FAR Section 2.1

Question 1

What is the formula to reconcile balance on bank statement?

Answer 1

Adjusted cash balance =
Book balance before adjustments
+ amounts credited by the bank not reflected in the book balance
– unrecorded bank charges
+/- errors made in recording transactions

Question 2

What elements should be calculated when determining accrual vs. cash basis?

Answer 2

Revenues and expenses but not investments or drawings

Question 3

What is the formula to reconcile a checkbook balance?

Answer 3

+Amounts collected by bank
-Unrecorded bank charges
+/- errors made in recording transactions

Question 4

Greenway has a variety of financial instruments some of which are bonds of publicly-held entities. It is Greenway’s business model to hold the bonds for the purpose of collecting the scheduled cash flows, which consist exclusively of principal and interest payments. Under IFRS, Greenway will account for these bonds:

Answer 4

Under IFRS, a financial instrument is accounted for at amortized cost if the entity’s business model is to hold the asset to collect its scheduled cash flows and if those cash flows consist exclusively of principal and interest payments. All others are reported at fair value, which may not be elected. This instrument will be accounted for at amortized cost.