Cash Management – Page 2

AAA – Nov 2023 – L3 – SC – Q6 – Internal Audit and Corporate Governance

Discusses control activities for Reliable Ltd and external auditor responsibilities in light of control gaps and bank requirements.

Question

Reliable Limited is into wholesale and retail supply and distribution of stationeries to companies and educational institutions. The company maintains business relationships with other enterprises that are owned by close friends and relatives. The books of account of the company were kept manually and in simple Excel. The company had only a staff member in the accounts department since it is a small business operation.

A review of the company’s operations shows that inventory of stationeries purchased was not properly valued due to incomplete recording of purchases made. Although bank statements are obtained, the balances on the bank statements were not reconciled with the cash book.

Cash from sales made was not banked intact, and expenses relating to cash takings from the till were not all recorded or properly monitored. Added to this, goods bought from related parties were sometimes overvalued as suppliers made frivolous claims which could not be disputed due to poor record keeping. The Managing Director and owner of the company has been sick for some time, and the wife concentrated more on her own business, leaving the operations of the company to a relation who is not well educated. Available evidence revealed that invoices and vouchers of the company were approved without management review, and the procedure or selection of suppliers was not transparent.

The company has just won a contract for the supply of stationeries in one of the states in the Federation, and it was found that there was inadequate cash flow to execute the contract. The manager of the company informed the Managing Director’s wife of the development, and it was agreed that a bank loan would be needed. On approaching the bank, updated financial statements of the company were requested to determine the financial health of the business and ability to repay the loan when due.

Your firm has been appointed as auditors of the company with a stipulated deadline to complete the audit so that the company could meet the bank’s conditions. The firm has conducted a preliminary review of the operations of the company, and some control gaps have been noted.

Required:

a. Discuss suitable control activities that will be required in the above scenario and how you will assess the degree of effectiveness of the internal control systems.
(10 Marks)

b. Identify and explain what the external auditors are expected to do during the course of the above audit.
(5 Marks)

Total: 15 Marks

Answer

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Tags: Bank Reconciliation, Cash Management, Control Gaps, Corporate Governance, External audit, Financial Statements, Internal Controls, Inventory Valuation, Loan Assessment, Related parties
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2023

FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

Question

Financial statements and extract from the cashbook of Obudu Nigeria Limited for the year ended December 31, 2020 are summarised below:
Obudu Nigeria Limited Statement of profit or Loss for the year ended December 31, 2020

Obudu Nigeria Limited Statement of financial position as at December 31

Other Information
(i) The 8% loan notes have been partly redeemed. It is expected that the full redemption will be made in five years time.
(ii) A cash payment for insurance of N1million was omitted in the cash book and other records.
(iii) The investments are not easily realisable.
Required:
a. Prepare the statement of cash flows for the year ended December 31, 2020 using the direct method in accordance with IAS 7. (9 Marks)
b. Prepare a statement of reconciliation of the operating profit to cash flow from operations. (5 Marks)
c. Discuss the benefits of statement of cash flows information to users of financial statements.

Answer

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Tags: Cash Flows, Cash Management, Direct Method, Financing Activities, IAS 7, Investing Activities, Operating Activities
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: NOV 2022

PSAF – May 2021 – L2 – Q3a – Treasury Management in the Public Sector

Explain strategies to enhance cash management and factors affecting its effectiveness in public finance.

Question

Cash management implemented by the Budget Office of the Federation (BoF) was to ensure that the right amount of money is made available to fund government expenditure in a timely manner as well as meeting its obligations as they fall due.

Required:
Explain FIVE strategies to enhance cash management control and FIVE factors militating against effective cash management. (10 Marks)

Answer

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Tags: Budget Office, Cash Management, Financial Control, Public Expenditure, Treasury Management
Level: Level 2

Topic: Treasury Management in the Public Sector
Series: MAY 2021

PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

Question

Discuss any FIVE weaknesses in the current system of cash management in Nigeria.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgetary Control, Cash Management, Government Revenue, Inter-Agency Collaboration, Oil Dependence, Treasury Monitoring
Level: Level 2

Topic: Treasury Management in the Public Sector
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

Question

Cash management is one of the challenges of Treasuries all over the world.

a. Identify any FOUR objectives of cash planning and management.

