Question

Below is a list of items. indicate the item number and the line and section of the Balance Sheet that the item should be reported.

(Example: assume there was an Item 8. Postage Stamps, the correct answer would be

8. Prepaid Expenses, Current Asset)

Item 1. Compensating balances held for short-term borrowing arrangements

Item 2. Savings account

Item 3. Cash set aside as a bond sinking fund for bonds maturing in 3 years

Item 4. Treasury bills with original maturing date in two months

Item 5. Post-dated checks received from customers

Answer 1

Ans.

Item 1. Compensating balances held for short-term borrowing arrangements :- This balance should be reported under current assets (cash & cash equivalent section) as restricted cash. This money can't be used for general purpose.

Item 2. Savings account :- It will be shown under current assets, cash & cash equivalent.

Item 3. Cash set aside as a bond sinking fund for bonds maturing in 3 years :- As this will be used to retire long term bonds so we will show it under non current assets, investment section of balance sheet.

Item 4. Treasury bills with original maturing date in two months :- These are shown under current assets, cash & cash equivalent section of balance sheet.

Item 5. Post-dated checks received from customers :- These will be shown as current assets, cash & cash equivalent.