Which of the Following Is True Regarding the Cash Management

question 23

Multiple Choice

Which of the following is true regarding the cash management model in Figure 20.5?

• A)The return point is in the middle of the spread
• B)The model minimizes the number of transactions
• C)The model assumes cash flows to be predictable
• D)The return point minimizes the sum of interest costs and transaction costs

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Definitions:

Temporary Accounts

Temporary Accounts are categories in accounting that are used to track financial transactions for a specific period, being reset or closed at the end of the fiscal year.

Income Summary

A temporary account used in accounting to aggregate all income and expense accounts for a period, facilitating the transfer of their balances to permanent equity accounts.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts and prepare the company's books for the next period.

Income Summary

A temporary account used in closing process to summarize the results of a period's revenues and expenses.