Cash, Cash Equivalents, Bank Reconciliation, and Petty Cash
What this domain tests
This domain covers what counts as cash, how to reconcile the 当座預金 book balance to the bank statement, and how the imprest petty cash system works. Grade 3 questions often give a book balance, a bank balance, and a list of reconciling items, then ask for the adjusted balance and the required book entries.
Cash and cash equivalents
- Cash includes currency, checks received, money orders, and cash equivalents: short-term, highly liquid investments with original maturities of three months or less and insignificant risk of value change.
- 当座預金 is a demand deposit. A negative balance is 当座借越, a liability, not a negative asset.
- Post-dated checks and IOUs are receivables, not cash.
Bank reconciliation
- Bank-side adjustments: subtract 未取付小切手 (outstanding checks); add 未取立小切手 or deposits in transit.
- Book-side adjustments: subtract 銀行手数料; add 受取利息 or direct deposits; subtract 不渡小切手; record automatic transfers.
- Only book-side items need journal entries. Outstanding checks and deposits in transit are timing differences.
Worked example
Book balance is ¥553,000; bank statement is ¥600,000. Outstanding checks are ¥80,000; deposits in transit are ¥30,000; bank charge is ¥5,000; interest credited is ¥2,000. Bank side: 600,000 − 80,000 + 30,000 = ¥550,000. Book side: 553,000 − 5,000 + 2,000 = ¥550,000. Entries: 支払手数料 5,000 / 当座預金 5,000; 当座預金 2,000 / 受取利息 2,000.
Petty cash
Under the imprest system, establish a fixed float: 小口現金 50,000 / 当座預金 50,000. Expenses are paid from the box; at replenishment, debit the expense accounts and credit 当座預金, leaving 小口現金 at ¥50,000. Shortages or overages go to 現金過不足, then to 雑損 or 雑益 when resolved.
Traps
- Adjusting the bank side for a bank charge the company has not recorded.
- Journalizing outstanding checks.
- Recording every petty cash payment daily instead of at replenishment.
- Writing off a shortage to 雑損 before investigating.