Cash and Cash Equivalents Flashcards
List the items included in cash.
Coin and currency, petty cash, cash in bank, and negotiable instruments such as ordinary checks, cashier’s checks, certified checks, and money orders.
Define “compensating balance.”
A minimum balance that must be maintained by the firm in relation to a borrowing. Classified as current or non-current based on related loan classification.
What effect do overdrafts have in IFRS?
They can be subtracted from cash, rather than classified as a liability.
What does separation of duties accomplish?
Makes it more difficult for employees to perpetrate fraud and gain access to the firm’s cash.
Define “cash equivalents.”
Treasury obligations (bills, notes, and bonds), commercial paper (very short-term corporate notes), and money market funds.
Define “monetary assets.”
As asset with a fixed nominal value.
List the items that are not included in cash.
- COD
- Legally restricted compensating balances
- Restricted cash funds
- Post-dated checks received
- Checks written but not sent
- Advances to employees
- Postage stamps
Describe bank overdraft rules.
Overdrafts can be offset against cash in the same bank, but if the bank has insufficient cash at the same bank, it is reported as a current liability.
List the adjustments made to a bank balance to arrive at book income.
- Deposits in Transit
- Cash on Hand (deposited cash receipts, not petty cash)
- Outstanding Checks
- Bank Errors
What is a deposit in transit?
Deposits made by a company that have not yet cleared the bank as of the bank statement date.
What does an NSF check represent?
“Non-sufficient funds” checks received from customers.
What does cash on hand reflect?
Petty cash on hand and undeposited cash receipts.
List the adjustments made to book balance to arrive at the bank balance.
- Interest Earned
- Note Collected
- Service Changes
- NSF Checks
- Errors in company’s records
What are outstanding checks?
Checks written and mailed by the company which have not cleared the bank by the bank statement date.
List the three types of bank reconciliations.
- Bank to Book
- Book to Bank
- Bank and Book to True
