Question

Float is defined as the difference between the:

Select one:

A. available balance and the collected balance.

B. beginning and ending cash balances as shown on a cash budget.

C. collections and disbursements for any given period of time.

D. ledger balance and the available balance.

E. book balance and the ledger balance.

Answer 1

A. available balance and the collected balance

Float is the difference betwen the book balance and available balance

Say a firm writes a check for paying its supplier, it will record this as a decrease in its book balance, but this physical check might take some time in hrs or 1-2 days to be actually encashed hence the actual available balance in the bank is higher than the decrease recorded in the books

Similarly when a firm receives a check, it will record this as an increase in its book balance, but this physical check might take some time in hrs or 1-2 days to be actually encashed. Hence the available balance in the bank may stay the same till it is encashed whereas the records show a higher collected balance