[Anonymous]

Which of the following cash transfers results in a misstatement of cash on December 31, 20X1?

BANK TRANSFER SCHEDULE

Disbursement Date Receipt Date

Transfers Per Books Per Bank Per Books Per Bank

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A. 12/31/X1 01/05/X2 12/31/X1 01/04/X2

B. 01/04/X2 01/11/X2 01/04/X2 01/04/X2

C. 12/31/X1 01/04/X2 12/31/X1 12/31/X1

D. 01/04/X2 01/05/X2 12/31/X1 01/04/X2

If the receipt of cash into one account occurs prior to year-end while the disbursement date from the other account occurs after year-end, both accounts will have the transferred amount in them at year-end. The total cash will be overstated by the transferred amount, as that amount will be doubled on the books. Transfer D will result in a misstatement of cash on December 31, 20X1.

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What the heck are you supposed to be looking for in this kind of question? Also, how are you supposed to know if this is a bank to company transfer or a company to bank transfer?

[mw798]

You're looking for any choices which would cause a disconnect between the cash on your books and what your actual cash balance is.

[Anonymous]

I remember seeing this before and getting confused, but it's simple once you figure out what's being presented. These are transfers from one of the company's bank accounts to another one of it's own bank accounts (Bank 1 and Bank 2). I like to think of the transfers as checks written and not transfers, because logically, technology makes it possible for transfers to happen same day as you record them.

D is obviously incorrect, because bank 2 received the check before it was written (book recording error/fraud).

[Author]

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