A Primary Purpose of the Proof of Cash Is to

question 25

Multiple Choice

A primary purpose of the proof of cash is to

• A) Prevent fraud.
• B) Reconcile actual cash receipts and disbursements to budgeted receipts and disbursements.
• C) Investigate variances from expected cash balances.
• D) Ensure that all cash receipts recorded in the cash receipts journal were deposited in the bank account.

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Definitions:

Noncash Financing

Financing activities that do not involve cash flows, such as issuing stock for assets or converting debt to equity.

Investing Activities

Financial transactions related to the acquisition or sale of long-term assets and investments not related to the entity's primary business operations.

Financing Activities

Transactions and events where cash is raised or paid back to finance the company's operations, including issuing debt, equity, and paying dividends.

Operating Activities

Transactions and other events that are not investing or financing activities which affect the net income of a company.