[cso23]

CPA-00053
The following information pertains to Grey Co. at December 31, Year 1:
Checkbook balance – 12,000
Bank statement balance – 16,000
Check drawn on Grey’s account, payable to a vendor, dated and recorded 12/31/Year 1 but not mailed until 1/10/Year 2 – 1,800
On Grey’s December 31, Year 1, balance sheet, what amount should be reported as cash?

The correct answer is $ 13,800, both checkbook balance and outstanding cheques are reported as cash, which I understand why.
However, my questions is, why is it that a bank statement balance is not reported as cash? I understand a bank statement balance to be a balance from a savings account per say. Can someone please clarify this for me.

[Mike J]

For something to be counted toward cash it must be (1) free and clear (eg not a bond sinking fund, which is required to be spent elsewhere), (2) available to be spent in current operations (the question is testing this requirement, which has to do with proper cutoff), and (3) highly liquid securities (original maturity of 3 months or less).

[Author]

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