the Philippines.
FALSE. It is not permitted here in the Philippines.
33
TRUE OR FALSE. Deposits in foreign countries which are not subject to any foreign exchange restrictions are included in cash.
TRUE
34
TRUE OR FALSE. Deposits in foreign banks which are subject to foreign exchange restrictions, if material, should be classified separately among the current assets and the restriction clearly indicated.
TRUE
35
TRUE OR FALSE. There is no exemption when it comes to overdrafts.
FALSE
36
TRUE OR FALSE. When an entity maintains two or more accounts in one bank and one account results in an overdraft, such overdraft can be offset against the other account with a debit balance. This shows the net of Bank overdraft.
TRUE
37
TRUE OR FALSE. An overdraft can also be offset if the amount is material.
FALSE. It must be immaterial (e.g. 1,000).
38
TRUE OR FALSE. Compensating balance generally takes the form of a maximum checking or demand deposit account balance that must be maintained in connection with the borrowing arrangement with the bank.
FALSE. It must be minimum checking not maximum.
39
TRUE OR FALSE. A compensating balance results in the reduction of amount borrowed because the compensating balance provides a source a fund to the bank as partial compensation for the loan extended.
TRUE
40
TRUE OR FALSE. A compensating balance can be a part of cash if the deposit is not legally restricted as to withdrawal by the borrower because of an informal compensating balance.
TRUE
41
TRUE OR FALSE. A compensating balance can be categorized as cash if the deposit is legally restricted because of a formal compensating balance agreement.
FALSE. If this is the case it is categorized as cash held as compensating balance under current assets if the related loan is short-term.
42
TRUE OR FALSE. If the related loan is long term and is legally restricted because of a formal compensating balance agreement, it is classified as non-current investment.
TRUE
43
These are checks that are merely drawn and recorded but not given to the payee before the end of the reporting period.
Undelivered or unreleased check
44
TRUE OR FALSE. There is a payment when a check is pending delivery to the payee at the end of the reporting period.
FALSE. In such a case, there is no payment made.
45
What is the correct adjusting entry for an undelivered check?
Dr: Cash Cr: Accounts Payable
46
These are checks that are drawn, recorded, and already given to the payee but bears a date subsequent to the end of the reporting period.
Postdated Checks
47
TRUE OR FALSE. In cases of postdated checks, there is no payment until the check can be presented to the bank for encashment or deposit.
TRUE
48
What is the correct adjusting entry for a postdated check?
Dr: Cash Cr: Accounts Payable
49
These are checks that are not encashed by the payee within a relatively long period of time.
Stale Checks
50
TRUE OR FALSE. The law provides a specific or definite period within which checks must be presented for encashment.
FALSE. There is no specific or definite period required by the law.
51
In banking parlance, how many months does it take for a check to become stale?
Usually 6 months but it depends on the company policy.
52
TRUE OR FALSE. Even after 3 months only, an entity may issue a stop payment order to the bank for the cancellation of a previously issued check.
TRUE
53
What is the correct adjusting entry for a stale check IF THE AMOUNT IS IMMATERIAL?
Dr: Cash Cr: Miscellaneous Income
54
What is the correct adjusting entry for a stale check IF THE AMOUNT IS MATERIAL AND LIABILITY IS EXPECTED TO CONTINUE?
Dr: Cash Cr: Accounts Payable
55
TRUE OR FALSE. Where the cash count shows cash which is less than the balance per book, a cash shortage is to be recorded.
TRUE
56
TRUE OR FALSE. When the cash count shows cash which is more than the balance per book, a cash overage is to be recorded.
TRUE
57
TRUE OR FALSE. The cash short or over account is a permanent account.
FALSE. It is a temporary or suspense account.
58
What is the correct entry if there is a cash shortage?
Dr: Cash Short or Over Cr: Cash
59
What is the correct entry for cash overage?
Dr: Cash Cr: Cash Short or Over
60
What is the correct adjusting entry if the cashier or cash custodian is held responsible for the cash shortage?
Dr: Due From Cashier Cr: Cash Short or Over
61
What is the correct adjusting entry if reasonable efforts fail to disclose the cause of the cash shortage?
Dr: Loss From Cash Shortage Cr: Cash Short or Over
62
TRUE OR FALSE. The cash overage is treated as miscellaneous income if there is no claim on the same.
TRUE
63
What is the correct adjusting entry if the cash overage has no claim?
