APPLIED AUDITING, MA, ELENITA BALATBAT
CABRERA ACTUAL FINAL PRACTICE EXAM PREP
WITH ALL POSSIBLE COMPLETE DETAILED AND
MOST TESTED PRACTICE QUESTIONS AND 100%
CORRECT VERIFIED ANSWERS FULLY SOLVED
WITH CERTIFIED RATIONALES PLUS RELIABLE
ANSWER KEY (100% COMPLETE SOLUTIONS) 2026-
2027 Q&A UPDATED VERSION 100% GUARANTEED
PASS INSTANT DOWNLOAD PDF
1. Which of the following is not considered cash for financial reporting
purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.s
Rationale: Postdated checks and I.O.U.s are not considered cash because they
are not readily available for use. They are classified as receivables.
2. Which of the following is considered cash?
a. Certificate of deposit
b. Checking accounts
c. Money market savings certificates
d. Postdated checks
Rationale: Checking accounts are demand deposits and are considered cash.
Certificates of deposit and money market savings certificates are typically
,classified as temporary investments unless they have original maturities of three
months or less.
3. Travel advances should be reported as:
a. Supplies
b. Cash because they represent the equivalent of money
c. Investments
d. Receivables
Rationale: Travel advances are amounts given to employees for future travel
expenses. They are reported as receivables until the employee submits an
expense report.
4. Which of the following items should not be included in the Cash caption on
the balance sheet?
a. Coins and currency in the cash register
b. Post-dated checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
Rationale: Postage stamps on hand are classified as office supplies, not cash,
because they are not a medium of exchange.
5. All of the following may be included under the heading of "cash" except:
a. Currency
b. Money market funds
c. Checking account balance
d. Savings account balance
Rationale: Money market funds are typically classified as temporary investments
unless they meet the criteria for cash equivalents (short-term, highly liquid,
original maturity of three months or less).
,6. In which account are post-dated checks received classified?
a. Receivables
b. Prepaid expenses
c. Cash
d. Payables
Rationale: Post-dated checks are not payable on demand and therefore are
classified as receivables until the date of the check.
7. In which account are postage stamps classified?
a. Cash
b. Office Supplies
c. Receivables
d. Inventory
Rationale: Postage stamps are office supplies because they are consumed in
operations and are not a medium of exchange.
8. What is a compensating balance?
a. Savings account balances
b. Margin accounts held with brokers
c. Temporary investments serving as collateral for outstanding loans
d. Minimum deposits required to be maintained in connection with a
borrowing arrangement
Rationale: A compensating balance is a minimum deposit that a borrower must
maintain with a lender, often as a condition for a loan.
9. Under which section of the balance sheet is "cash restricted for plant
expansion" reported?
, a. Current assets
b. Non-current assets
c. Current liabilities
d. Shareholders' equity
Rationale: Cash restricted for plant expansion is a long-term restriction, so it is
reported as a non-current asset (often under "other assets").
10. A cash equivalent is a short-term, highly liquid investment that is readily
convertible into known amounts of cash and:
a. Is acceptable as a means to pay current liabilities
b. Has a current market value that is greater than its original cost
c. Bears an interest rate that is at least equal to the prime rate of interest at the date
of liquidation
d. Is so near its maturity that it presents insignificant risk of changes in
interest rates
Rationale: By definition, a cash equivalent must be so near maturity that it
presents insignificant risk of changes in value due to interest rate fluctuations.
11. Which of the following statements concerning compensating balance
agreements is not true?
a. They reduce the amount of cash available to the borrower
b. They always involve legal restrictions on the cash received
c. They increase the effective interest rate to the borrower
d. They must be disclosed in the financial statements footnotes
Rationale: Compensating balance agreements do not always involve legal
restrictions; they may be informal arrangements. However, they still reduce
available cash and increase the effective interest rate.
