7 - Cash and Cash Equivalents
Study online at quizlet.com/_3dst04
1. standard medium of exchange in business transactions: Money
2. currency and coins which are in circulation and legal tender:
Money
3. includes money and any other negotiable instrument that is
payable in money and acceptable by the bank for deposit
and immediate credit: Cash
4. to be reported as "cash," it must be?: Unrestricted in use
5. what does it mean for cash to be 'unrestricted in use?': It must
be readily available in the payment of current obligations and
not be subject to any restrictions, contractual or otherwise.
6. cash items included in cash: 1. Cash on hand
2. Cash in bank
3. Cash fund
7. cash that includes undeposited cash collections and other
cash items awaiting deposit: Cash on hand
8. Classify cash item: Customers'/Cashier's/Manager's check:
Cash on hand
9. Classify cash item: traveler's check: Cash on hand
10. Classify cash item: bank drafts: Cash on hand
11. Classify cash item: money orders: Cash on hand
12. cash that includes demand deposit or checking account and
saving deposit which are unrestricted as to withdrawal: Cash
in bank
13. Classify cash item: Demand deposit/ checking account: Cash
in bank
14. Classify cash item: saving deposit unrestricted for withdrawal:
Cash in bank
15. cash set aside for CURRENT purposes: Cash fund
16. Classify cash item: petty cash fund: Cash fund
17. Classify cash item: payroll fund: Cash fund
18. Classify cash item: dividend fund: Cash fund
19. 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 rates: Cash equivalents
20. what can only qualify as cash equivalents: HIGHLY LIQUID
investments acquired 3 months before maturity
21. what equity security may qualify as cash equivalents?:
Preference shares with specified redemption date and
acquired 3 months before said date
22. what distinguishes cash from cash equivalents: Cash
equivalents have a maturity.
23. default classification (meaning when problem is silent) for
preference shares: Equity security
24. date that matters in the recognition as cash equivalent: Date
of purchase
25. what is the best way to make use of excess cash?: Temporary
investment, like in time deposits, money market instruments
and treasury bills
26. classification of investment with a term of 3 months or less:
Cash equivalent
27. classification of investment with a term of more than 3
months but within 1 year: Short-term financial assets
28. classification of investment with a term of more than 1 year:
Long-term investments
29. measurement value of cash: Face value
30. measurement of cash in foreign currency: Current exchange
rate
31. measurement of cash held by bank or financial institution in
bankruptcy, if the recoverable amount is estimated to be
lower than the face value: Estimated realizable value
32. item first shown among the current assets: Cash and cash
equivalents
33. where details that comprise the item cash and cash
equivalents are disclosed: Notes to financial statements
34. recognition of deposits in foreign countries which are not
subject to any foreign exchange restriction: Cash
35. recognition of deposits in foreign countries which are subject
to foreign exchange restriction (if material): Noncurrent
assets (indicate restriction)
36. recognition of cash fund set aside for use in current
operations or for payment of current liability: Cash and cash
equivalent
37. recognition of cash fund set aside for noncurrent purpose or
for payment of noncurrent liability: Long-term investment
38. recognition of cash fund set aside for noncurrent asset:
Noncurrent asset
39. classification of cash fund as current or noncurrent should
parallel the classification of?: Its related liability
40. credit balance in cash in bank account: Overdraft
41. cause of overdrafts: Issuance of checks in excess of deposits
42. classification of bank overdraft: Current liability
43. when is it allowed to offset bank overdraft with a bank
account: 1. Different accounts but same bank
2. Immaterial amount
44. are overdrafts allowed in the Philippines?: No
45. generally takes the form of minimum checking or demand
deposit account balance that must be maintained in
connection with a borrowing arrangement with a bank:
Compensating balance
46. what is the effect of the compensating balance on the
amount borrowed: Reduction in the amount borrowed
because the compensating balance provides a source of fund
to the bank as partial compensation for the loan extended
47. classification of compensating balance if deposit is not
legally restricted as to withdrawal by the borrower because
of an informal compensating balance agreement: Cash
48. classification of compensating balance if deposit is legally 67. adjusting entry for cash shortage if reasonable efforts fail to
restricted as to withdrawal by the borrower because of a disclose the cause of the shortage: Debit Loss from cash
formal compensating balance agreement and if related loan shortage
is SHORT-TERM: Cash held as compensating balance (current Credit Cash short or over
asset) 68. occurs when the cash count shows cash which is more than