Dr: Cash Short or Over Cr: Miscellaneous Income
64
What is the correct adjusting entry if the cash overage is found to be the money of the cashier?
Dr: Cash Short or Over Cr: Payable To Cashier
65
This is a system of control of cash which requires that all cash receipts should be deposited intact and all cash disbursement should be made by means of check.
IMPREST SYSTEM
66
This is a money set aside to pay small expenses which cannot be paid conveniently by means of check.
Petty Cash Fund
67
What are the two methods of handling petty cash?
1. Imprest Fund System 2. Fluctuating Fund System
68
This system is the one usually followed in handling petty cash transactions.
Imprest Fund System
69
This is a system where checks are drawn to replenish the fund which does not necessarily equal the petty cash disbursement. The replenishment checks are simply drawn upon the request of the petty cashier and petty cash disbursement are immediately recorded plus resulting in a fluctuating petty cash balance per book from time to time.
Fluctuating Fund System
70
TRUE OR FALSE. All transactions can be done via check.
FALSE. There are instances when insurance of checks becomes impractical or inconvenient.
71
UNDER IMPREST FUND SYSTEM, what is the journal entry for the establishment of the fund?
Dr: Petty Cash Fund Cr: Cash
72
UNDER IMPREST FUND SYSTEM, what is the correct journal entry for the payment of expenses out of the fund?
No journal entries are needed. The petty cashier generally requires a scientific cash voucher for such payments and simply prepares memorandum entries in the petty cash journal.
73
UNDER IMPREST FUND SYSTEM, what is the correct journal entry for the replenishment of the fund?
Dr: Expenses Cr: Cash in Bank
74
TRUE OR FALSE. Petty cash disbursements can be replenished by means of undeposited collections.
FALSE. Petty cash disbursements should only be replenished by means of check.
75
TRUE OR FALSE. UNDER IMPREST FUND SYSTEM, it is necessary to adjust the unreplenished expenses in order to state the correct petty cash balance.
TRUE
76
UNDER IMPREST FUND SYSTEM, what is the correct adjusting entry for adjusting the unrplenished expenses at the end of the accounting period?
Dr: Expenses Cr: Petty Cash Fund
77
UNDER IMPREST FUND SYSTEM, what is the correct adjusting entry for reversing the unreplenished expenses at the beginning of the accounting period?
Dr: Petty Cash Fund Cr: Expenses
78
UNDER IMPREST FUND SYSTEM, what is the correct journal entry to record an increase in the fund?
Dr: Petty Cash Fund Cr: Cash
79
UNDER IMPREST FUND SYSTEM, what is the correct journal entry for a decrease in the fund?
Dr: Cash Cr: Petty Cash Fund
80
UNDER FLUCTUATING FUND SYSTEM, what is the correct journal entry for the establishment of the fund?
Dr: Petty Cash Fund Cr: Cash
81
TRUE OR FALSE. Under the fluctuating fund system, The disbursements from the petty cash fund are immediately recorded.
TRUE
82
UNDER FLUCTUATING FUND SYSTEM, what is the correct journal entry for the payment of expenses out of the petty cash fund?
Dr: Expenses Cr: Petty Cash Fund
83
UNDER FLUCTUATING FUND SYSTEM, what is the correct journal entry for the replenishment of the fund?
Dr: Petty Cash Fund Cr: Cash
84
UNDER FLUCTUATING FUND SYSTEM, is there a need to record the adjustments and reversing of the unreplenished expenses?
There is no need. At the end of the reporting period no adjustment is necessary because the petty cash expenses are recorded outright.
85
UNDER FLUCTUATING FUND SYSTEM, what is the correct journal entry to record an increase in the fund?
Dr: Petty Cash Fund Cr: Cash
86
UNDER FLUCTUATING FUND SYSTEM, what is the correct journal entry to record a decrease in the fund?
Dr: Cash Cr: Petty Cash Fund
87
TRUE OR FALSE. A 3-year BSP Treasury bill purchase 3 months before date of maturity is an example of cash equivalent.
TRUE
88
TRUE OR FALSE. A cash that is set aside for the firm's improvement and expansion is considered as cash.
FALSE. Because it is restricted for the expansion.
89
TRUE OR FALSE. An entity must rather save their excess money rather than invest it.
FALSE. Any cash accumulated in excess of that needed for current operations should be invested even temporarily in some type of revenue earning investment.
90
This is considered as the most liquid asset.
Cash

INTERMEDIATE ACCOUNTING 1 (4 decks)

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