Chapter 7, Problem 7.12E

(a)

To determine

Cash: Cash is the money which is readily available in the form of currency. Since cash can be easily converted into other types of assets, it is reported as current assets in the assets section as the most liquid asset.

Forms of cash:

• Coins
• Currency or paper money
• Checks
• Money orders
• Traveler’s checks
• Funds in checking accounts
• Funds in savings account

The following items are not considered as cash because they are near-cash items but not cash:

• Certificates of deposit
• Postdated checks
• Non-sufficient fund checks
• IOUs (‘I owe you’)

Cash and cash equivalents: Cash equivalents are the near-cash items, which are readily convertible into cash.  Cash equivalents have a maturity period of three months, or less than 3 months. Cash equivalents are reported along with cash in the assets section of the balance sheet, as ‘Cash and cash equivalents’.

To determine: The balance of ‘Cash and cash equivalents’ to be reported on the balance sheet of Incorporation L, as at April 30, 2014.

(b)

To determine

To indicate: The accounts and statements where the items which are not included as ‘Cash and Cash equivalents’ in part (a) should be reported.