CAP Banking and Cash Management Flashcards

Which document authorizes a bank to transfer funds electronically between accounts?

Answer: Wire transfer instruction or ACH authorization

A wire transfer instruction or ACH (Automated Clearing House) authorization directs the bank to move funds electronically.

When establishing a petty cash fund of $150, the correct journal entry is:

Answer: Debit Petty Cash $150; Credit Cash $150

Setting up petty cash transfers money from the main cash account to the petty cash fund: debit Petty Cash, credit Cash.

Which of the following best describes the float in banking?

Answer: The time delay between when a check is written and when funds are actually withdrawn

Float is the period between issuing a check and when it clears the bank, temporarily making funds appear available in both the payer's and payee's accounts.

A positive cash flow from operating activities on the cash flow statement primarily indicates:

Answer: The company's core business operations are generating cash

Positive operating cash flow shows the company's day-to-day business activities are producing more cash than they consume.

Which cash management technique involves delaying outgoing payments as long as possible while still meeting obligations?

Answer: Controlled disbursement

Controlled disbursement maximizes the time a company holds cash before paying obligations, improving liquidity without harming vendor relationships.

Under which circumstance would a company need to establish an allowance for bank errors on its reconciliation?

Answer: When the bank incorrectly records a transaction amount

If the bank records the wrong amount for a transaction, the company records it as a bank error on the reconciliation until the bank corrects it.