Module 12: Monetary Current Assets and Current Liabilities


This study module reviews accounting for current assets (except inventory which is presented in Module 10) and short-term investments (which are presented in Module 16). The primary topics covered on the Financial Accounting Reporting Section of the exam include

1. Cash and bank reconciliations.
2. Receivables with respect to initial recording, bad debts, borrowing, factoring, transferring, servicing, and securitizing.

This module also reviews current liabilities. The primary topics tested on the exam include accounting for payroll and contingencies (e.g., warranties, lawsuits.) Additionally, this module covers ratio analysis for solvency (e.g. current ratio) and operational efficiency (e.g. inventory turnover).

A. Cash

B. Bank Reconciliations

C. Receivables

D. Current Liabilities

E. Fair Value Option

F. Ratios

G. Research Component—Accounting Standards Codification

H. International Financial Reporting Standards (IFRS)

Key Terms

Multiple-Choice Questions

Multiple-Choice Answers and Explanations


Simulation Solutions

A. Cash

The definition of cash includes both cash (cash on hand and demand deposits) and cash equivalents (short-term, highly liquid investments).
1. Cash equivalents have to be readily convertible into cash and so near maturity that they carry little risk of changing in value due to interest rate changes. Generally this will include only those investments with original maturities of three ...

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