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One example of a cash equivalent is a financial instrument that has an original maturity of ___ months or less FROM DATE OF PURCHASE
3
Bank Balance Adjustments
Bank statement balance
(add) Deposits in transit
(subtract) checks outstanding
(add or subtract) Bank errors
= net cash balance, must tie to book balance net cash balance
Think about: What would the bank be unaware of that the books would be aware of? (except for bank errors)
Book balance adjustments
Book Balance
(add) Interest paid by bank
(add) Deposits not yet recorded in book
(subtract) withdrawals not yet recorded in books
(subtract) bank charges and fees
(subtract) Returned checks, NSF
(Add or subtract) Recording errors
= net cash balance, must tie to bank balance net cash balance
Think about: what would the books be unaware of that the bank would be aware of? (except for recording errors)
There's cash in the bank held in relation to a short term liability.
Is this cash considered a current asset? True / False.
True. But not part of unrestricted cash balance (it's separated from cash because it's not available for use in current operations)
If held in relation to long term liability, it's non current asset. (Long term asset)
(note) A bond sinking fund indicates long term.
A bank is showing a negative balance through an overdraft. How is this presented?
A current liability if it's in a separate bank.
If it's with other accounts at same bank institution with positive account balances, it's netted.
Your year end is December 31. You receive a post dated check dated Jan 2 of the next year. Can this be considered cash?
No. Cash must be readily available for current needs without restriction limiting its use.
You deposit a check but it bounced as non-sufficient funds (NSF). Should you record this as cash on your books?
No. It's not readily available for current needs.
You write a check to pay a vendor, but haven't mailed the check out yet. Should you record this check on your books?
No, because you are still in physical control of the check. Record when you give up control (mail it out)
you are given the following information.
Balance per book: $9,000
balance per bank: $$11,000
Bank statement error in company favor: $1,000
Bank Fee: $1,000
Deposit received by bank directly from customer: $1,000
Check payable to vendor recorded on books but not mailed: $1,000
What's the reconciled cash balance?
$10,000
Bank recon:
$11,000 balance per bank
- $1,000 bank error
= $10,000
Book recon
$9,000 balance per book
+ $1,000deposit received direct to bank
+ $1,000 check not mailed
- $1,000 bank fee
= $10,000
True / False cash in bond sinking fund is reported as cash/cash equivalents.
False. Because it's designated for long-term use, it's treated as a noncurrent asset.
Are marketable securities cash and cash equivalent?
No.
Note 
Flashcard (85)