NAME: ______________________________________________________________________________________________________ DATE: _______________________________________ SCORE: ________________________

INSTRUCTION: Choose the letter of the best answer. Encircle the letter of your final answer. NO ERASURE.

1. The term “cash” refer to

a. Currency and coins which are in the circulation and legal tender
b. Money and any other negotiable instrument that is payable in money
c. Checks, including those which are unacceptable by bank for outright encashment
d. Both a and b

2. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds c. Coin, currency, and available funds
b. Money orders, certified checks, and personal checks d. Postdated checks and I.O.U.'s

3. Which of the following is considered cash?

a. Certificates of deposit (CDs) c. Money market savings certificates
b. Money orders d. Postdated checks

4. Which of the following statement is incorrect regarding the classification of investments in time deposit, money market instruments, and treasury bills
a. If the term is less than three months, such instruments shall be classified as “cash”
b. If the term is three months, such instruments shall be classified as part of “cash and cash equivalents”
c. If the term is more than three months but within one year, such investments shall be classified as “short-term investments”
d. If the term is more than one year, such investments shall be classified as “long-term investments”

5. Which of the following items should not be included in the Cash caption on the statement of financial position
a. Coins and currency in the cash register c. Amounts on deposit in checking account at the bank
b. Checks from other parties presently in the cash register d. Postage stamps on hand

6. In which account are postdated checks received classified?

a. Receivables. c. Cash.
b. Prepaid expenses. d. Payables.

7. 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.

8. In an imprest fund system, the entry for the payment of expenses out of the fund includes
a. Debit to expenses and credit to cash in bank c. No formal journal entry is made
b. Debit to expenses and credit to petty cash fund d. Debit to petty cash fund and credit to cash in bank

9. Under which section of the statement of financial position is "cash restricted for plant expansion" reported?
a. Current assets. c. Current liabilities.
b. Non-current assets. d. Equity.

10. Bank overdrafts generally should be

a. reported as a deduction from the current asset section. c. netted against cash and a net cash amount reported.
b. reported as a deduction from cash. d. reported as a current liability.

11. 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. none of these.

12. Which of the following is not classified as cash:

a. Dividend fund d. Petty cash fund
b. Payroll fund e. Both a and c
c. Contingent fund

13. The following are examples of cash equivalents, except:

a. One-year BSP treasury bill purchased three months before maturity c. Two-month money market instrument
b. Three-month BSP treasury bill d. Three-month BSP treasury bill purchased one year ago

14. Travel advances should be reported as

a. supplies. c. investments.
b. cash because they represent the equivalent of money. d. none of these.

15. Which of the following statement(s) is(are) correct?

a. Bank overdraft results from the issuance of checks in excess of the deposits
b. It should not be offset against accounts from other banks with debit balances
c. When an entity maintains two or more accounts in one bank, the overdraft in such bank can be offset against the other bank account with a debit balance
d. Both a and b
e. Choices a, b, and c are correct

16. The imprest system

a. Requires that all cash receipts should be deposited intact
b. Requires that all cash disbursements should be made by means of check
c. Is a system of control of cash
d. All of the above

17. 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.

18. Which of the following statement is true?

a. Window dressing is a practice that occurs when a check is drawn against a first bank and depositing the same check in a second bank to cover the shortage in the latter
bank.
b. Kiting occurs when a collection from one customer is misappropriated then conceals this defalcation by applying a subsequent collection made from another customer.
c. Lapping is a practice of opening the books of accounts beyond the close of the reporting period for the purpose of showing a better financial position and performance.
d. In banking practice, a check becomes stale if not encashed within six months from the time of issuance.

19. All of the following may be included under the heading of "cash" except
a. currency. c. checking account balance.
b. money market funds. d. savings account balance.

20. In fluctuating fund system,

a. Petty cash disbursements are immediately recorded
b. The establishment of the petty cash fund includes a debit to cash in bank and a credit to petty cash fund
c. No adjustment in petty cash fund account is necessary at the end of the reporting period
d. Both a and c are correct
e. Statements a, b, and c are correct

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