acctg 326 exam 2 ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS
what is cash? currency/coins, balances in checking accounts, items acceptable for deposit in
these accounts (checks, money orders, etc.)
what does cash represent? amounts readily available to pay off debt or use in operations without legal or
contractual restriction
, true/false: short term, highly liquid investments are true
equivalent to cash due to their liquidity
what are cash equivalents? short term investments that have a maturity date no longer than three months
from the date of purchase
ex: money market funds, t-bills, commercial paper
true/false: companies can be flexible in designating cash true. but they must disclose them in the "disclosure of cash equivalents section"
equivalents
what is internal control? a company's system to encourage adherance to company policies and
procedures, promote operational efficiency, minimize errors and theft, and
enhance the reliability and accuracy of accounting data
what is "separation of duties?" an internal control technique in which various functions are distributed amongst
employees to provide cross-checking that encourages accuracy and discourages
fraud.
how should any disbursements be made? by check, unless it is petty cash. check provides a permanent record of all
disbursements
what is restricted cash? cash that is restricted in some way or NOT available for current use. is usually
reported as a noncurrent asset such as investments or other assets.
when is cash restricted? usually informally out of a management's intent to use a certain amount of cash
for a specific purpose, OR contractually as a debt instrument
what is a sinking fund? a fund required by borrowers to set aside for future payment of debts
what is a compensating balance? minimum deposits required to be maintained in connection with a borrowing
arrangement. amount that compensates the bank for granting the loan or
extending the line of credit, that the borrower is asked to maintain in a low interest
or noninterest bearing account at the bank.
what are accounts receivable? created when sellers recognize revenue associated with a credit sale.
performance obligation satisfied at point of delivery, revenue and related
receivable are recognized at that time
what are receivables? a company's claims to future collections of cash, other assets, or services. usually
due 30-60 days after the sale
what are trade receivables? amounts owed to the business for credit sales of goods or services
what are nontrade receivables? receivables other than trade receivables. includes tax refund claims, interest
receivable, and advances to employees
what are notes receivable? when a receivable (trade or nontrade) is accompanied by a formal promissory
note
what is cash? currency/coins, balances in checking accounts, items acceptable for deposit in
these accounts (checks, money orders, etc.)
what does cash represent? amounts readily available to pay off debt or use in operations without legal or
contractual restriction
, true/false: short term, highly liquid investments are true
equivalent to cash due to their liquidity
what are cash equivalents? short term investments that have a maturity date no longer than three months
from the date of purchase
ex: money market funds, t-bills, commercial paper
true/false: companies can be flexible in designating cash true. but they must disclose them in the "disclosure of cash equivalents section"
equivalents
what is internal control? a company's system to encourage adherance to company policies and
procedures, promote operational efficiency, minimize errors and theft, and
enhance the reliability and accuracy of accounting data
what is "separation of duties?" an internal control technique in which various functions are distributed amongst
employees to provide cross-checking that encourages accuracy and discourages
fraud.
how should any disbursements be made? by check, unless it is petty cash. check provides a permanent record of all
disbursements
what is restricted cash? cash that is restricted in some way or NOT available for current use. is usually
reported as a noncurrent asset such as investments or other assets.
when is cash restricted? usually informally out of a management's intent to use a certain amount of cash
for a specific purpose, OR contractually as a debt instrument
what is a sinking fund? a fund required by borrowers to set aside for future payment of debts
what is a compensating balance? minimum deposits required to be maintained in connection with a borrowing
arrangement. amount that compensates the bank for granting the loan or
extending the line of credit, that the borrower is asked to maintain in a low interest
or noninterest bearing account at the bank.
what are accounts receivable? created when sellers recognize revenue associated with a credit sale.
performance obligation satisfied at point of delivery, revenue and related
receivable are recognized at that time
what are receivables? a company's claims to future collections of cash, other assets, or services. usually
due 30-60 days after the sale
what are trade receivables? amounts owed to the business for credit sales of goods or services
what are nontrade receivables? receivables other than trade receivables. includes tax refund claims, interest
receivable, and advances to employees
what are notes receivable? when a receivable (trade or nontrade) is accompanied by a formal promissory
note
