30 Questions
Which of the following items is a common example of cash equivalents?
Treasury bills
In the bank reconciliation, what was the amount of notes receivable added to the adjusted balance?
$2,900
What effect did the interest expense have on the adjusted book balance?
Decreased it by $596
Which item is considered a deduction in the adjusting entries?
Accounts Receivable
What was the effect of the bank error on the adjusted bank balance?
Decreased by $2,615
Which financial instrument presents insignificant risk of changes in value due to interest rate changes?
Treasury bills
What is one of the ways to ensure internal control over cash receipts according to the text?
Using cash registers for over-the-counter receipts
Which document should be maintained to ensure proper internal control over cash receipts?
Deposit slips and cash register tapes
What is the primary tool a business uses to control cash receipts and payments?
Bank account
In what situations should payments be made by cash according to the text?
For convenience
What type of bank account has no restrictions on withdrawals unless above a specific limit?
Saving account
What is another term for a demand account as per the text?
Checking account
What is the primary purpose of using a bank account for controlling cash in a business?
To maintain a double record of cash transactions
Which of the following is NOT a reason for disagreements between the balance per bank and balance per books in bank reconciliation?
Cash payments made by checks
In bank reconciliation, what are 'collections by bank' referring to?
Funds collected by the bank on behalf of the business
What is the purpose of a four-column bank reconciliation?
To agree on the cash balance between bank statement and depositor ledger
In bank reconciliation, what does 'Not-sufficient-funds (NSF) checks' refer to?
Checks written by the business but unable to clear due to insufficient funds in the payer's account
What is a common reason for discrepancies between the balance per bank and balance per books in bank reconciliation?
Errors in recording cash receipts
How should companies classify restricted deposits held as compensating balances against short-term borrowing arrangements?
As part of current assets under 'Cash and cash equivalent items'
In what section of the financial statement should companies report bank overdrafts?
Current liabilities
When should companies disclose bank overdrafts separately according to the text?
When they are material
What should companies do if they have compensating balance arrangements without any cash use restrictions?
Disclose the arrangements in the balance sheet
When are bank overdrafts included as a component of cash according to the text?
When they are repayable on demand and integral to cash management
What is the suggested classification for restricted deposits held as compensating balances against long-term borrowing arrangements?
Non-current assets under 'Investments' or other assets sections
How do companies classify receivables for financial statement purposes?
As current or non-current based on whether they are short-term or long-term
What distinguishes accounts receivable from notes receivable?
Accounts receivable are oral promises to pay, notes receivable are written promises to pay
How do companies typically collect accounts receivable?
Within 30 to 60 days
What do non-trade receivables arise from?
Various transactions
How should overdrafts that do not meet specific conditions be reported?
As a current liability
What is the most significant item in a company's current assets according to the text?
Trade receivables
Test your understanding of the proof of cash process for Expert Company for the month ended October 31, 2017. Analyze the bank reconciliation statements, receipts, disbursements, and adjusted balances to determine the accuracy of the company's cash position.
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