QUESTIONS

(1-5). Define Cash (5points)

(6-7) For an item to be considered unrestricted cash it must be ______ and _______

(8) Why are PDCs received cannot be considered as cash when received?

(9) True or False: To be reported as cash, an item must be unrestricted in use.

(10-12) What are the cash items included in cash?

(13) Only highly liquid investments that are acquired __________ maturity can qualify as cash
equivalents.

(14) True or False: Equity securities cannot qualify as cash equivalents because shares do have a
maturity date.
(15) True or False: Preference shares with specified redemption date and acquired 3 months after
redemption date can qualify as cash equivalents.

(16) True or False: An overdraft can also be offset against the other bank account if the amount is not
material.

(17) A _________ is a check that is not encashed by the payee within a relatively long period of time.

(18-19) What are the two methods of handling/(recording) the petty cash transactions.

(20)__________ is the one usually followed in handling petty cash transactions.

 ANSWERS

1. Cash includes money and any other negotiable instrument

2. that is payable in money
3. and acceptable by the bank
4. for deposit
5. and immediate credit
(6) readily available in the payment of current obligations and
(7) not be subject to any restriction, contractual or otherwise
(8) Postdated checks received cannot be considered as cash yet because these
are unacceptable by the bank for deposit and immediate credit or outright
encashment.
(9) True: To be reported as “cash”, an item must be unrestricted in use.
Cash items included in cash are:
(10) Cash on hand,
(11) Cash in bank,
(12) Cash fund
(13) Only highly liquid investments that are acquired 3_months before
maturity can qualify as cash equivalents.

(14) True: Equity securities cannot qualify as cash equivalents because shares
do not have a maturity date.
(15) False: Preference shares with specified redemption date and acquired 3
months after redemption date can qualify as cash equivalents.

(16) True: An overdraft can also be offset against the other bank account if the
amount is not material.

(17) Stale check: a check that is not encashed by the payee within a relatively
long period of time.

(18-19) Two methods of handling the petty cash: (18) Imprest fund system &
(19) Fluctuating fund system

(20) Imprest system is the one usually method followed in handling petty cash
transactions.