Answer

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Tags: Budget Execution, Cash Management, Financial Monitoring, Idle Cash, Procurement
Level: Level 2

Topic: Treasury Management in the Public Sector
Series: NOV 2015

FA – Nov 2022 – L1 – SB – Q4c – Recording Financial Transactions

This question asks for an explanation of how a petty cash book operates for Chief Emeka.

Question

Chief Emeka is considering setting up a petty cash book from which to pay small expenses. However, he is not sure of how a petty cash book operates.

Required:
Explain to Chief Emeka the operation of a petty cash book. (6 Marks)

Answer

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Tags: Cash Management, Imprest System, Petty Cash Book, Small Expenses
Level: Level 1

Topic: Recording Financial Transactions
Series: NOV 2022

FA – Nov 2022 – L1 – SA – Q14 – Recording Financial Transaction

Identify the correct term for the fixed amount of money given to a petty cashier.

Question

The fixed amount of money given to a petty cashier at the beginning of a period is called
A. Float
B. Imprest
C. Petty cash
D. Cash received
E. Cash advance

Answer

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Tags: Cash Management, Financial Records, Petty Cash
Level: Level 1

Topic: Recording Financial Transactions
Series: NOV 2022

MI – Nov 2014 – L1 – SA – Q5 – Decision-making techniques

Working Capital, Cash Cycle, Inventory, Receivables, Cash Management

Question

The working capital cycle starts and ends with ONE of the following:

A. Cash and Payables
B. Inventory and Receivables
C. Work in Progress and Inventory
D. Cash and Inventory
E. Cash and Receivables

Answer

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Tags: Cash Cycle, Cash Management, Inventory, Receivables, Working Capital
Level: Level 1

Topic: Decision-making techniques
Series: NOV 2014

FA – May 2024 – L1 – SB – Q2a – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Examines internal control procedures over cash receipts in a business.

Question

Examines internal control procedures over cash receipts in a business.

Answer

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Tags: Cash Management, Internal Control
Level: Level 1

FA – May 2024 – L1 – SA – Q16 – Bank Reconciliation

Identifies the primary purpose of performing bank reconciliations in accounting.

Question

The primary purpose of performing bank reconciliations in accounting is to:

A. Ensure that the balance in the cash at bank account and the balance shown in the bank statement are always the same
B. Identify and correct errors in accounting records related to cash transactions with the bank
C. Combine the cash book balance with the bank statement balance to get the total cash position
D. Reconcile the balances of other accounts in the general ledger with the bank statement
E. Verify the accuracy of non-cash transactions in the accounting records

Answer

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Tags: Accounting Controls, Bank Reconciliation, Cash Management
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2024

AA – Mar 2024 – L2 – Q5b – Internal Audit and Its Relationship with External Audit

Recommend internal control procedures for cheque payments and petty cash systems for Automaga Ltd.

Question

Automaga Ltd has recently acquired the controlling interest in Alkars Ltd, who are importers of car spare parts. In reviewing the organisational structure of Alkars Ltd, Automaga Ltd noticed a weakness in the procedures for the signing of cheques and the operation of the petty cash system. Automaga Ltd engaged you as the company’s auditor and requested that you review the controls over cheque payments and petty cash. Cheques are drawn almost every week and the petty cash account normally has a working balance of about GH¢600, and GH¢1,200 is expended from the fund each month.

Required:
Prepare a letter to Automaga Ltd highlighting your recommendations for good internal control procedures for:
i) Cheque payments. (5 marks)
ii) Petty cash. (5 marks)

Answer

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Tags: Cash Management, Cheque Payments, Internal Control, Petty Cash
Level: Level 2

Topic: Internal Audit and Its Relationship with External Audit
Series: MAR 2024

PSAF – Nov 2021 – L2 – Q5a – Public sector financing initiatives

Explain Treasury Single Account (TSA) and discuss its benefits, and explain how GIFMIS supports cash management and budgeting.