49. classification of compensating balance if deposit is legally the balance per book: Cash overage
restricted as to withdrawal by the borrower because of a 69. entry to record cash overage: Debit Cash
formal compensating balance agreement and if related loan Credit Cash short or over
is LONG TERM: Noncurrent investment
70. adjusting entry to record cash overage if there is no claim:
50. check that is merely drawn and recorded but not given to the Debit Cash
payee BEFORE the end of reporting period: Credit Miscellaneous Income
Undelivered/unreleased check
71. adjusting entry to record cash overage if it is properly found
51. check drawn, recorded and already given to the payee but it to be the money of the cashier: Debit Cash
bears a date subsequent to the end of reporting period: Credit Payable to cashier
Postdated check delivered
72. a system of control of cash which requires that all cash
52. recognition of Undelivered/unreleased check: Cash receipts be deposited intact and all cash disbursements be
53. recognition of Postdated check delivered: Cash made by means of check: Imprest system
54. check not encashed by payee within a relatively long time: 73. a compromise system of imprest system: Petty cash fund
Stale check system
55. law that provides how long a check must remain outstanding: 74. money set aside to pay small expenses which cannot be paid
Negotiable Instruments Law conveniently by means of a check: Petty cash fund
56. according to the Negotiable Instruments Law, how long must 75. two methods of handling the petty cash: 1. Imprest fund
a check remain outstanding: "Presentment must be made system
within A REASONABLE TIME after its issue." 2. Fluctuating fund system
57. considered in determining "reasonable time" before 76. system usually followed in handling petty cash transactions:
becoming stale: 1. Nature of instrument Imprest fund system
2. Usage of trade or business, if any, with respect to such 77. system where checks drawn to replenish the fund do not
instrument necessarily equal petty cash disbursements: Fluctuating fund
3. Facts of the particular case system
58. where reference is usually made in determining reasonable 78. in the Fluctuating fund system, who is authorized to request
time before becoming stale: Usage of trade or business for the drawing of replenishment checks: Petty cashier
practice
79. system where petty cash disbursements are immediately
59. period used in banking practice before check becomes stale: recorded: Fluctuating fund system
Within 6 months
80. system where no formal journal entries are made in the
60. a request made to a financial institution to cancel a check or payment of expenses out of the fund: Imprest fund system
payment that has not been processed yet: stop payment
81. entry made (when using imprest fund system) by petty
order
cashier upon paying expenses out of the fund: Memorandum
61. how amount of stale check is accounted for when it is entry (petty cash journal)
immaterial: Miscellaneous income (and cash restored)
82. generally required by petty cashier in payment of expenses
62. how amount of stale check is accounted for when it is out of the fund when imprest fund system is used: Petty cash
material: Re-set up the liability or any appropriate account voucher
(and cash restored)
83. entry to establish petty cash fund (amount is fixed): Debit
63. occurs when cash account shows cash which is less than the Petty cash fund
balance per book: Cash shortage Credit Cash in bank
64. account used as temporary or suspense account for cash 84. under the imprest fund system, what should be done when
shortages and overages: Cash short or over petty cash fund runs low?: Draw check to REPLENISH fund.
65. entry to record cash shortage: Debit Cash short or over 85. under the imprest fund system, replenishment check is
Credit Cash usually equal to?: Petty cash disbursements
66. adjusting entry for cash shortage when cashier or cash 86. entry to replenish petty cash fund under imprest fund
custodian is held responsible: Debit Due from Cashier system: Debit Expenses
Credit Cash short or over Credit Cash in bank
87. Check or Undeposited collections or Either: means by which petty cash disbursements should be replenished: Check
88. at the end of the accounting period, what is the entry to adjust unreplenished expenses in order to state the correct petty cash
balance?: Debit Expenses
Credit Petty cash fund
89. reversing entry for unreplenished expenses for reason of continuing normal replenishment procedures, without distinguishing
whether expenses pertain to prior or current period: Debit Petty cash fund
Credit expenses
90. entry to increase petty cash fund: Debit Petty cash fund
Credit Cash in bank
91. entry to decrease petty cash fund: Debit Cash in bank
Credit Petty cash fund
92. entry to replenish petty cash fund under fluctuating fund system: Debit Petty cash fund
Credit Cash in bank
93. entry to record payment of expenses out of petty cash fund under fluctuating fund system: Debit Expenses
Credit Petty cash fund