12. Compensating balance agreements that do not legally restrict the amount
of funds shown on the Statement of Financial Position should:
CABRERA ACTUAL FINAL PRACTICE EXAM PREP
WITH ALL POSSIBLE COMPLETE DETAILED AND
MOST TESTED PRACTICE QUESTIONS AND 100%
CORRECT VERIFIED ANSWERS FULLY SOLVED
WITH CERTIFIED RATIONALES PLUS RELIABLE
ANSWER KEY (100% COMPLETE SOLUTIONS) 2026-
2027 Q&A UPDATED VERSION 100% GUARANTEED
PASS INSTANT DOWNLOAD PDF
1. Which of the following is not considered cash for financial reporting
purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.s
Rationale: Postdated checks and I.O.U.s are not considered cash because they
are not readily available for use. They are classified as receivables.
2. Which of the following is considered cash?
a. Certificate of deposit
b. Checking accounts
c. Money market savings certificates
d. Postdated checks
Rationale: Checking accounts are demand deposits and are considered cash.
Certificates of deposit and money market savings certificates are typically
,classified as temporary investments unless they have original maturities of three
months or less.
3. Travel advances should be reported as:
a. Supplies
b. Cash because they represent the equivalent of money
c. Investments
d. Receivables
Rationale: Travel advances are amounts given to employees for future travel
expenses. They are reported as receivables until the employee submits an
expense report.
4. Which of the following items should not be included in the Cash caption on
the balance sheet?
a. Coins and currency in the cash register
b. Post-dated checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
Rationale: Postage stamps on hand are classified as office supplies, not cash,
because they are not a medium of exchange.
5. All of the following may be included under the heading of "cash" except:
a. Currency
b. Money market funds
c. Checking account balance
d. Savings account balance
Rationale: Money market funds are typically classified as temporary investments
unless they meet the criteria for cash equivalents (short-term, highly liquid,
original maturity of three months or less).
,6. In which account are post-dated checks received classified?
a. Receivables
b. Prepaid expenses
c. Cash
d. Payables
Rationale: Post-dated checks are not payable on demand and therefore are
classified as receivables until the date of the check.
7. In which account are postage stamps classified?
a. Cash
b. Office Supplies
c. Receivables
d. Inventory
Rationale: Postage stamps are office supplies because they are consumed in
operations and are not a medium of exchange.
8. What is a compensating balance?
a. Savings account balances
b. Margin accounts held with brokers
c. Temporary investments serving as collateral for outstanding loans
d. Minimum deposits required to be maintained in connection with a
borrowing arrangement
Rationale: A compensating balance is a minimum deposit that a borrower must
maintain with a lender, often as a condition for a loan.
9. Under which section of the balance sheet is "cash restricted for plant
expansion" reported?
, a. Current assets
b. Non-current assets
c. Current liabilities
d. Shareholders' equity
Rationale: Cash restricted for plant expansion is a long-term restriction, so it is
reported as a non-current asset (often under "other assets").
10. A cash equivalent is a short-term, highly liquid investment that is readily
convertible into known amounts of cash and:
a. Is acceptable as a means to pay current liabilities
b. Has a current market value that is greater than its original cost
c. Bears an interest rate that is at least equal to the prime rate of interest at the date
of liquidation
d. Is so near its maturity that it presents insignificant risk of changes in
interest rates
Rationale: By definition, a cash equivalent must be so near maturity that it
presents insignificant risk of changes in value due to interest rate fluctuations.
11. Which of the following statements concerning compensating balance
agreements is not true?
a. They reduce the amount of cash available to the borrower
b. They always involve legal restrictions on the cash received
c. They increase the effective interest rate to the borrower
d. They must be disclosed in the financial statements footnotes
Rationale: Compensating balance agreements do not always involve legal
restrictions; they may be informal arrangements. However, they still reduce
available cash and increase the effective interest rate.
12. Compensating balance agreements that do not legally restrict the amount
of funds shown on the Statement of Financial Position should:
