BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
WHICH STATEMENT IS INCORRECT REGARDING CASH AND CASH EQUIVALENTS?
|
|
CASH AND CASH EQUIVALENTS ARE FINANCIAL ASSETS
|
|
|
CASH COMPRISES CASH ON HAND AND DEMAND DEPOSITS
|
|
|
CASH EQUIVALENTS ARE HELD FOR INVESTMENT PURPOSES
|
|
|
AN EQUITY SHALL DISCLOSE THE COMPONENTS OF CASH AND CASH EQUIVALENTS
|
Explanation:
Detailed explanation-1: -Investments in liquid securities, such as stocks, bonds, and derivatives, are not included in cash and equivalents.
Detailed explanation-2: -Cash equivalents include bank accounts and marketable securities such as commercial paper and short-term government bonds.
Detailed explanation-3: -It reconciles ending cash balance with the balance as per bank statement is incorrect about the statement of cash flows.
Detailed explanation-4: -Cash equivalents include U.S. government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper, and other money market instruments. All of these financial instruments often have a short maturity, highly liquid market, and low risk.
There is 1 question to complete.