Section 2: 30–40%2A
Cash and Cash Equivalents
Cash is the most liquid asset and the foundation of the balance sheet. The exam tests what qualifies as a cash equivalent, how to handle bank reconciliations, restricted cash, and compensating balances — all of which affect how cash is presented and disclosed.
What AICPA Wants You to Know
- 1Define cash equivalents and apply the three-month maturity rule
- 2Prepare a bank reconciliation and identify adjusting entries
- 3Distinguish restricted cash from unrestricted cash and explain balance sheet presentation
- 4Explain compensating balance disclosure requirements
- 5Identify common items excluded from cash and cash equivalents