Unit 2: Cash & Cash Equivalents

Question 1

Legal tender or coins that can be used to exchange goods, debt or services.

Answer 1

Cash

Question 2

A summary of banking and business activity that resolves an entity’s bank accounts with its financial records.

Answer 2

Bank reconciliation

Question 3

A bank account balance that a corporation agrees to maintain with a current or potential lender.

Answer 3

Maintaining balance

Question 4

A small amount of discretionary funds used for expenditures where it is not sensible to make any disbursements by check.

Answer 4

Petty cash.

Question 5

A roll forward of each line item in a bank recon from one accounting period to the next, incorporating separate columns for cash receipts and disbursements.

Answer 5

Proof of cash

Question 6

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Answer 6

Cash equivalent

Question 7

A printed record of the balance in the bank account and the amounts that have been paid into it and withdrawn from it, issued periodically to the holder of the account.

Answer 7

Bank statement

Question 8

Increases in a depositor’s bank account that have not yet been taken up in its records.

Answer 8

Credit memo

Question 9

Cash that a company has received and is rightfully reported as cash, but does not appear on the bank statement until a later date.

Answer 9

Deposits in Transit

Question 10

The government-owned and controlled corporation that has the exclusive power to issue the national currency.

Answer 10

Banko Sentral ng Pilipinas.

Question 11

[T/F] All disbursements, even for incidental amounts, must be paid by check.

Answer 11

False

Question 12

[T/F] Under the accrual basis of accounting, cash inflows do not necessarily equate to income earned.

Answer 12

True

Question 13

[T/F] The imprest petty cash system in effect adheres to the rule of disbursement by check.

Answer 13

True

Question 14

[T/F] Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank, all other things being equal.

Answer 14

False

Question 15

[T/F] A proof of cash would be useful for discovering cash receipts that have been recorded but have not been deposited.

Answer 15

True

Question 16

[T/F] A certified check is a liability of the bank certifying it.

Answer 16

True

Question 17

[T/F] The use of the voucher system is a characteristic of a system of a cash control.

Answer 17

True

Question 18

[T/F] If the cash short or over account has a debit balance at the end of the period, it must be debited to an expense account.

Answer 18

False

Question 19

[T/F] Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents.

Answer 19

True

Question 20

[T/F] At the end of each reporting period, foreign currency monetary items shall be translated using the average rate for the year.

Answer 20

False

Question 21

This represents formal evidence of indebtedness, issued by a bank, subject to withdrawal under the specific terms of the instrument.

Answer 21

Certificates of Deposits (CDs)

Question 22

A variation of the mutual fund, a mix of Treasury bills and commercial paper making up the fund’s portfolio determines the yield. Many allow withdrawal by check or wire transfer.

Answer 22

Money-market funds

Question 23

A short-term debt obligation backed by the Philippine government with a maturity of less that one year.

Answer 23

Treasury bills

Question 24

A short-term note issued by corporations with good credit ratings. These generally yield a higher rate than Treasury Bills.

Answer 24

Commercial paper

Question 25

Issued by banks and savings loan associations for 6-month periods (6 to 48 months). The interest rate is tied to the 26-week Treasury bill rate.

Answer 25

Money market savings certificate

Question 26

These are checks drawn before the balance sheet but held for later delivery to creditors. These are not treated as outstanding checks and are restored to the cash balance.

Answer 26

Unreleased / undelivered checks

Question 27

Under this method of handling petty cash funds, replenishment checks are prepared upon the request of the petty cash cashier.

Answer 27

Fluctuating fund system

Question 28

[T/F] Under the Imprest system, cash receipts are deposited at least weekly.

Answer 28

False (daily).

Question 29

When there is a cash overage (and hence, Cash over and short is credited), the account may be closed to a miscellaneous income or ________ account.

Answer 29

Expense account.

Question 30

[T/F] A bank statement is only prepared for demand or checking accounts.

Answer 30

True.

Question 31

A check that has been stamped by the bank as “accepted”, indicating sufficiency of fund.

Answer 31

Certified check.

Question 32

These are checks issued by the depositor and are paid by the bank during the month.

Answer 32

Cancelled checks.