When a Company Has Cash Available in Another Account in the Same

question 143

Multiple Choice

When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will:

• A) offset the overdraft against cash account.
• B) report the same in the notes to financial statement.
• C) report the bank overdraft amount as account payable.
• D) classify the bank overdraft as compensating balance.

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Definitions:

Mixed Cost

A cost that has both fixed and variable components, which changes with the level of output but not in direct proportion.

Fixed Manufacturing Costs

Overhead expenses that do not vary with production level, such as rent, salaries, and utility costs in a manufacturing environment.

Margin of Safety

Margin of Safety is the difference between actual sales and the break-even point, indicating the amount of sales decline a company can sustain before incurring a loss.

CVP Income Statement

An income statement format that is used to analyze the impact of varying levels of sales and product costs on operating profit, focusing on the relationships between cost, volume, and profit.