Deck 9: Cash Management

Question 1

The net cash & cash equivalents from an end of fiscal year statement of cash flows should match the ____.

A) cash & cash equivalents on the balance sheet
B) total current assets on the balance sheet
C) accounts receivable less allowance for uncollectible accounts
D) net income on the income statement

Answer 1

cash & cash equivalents on the balance sheet

Question 2

What is the accepted method for a healthcare facility to get money into its petty cash fund?

A) Cash a check written against the operating checking account.
B) Transfer cash from the cash drawer.
C) Get cash from the facility's owners.
D) Withdraw cash from an investment account.

Answer 2

Cash a check written against the operating checking account.

Question 3

A medical practice uses its revenues to purchase a $20,000 certificate of deposit that matures in two years. The $20,000 CD should be recorded as ____.

A) a short term investment
B) cash & cash equivalents
C) investment income
D) a long term investment

Answer 3

a long term investment

Question 4

In a sole proprietorship physician practice, only the physician can sign checks.

Question 5

Under accrual accounting, patient charges for medical services are posted as revenues on the date ____.

A) of service
B) the patient's check clears
C) the third party payment arrives
D) the appointment for service is made

Question 6

Which of the following is true about payroll in a large healthcare facility?

A) Employee paychecks are written from the operating checking account.
B) Payroll tasks are complex and labor-intensive.
C) A payroll checking account typically contains enough money for two pay periods.
D) Outsourcing payroll is much more expensive than doing it in-house.

Question 7

When reconciling a bank statement for the operating checking account of a medical practice, the bookkeeper sees two bank charges of $25 for stopping payment on checks that vendors said did not arrive in the mail. The bookkeeper should ____.

A) transfer $50 from the cash account to the operating checking account
B) make two journal entries in the account ledger
C) write new checks to the vendors that are $25 less than the original checks
D) find new vendors that are less likely to misplace checks

Question 8

The final section of the statement of cash flows reconciles cash to the ____.

A) balance sheet
B) income statement
C) cash budget
D) revenue budget

Question 9

Bank reconciliation refers to the process of regaining good credit after missing payments on a bank loan.

Question 10

To reduce the risk of theft by an employee, a business should have one employee who receives the cash for the cash drawer, accepts cash payments and makes change, and performs the cash drawer balancing at the end of the day

Question 11

The statement of cash flows is an example of managerial accounting.

Question 12

A plumber fixes a leaky pipe in a medical practice late at night on September 23rd. He mails an invoice for services rendered to the medical practice that is received on September 29th and is due by October 14th. A check is written to pay the invoice on October 2nd. Under accrual accounting, what should be the posting date for the repair expense?

A) October 2nd
B) September 23rd
C) September 29th
D) October 14th

Question 13

The final statement or "bottom line" of an annual statement of cash flows is the end of year ____.

A) net increase in cash & cash equivalents
B) net cash flow from operations
C) total assets
D) cash & cash equivalents

Question 14

A new government regulation decreases the time that a bank can hold a check before clearing it. This shortens the average float by two days. Under which circumstance will this cause a loss of revenue for a healthcare business?

A) When it writes checks from an account that pays interest
B) When it deposits checks from customers in an account that pays no interest
C) When it deposits checks from customers in an account that pays interest
D) When it receives as payment a high number of NSF checks

Question 15

Some businesses will accept only customer payments made by credit cards or debit cards despite having to pay service fees for each transaction. Which of the following is the best reason for not accepting cash payments?

A) Cash can transmit diseases.
B) Handling cash costs money.
C) Checking for counterfeit bills is time-consuming.
D) Employees frequently steal cash.

Question 16

When a bank statement for the operating checking account of a medical practice does not include a check to a vendor mailed three weeks earlier, someone at the medical practice should ____.

A) delete the payment from the accounting ledger
B) write and mail a new check to the vendor
C) stop payment on that check
D) contact the vendor and ask about receipt of the check.

Question 17

After completing the bank reconciliation, a journal entry is prepared to increase the cash balance in the accounting records for which of the following?

A) interest received
B) deposits in transit
C) checks outstanding
D) charge for an NSF check

Question 18

Which of the following is true about the statement of cash flows?

A) It is comprised of five parts.
B) It is an optional statement.
C) It is included among generally accepted accounting principles.
D) It converts from accrual accounting to cash accounting.

Question 19

Credit card companies charge merchants and businesses a fee each time a customer pays by credit card.

Question 20

Who is held accountable for the accuracy of a medical office's petty cash fund?

A) the petty cash custodian
B) the office manager
C) the accountant
D) the owners or partners

Question 21

One of the physician owners of a medical partnership meets his wife for lunch at a nearby restaurant. He presents the restaurant receipt to the petty cash custodian and request reimbursement. The request is ____.

A) appropriate because a partner's lunch is a business expense
B) inappropriate because a partner's lunch with his wife is not a business expense
C) appropriate because a partner can use petty cash however he wishes
D) inappropriate because the lunch expense should not come from petty cash

Question 22

The length of time from check writing until the check is cleared by the bank that manages the checking account is the _______________,

Question 23

One of the physician owners of a partnership medical practice left his wallet at home and wants the office manager to give him $10 from the cash drawer so he can buy lunch. What should the office manager do?

A) Take the $10 and have the physician put an IOU in the cash drawer.
B) Loan him $10.
C) Take $10 from the petty cash lockbox and record that the physician will repay it.
D) Tell the physician to borrow $10 from one of the partner physicians.

Question 24

To reduce the risk of fraud, personal checks written by patients to pay for medical services should have a secured endorsement on the back and should be marked _______________.

Question 25

The section of the statement of cash flows that includes the amount of money borrowed during the fiscal year is net cash _______________.

Question 26

Sue, a bookkeeper at a hospital, normally prepares vendor bills for payments but was on vacation. The covering employee missed an invoice totaling $1000 for supplies received. When Sue returns, she discovers that the bill is past due and that the vendor will charge a 5% penalty for late payment. Which of the following is the best way to record the 5% penalty?

A) The original Medical Supplies Expense entry is increased by 5%.
B) A new Medical Supplies Expense entry of $50 is made.
C) A new Miscellaneous Expenses entry of $50 is made.
D) A new Bank Fees entry of $50 is made.

Question 27

A patient writes a $250 check for medical services, but only has $120 in his checking account. When the medical facility deposits the check, it will be labeled _______________.

Question 28

The part of the statement of cash flows that includes the day-to-day financial transactions of the business is the net cash _______________.

Question 29

Describe a large healthcare facility's internal controls related to payments to vendors.

Question 30

Define "stale-dated check" and describe how it should be handled in a healthcare facility.

Question 31

Many businesses charge customers a $20-30 fee if they write checks that cannot be cashed due to non-sufficient funds. What are the justifications for the fee?

Question 32

When a patient pays for a medical service in cash, the employee in charge of the cash drawer should ____.

A) document the denominations of the paper money submitted as payment
B) use a special scanner to check for counterfeit money
C) give the patient a receipt for the cash payment
D) immediately record the cash payment in the accounting ledger

Question 33

Describe the set-up and accounting process for establishing a petty cash fund.

Question 34

Describe the information obtained from the statement of cash flows that is not found on the balance sheet or the income statement.

Question 35

Which of the following is the best definition of the accounting term cash drawer?

A) The employee authorized to withdraw cash from the petty cash lock box
B) The desk or file cabinet drawer containing the cash lock box
C) A drawer containing a mix of bills and coins for receiving cash and making change
D) The person who designs the various denominations of printed money