1: cfas cash eval & bank

• In preparing a bank reconciliation, interest paid by the bank on the account is added to the book balance
• If the cash balance shown in a company's accounting records is less than the correct cash balance, and neither the company nor the bank has made any errors, there must be deposits credited by the bank but not yet recorded by the company
• A bank reconciliation is a schedule that accounts for the differences between an enterprise’s cash balance as shown on its bank statement and the cash balance shown in its general ledger
• Bank statements provide information about all of the following except errors made by the company
• In preparing the bank reconciliation, certified checks should be excluded from outstanding checks because when certifying checks, the bank automatically debits the company’s account
• Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the depositor's records and to identify bank errors
• In preparing the bank reconciliation using the adjusted balance method, errors to be included in reconciling the balance per books to the adjusted balance include only the errors committed by the company
• Cash which is restricted and not available for use within one year of the reporting period should be included in noncurrent assets
• In replenishing a petty cash fund, the required entry is to debit individual expense accounts and credit Cash in bank
• For effective internal control over the disbursement of payroll checks, an enterprise uses an Imprest bank account
• On October 31, 2003, Dingo, Inc. had cash accounts at three different banks: the segregated account should be reported as a noncurrent asset, the regular account as a current asset, and the overdraft as a current liability
• When making payments to suppliers, an entity normally credits the account "Cash in bank"
• A petty cash system is designed to pay small miscellaneous expenses
• Deposits held as compensating balances usually do not earn interest
• Deposits held as compensating balances:

  • If legally restricted and held against short-term credit, may be included as cash
  • If legally restricted and held against long-term credit, may be included among current assets
• The accounting function should be separated from the custodianship of a company's assets
• Certain clerical personnel in a company should be rotated among various jobs
• The responsibility for receiving merchandise and paying for it should usually be given to one person
• A company's personnel should be given well-defined responsibilities
• A voucher system is used in connection with transactions that involve only the payment of cash
• A voucher is the business paper which a company makes for every cash payment
• Cash in foreign currency is valued at the current exchange rate
• If material, deposits in foreign countries subject to foreign exchange restriction should be shown separately as non-current assets with disclosure of the restriction
• Preference shares with mandatory redemption and acquired three months prior to redemption date may properly be included as part of cash to be reported in the financial statement
• A system of cash control should not include the use of a voucher system
• A system of cash control should not include combined responsibility for handling and recording cash
• A system of cash control should not include daily deposit of all cash received
• A system of cash control should not include internal audits at irregular intervals
• Internal control is the backbone of all businesses and is important to protect and safeguard assets and company data
• A "cash equivalent" would be a firm's investment in government treasury bills
• The amount reported as "Cash" on a company's balance sheet normally should exclude postdated checks that are payable to the company
• Which of the following is not a correct way of handling a voucher system? In case there are purchase returns and allowances, there is no need to cancel the original voucher and the issuance of a new one for the lower amount because adjusting entries could later on be prepared.
• Bank overdrafts, if material, should be reported as a current liability
• Certified checks, personal checks, manager's checks, and travel cash advances should not be included in cash
• Cash in the balance sheet should include Cash in Bank, Cash on hand, Post-dated checks received, and Certificates of deposit
• Lapping occurs when collection of receivable from one customer is misappropriated and then concealed by applying a subsequent collection from another customer
• After vouchers are recorded, they are filed in an "unpaid vouchers file" in the order of payment
• A voucher is a written authorization prepared for each check written
• Personal checks, traveler’s checks, cashier’s checks, and postdated checks would not be classified as cash
• Float refers to checks issued but not yet paid by a bank