CASH AND CASH EQUIVALENTS

1. If the cash balance shown in the companys bank statement is more than the correct cash balance and
neither the company nor the bank has made any errors, there must be
a. Deposits in transit
b. Bank charges not yet recorded by the company
c. Outstanding checks
d. Withdrawals made by the company debited to another account.
2. An item that should be excluded from cash and cash equivalents on the December 31, 2005 balance
sheet of Haydee Company is
a. A customers check denominated in foreign currency.
b. A check issued by Haydee Company on December 30, 2005, but dated January 10, 2006.
c. A P1,000,000 time deposit which matures in 4-months
d. A P100,000 balance in the companys current account maintained as a payroll fund.
3. Daffy Company placed P1.5 million in the money market for 120 days subject to a pretermination
clause. The P1.5 million should be
a. Included as part of the cash and cash equivalents with the appropriate disclosure on the notes to the
financial statements
b. Recorded as part of tits marketable financial assets without need of any disclosure.
c. Treated as short-term receivable with appropriate disclosure in the notes to the financial statements
d. Considered as part of its marketable financial assets with appropriate disclosure in the notes to financial
statements.
4. . Which of the following is not a basic characteristic of a system of cash control?
a. Use of a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received
d. Internal audits at irregular intervals
ANSWER KEY:
1. C
2. C
3. D
4. B
5.