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Cash and Cash Equivalents QUIZ

The document contains 35 multiple choice questions about cash and cash equivalents accounting. It tests understanding of topics like petty cash reimbursement entries, cash control systems, bank reconciliations, components included in the cash balance, and presentation of restricted cash balances. Correct answers are identified for each question.

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450 views4 pages

Cash and Cash Equivalents QUIZ

The document contains 35 multiple choice questions about cash and cash equivalents accounting. It tests understanding of topics like petty cash reimbursement entries, cash control systems, bank reconciliations, components included in the cash balance, and presentation of restricted cash balances. Correct answers are identified for each question.

Uploaded by

GIRL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Cash and Cash Equivalents

23. In most situations, the petty cash fund is reimbursed just prior to the year-ended and an
adjusting entry is made to avoid

a. The understatement of cash with the appropriate statement of expenses.

b. The overstatement of cash and the understatement of expenses.

c. The understatement of cash and the overstatement of expenses.

d. The misstatement of revenues.

24. A cash short and over account is

a. not generally accepted.

b. Debited when the petty cash fund proves out over.

c. Debited when the petty cash fund proves out short

d. A contra account to cash.

25. Which of the following are basic characteristics of a system of cash control?

I. Use of voucher system.

II. Combined responsibility for handling and recording cash.

III. Daily deposit of all cash received.

IV. Internal audits at irregular intervals.

V. Making disbursements from the day’s collections to minimize cash balance for deposit.

a. I, II, III, IV and V

b. I, II, III, and IV

c. I, III, IV and V

d. I, III, and IV

26. A good internal control system for safeguarding cash provides procedures for

a. Making payments from the day’s collections.

b. Allowing one person to received cash and to record cash receipts.\

c. Preparing regular bank reconciliation.

d. Delaying the deposit of cash collections because no one knows for use the account to be
credited.

27. Which of the following are considered cash for financial reporting purposes?
I. Petty cash funds and change funds.

II. Money orders, travelers’ checks, and personal checks.

III. Coin, currency, and available funds for current operations.

IV. Postdated checks and IOUs.

V. Savings account for employees’ travel

VI. Savings account for acquisition of equipment

VII. Savings account for acquisition of inventories.

a. I, II, III, IV, V, VI, and VII

b. I, II, III, V VI, and VII

c. I, II, III, IV, V and VI

d. I, II, III, V, and VII

28. A bank overdraft, should be

a. Reported as a deduction from the current asset section.

b. Reported as a deduction from cash.

c. Netted against cash and a net cash amount reported.

d. Reported as a current liability, when there is no valid basis for offsetting against another bank
account.

29. The following items are included in an entity’s account “Cash and Cash equivalents” in the
statement of financial position. Which of the following items will require an adjusting entry to state
Cash and Cash equivalents at its correct balance?

a. Checks drawn before the reporting date but held for later delivery to creditors.

b. 60-day time deposits.

c. US dollars deposited in a foreign currency depository account.

d. Cash reserved for the acquisition of inventories.

30. In preparing a monthly bank reconciliation, which of the following items would be added to the
balance reported on the bank statement to arrive at the correct cash balance?

a. Outstanding checks

b. Bank service charge

c. Deposit in transit

d. A customer note
31. Bank reconciliations are normally prepared on a monthly basis to identify adjustments need in
the depositor’s records and to identify bank errors. Adjustments should be recorded for

a. Bank errors, outstanding checks, and deposit in transit.

b. All reconciling items except bank errors, deposits in transit, and outstanding checks.

c. Boor errors, bank errors, deposit in transit, and outstanding checks.

d. Outstanding checks and deposits in transit.

32. 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

a. Deposits credited by the bank but not yet recorded by the company.

b. Outstanding checks.

c. Bank charges not yet recorded by the company.

d. Deposit in transit.

33. Deposits held as compensating balances

a. Usually do not earn interest.

b. If legally restricted and held against short-term credit may be included as cash.

c. If legally restricted and held against long-term credit may be included among current assets

d. If legally restricted and held against short-term credit should not be included in the cash balance
but are reported among current asset.

34. Proof of cash is a

a. Proof of a company’s liquid position.

b. Reconciliation of the cash receipts and payments during the previous period, together with the
beginning and ending balances of cash.

c. Proof of the existence of as cash deposit in a bank.

d. Reconciliation of the cash receipts and payments during the current period, together with the
beginning and ending balances of cash.

35. Ace Company had the following account balances at December 31, 2020:

Cash on hand P 125,000

Cash in banks 2,250,000

Cash legally restricted for additions to plant

(to be disbursed in 2020) 1,600,000


Cash in banks include compensating balances against short-term borrowing arrangements. The
compensating balances are bit legally restricted as to withdrawal by Ace.

In the current assets section of Ace’s December 31, 2020 statement of financial position, total cash
should be reported at

a. P1,775,000

b. P2,250,000

c. P2,375,000

d. P3,975,000

C Cash in banks P2,250,000

Cash on hand 125,000

Total cash P2,375,000

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