Monetary Transactions and the Accounting Equation

Comprehensive practice flashcards covering Unit 5: Handle Monetary Transactions (corporate bank accounts, banking features, deposit insurance, loan types, fund transfer mechanisms, demand drafts, cashier's orders, standing instructions, GIRO) and Unit 6: Compute Accounting Equation (assets, liabilities, owner's equity, and classifications).

What four requirements must all Singapore-registered companies fulfill before business activities can be conducted?

All Singapore-registered companies require a registered address, a company business profile, a company secretary, and a corporate bank account.

What is a corporate bank account and what purpose does it serve?

It is a bank account opened in the name of a business to keep business income separate from personal or other income, thereby providing legitimacy to business transactions.

According to the June 2020 corporate account comparison, what initial deposit and credit card policies apply to OCBC?

OCBC requires an initial deposit of $\text{S}\$3,000$ and does not offer a corporate credit card (marked as "No").

Under the June 2020 bank comparison table, what are the minimum balance and business loan requirements for Maybank (FlexiBiz)?

The minimum balance requirement is Nil, and for business loans, the entity must generally have been in operation for a minimum of $1$ to $3$ years.

What defines a Business Digital Account, and what are its key benefits?

An account where records, communications, transaction logs, and money exist entirely online with self-service internet access. Key benefits include convenience, low initial deposit, low fees, higher interest rates, fast and cheap international transfers, and 24/7 support.

What is a Corporate Multi-Currency Account and what are its primary benefits?

A corporate account allowing businesses to receive, pay, and hold multiple currencies in separate wallets under one account. Its benefits are convenience, low initial deposits, and cost-effective operations by avoiding unnecessary currency conversions.

What is a Fixed Deposit Account and what penalty applies to early withdrawals?

A low-risk investment instrument where money is deposited for a fixed tenure at a predetermined interest rate. Withdrawing funds prior to maturity results in a penalty or forfeiture of accrued interest.

What is the maximum compensation limit per depositor under the Singapore Deposit Insurance (DI) Scheme?

Eligible insured deposits placed with a DI Scheme member are aggregated across all its branches and insured up to $\text{S}\$100,000$.

Which deposits are insured under the Singapore DI Scheme, and which financial products are excluded?

Insured: Singapore dollar-denominated deposits in savings, fixed deposit, and current accounts. Excluded: foreign currency deposits, structured deposits, structured notes, investment products (such as unit trusts, shares, and securities), and monies under CPFIS and CPFRS.

What is the primary difference between a secured and an unsecured business loan?

A secured loan requires collateral that can be seized upon default. An unsecured loan requires no collateral, relies entirely on the borrower's creditworthiness and promise to repay, and typically carries a higher interest rate.

What is a bank overdraft facility?

A flexible, short-term credit facility (typically up to $12$ months) allowing an account holder to draw or pay from a current account beyond the existing balance up to an agreed limit; it is renewable annually and repayable on demand.

What is green financing, and what are examples of eligible projects?

Any structured financial activity created to produce better environmental outcomes. Examples include renewable energy, pollution control, biodiversity conservation, circular economy initiatives, and sustainable land and natural resource usage.

What are the eight recognized major currencies in the foreign exchange market?

US Dollar (USD), European Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Swiss Franc (CHF), Australian Dollar (AUD), Canadian Dollar (CAD), and New Zealand Dollar (NZD).

In a fund transfer, what are the defined roles of the Drawer and the Beneficiary?

The Drawer (Applicant) is the account owner who requests the payment transfer; the Beneficiary (Payee) is the final recipient of the transferred funds.

What is the function of a Correspondent Bank (Agent Bank) in a cross-border wire transfer?

It acts as a third-party intermediary bank linking and executing the transmission of funds between the remitting bank and the receiving bank.

What fund transfer structure and participating parties are shown in this diagram?

The cross-border fund transfer mechanism, detailing the payment flow from Drawer (Applicant) to Paying Bank (Remitting Bank), through the Correspondent Bank (Agent Bank), to the Receiving Bank, and finally to the Beneficiary (Payee).

Why is a demand draft considered more secure than a personal cheque for overseas payments?

A demand draft does not require the drawer's signature (minimizing forgery risk), is issued directly by the bank once funds are cleared, and does not require the beneficiary's bank account details.

Which specific domestic payment instrument and workflow is illustrated here?

Cashier's Order (Banker's Cheque), where the buyer requests and pays the bank, the bank issues the cashier's order, the buyer delivers it to the seller, and the seller presents it to their bank for collection.

Which automated payment service is depicted in this diagram?

Standing Instruction (Standing Order), where a customer instructs their bank to execute payments of a specified fixed amount to a third party at scheduled regular intervals.

Which direct payment system is depicted in this workflow?

GIRO, an arrangement authorizing a billing organization to collect money directly from a customer's bank account based on the outstanding bill amount.

How does a Standing Instruction differ from a GIRO arrangement?

A Standing Instruction is designated for recurring payments of fixed amounts (e.g., rent), while GIRO allows billing organizations to collect variable amounts directly (e.g., utility bills).

What are the two standard expressions of the accounting equation?

$\text{Owner's Equity} = \text{Assets} - \text{Liabilities}$ and $\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$ ($\text{Resources} = \text{Sources of Funds}$).

How are Current Assets distinguished from Non-Current Assets?

Current assets can be converted into cash within one year (e.g., cash at bank, inventory, trade receivables), whereas non-current assets are long-term resources not expected to be converted into cash within one year (e.g., buildings, machinery, motor vehicles).

What is the classification rule for items containing the word "machine"?

All items containing the word "machine" are classified as Machinery, except for fax machines and photocopier machines, which are classified as Office Equipment.

How do Current Liabilities differ from Non-Current Liabilities?

Current liabilities are short-term debts settled within one year (e.g., trade payables, bank overdrafts), while non-current liabilities have a repayment tenure exceeding one year (e.g., long-term bank loans, mortgage loans).

In accounting, what is the distinction between Capital and Drawings?

Capital represents the total resources contributed to the business by the owner, whereas Drawings represent the value of assets withdrawn from the business by the owner for personal use.

If a business has Inventory of $\$8,000$, Bank balance of $\$4,200$, Office Equipment of $\$12,000$, Trade Payables of $\$2,500$, and a Bank Loan of $\$5,000$, what is its Owner's Equity?

Total Assets equal $\$8,000 + \$4,200 + \$12,000 = \$24,200$. Total Liabilities equal $\$2,500 + \$5,000 = \$7,500$. Therefore, Owner's Equity is $\$24,200 - \$7,500 = \$16,700$.