Question

Under the Public Financial Management Act 2016, (Act 921), Treasury Single Account (TSA) system is recommended for managing cash resources of the government. The implementation of the treasury single account system is reflected in the Ghana Integrated Financial Management Information Systems (GIFMIS).

Required:

i) Explain Treasury Single Account and discuss FOUR (4) benefits associated with such a system in Ghana.
(6 marks)

ii) Explain how the use of GIFMIS has supported the following public financial management functions:

Cash management.
Budgeting and budgetary execution.
(4 marks)

Answer

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Tags: Cash Management, GIFMIS, Public Financial Management, Treasury Single Account
Level: Level 2

Topic: Public sector financing initiatives
Series: NOV 2021

PSAF – May 2018 – L2 – Q1b – Public sector fiscal planning and budgeting

Explain four objectives of proper cash management in public financial management.

Question

Your subordinate read an article written by the Minister of Finance titled “Streamlining and improving public cash management.” As a professional student of Public Financial Management, your subordinate has drawn your attention to a certain paragraph of the publication that reads:

“Without cash management it is very difficult for the Controller and Accountant-General or the Minister of Finance to make informed financing or investment decisions. For these reasons, all MDAs and MMDAs are expected to prepare cash-flow forecasts as part of their budgetary control system. All revenue agencies are to prepare revenue projections, just as the Ministry of Finance also prepares a schedule of statutory payments and non-tax revenues.”

Required:
Briefly explain to your subordinate FOUR objectives of proper cash management in public financial management.

Answer

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Tags: Cash Management, Objectives, Public Financial Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2018

FM – May 2020 – L2 – Q5a – Cash management

Explain three motives for holding cash.

Question

Explain THREE (3) motives for holding cash.

Answer

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Tags: Cash Management, Financial management, Motives for holding cash
Level: Level 2

Topic: Cash management
Series: MAY 2020

FM – NOV 2021 – L2 – Q5 – Cash management

Application of the Miller-Orr model to determine cash levels, comparison with the Baumol model, and the differences between futures and forward contracts.

Question

You are the assistant to the Finance Manager of Horthman Holdings Ltd. The Directors of the company are reviewing the cash management practices of the company. The main concern is that excessive cash balances are held in non-interest-bearing demand deposit accounts for relatively long periods. Your boss has been asked to advise the Directors on the appropriate cash balance levels the company should keep and matters relating to the investment of excess cash.

To assist your boss, you analysed the company’s demand for cash over the last three years and looked for some financial market figures. On the usage of cash, you found that the company’s daily cash needs vary with a standard deviation of GH¢25,000. However, the annual demand for cash averages around GH¢65 million. Considering the results of your examination, your boss proposes that the minimum cash balance is set at GH¢100,000 going forward.

From your search on the financial markets, you found that the company can earn interest from investments in money market securities at an annual rate of 21.6% on an actual/360-day count convention. Also, you found out that the average transaction cost for trading investments in such money market securities is GH¢2,500.

Your boss recommends using the Miller-Orr model for determining the critical cash control levels and investment of temporary excess cash in money market securities.

Required:
a) Using the Miller-Orr model, determine the following:
i) The cash spread between the lower and upper cash limit. (3 marks)
ii) The cash return point. (2 marks)
iii) The cash level at which the company should invest excess cash. (2 marks)

b) The Chief Executive Officer (CEO) believes that the Baumol model is a simpler model than the Miller-Orr model, and your boss should consider recommending that to the Directors. Considering the information provided in the preamble, would you say that the Baumol Model would be more appropriate? Explain. (4 marks)

c) Your boss recommends that temporary excess cash be invested in money market securities. Explain TWO (2) conditions required when deciding on investing temporary excess cash. (4 marks)

d) Future contracts and forward contracts (more commonly referred to as futures and forwards) are used by businesses and investors to hedge against risks or speculate. Futures and forwards are examples of derivative assets that derive their values from underlying assets. Both contracts rely on locking in a specific price for a certain asset, but they have differences.

Required:
Explain FOUR (4) differences between futures and forwards. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Baumol Model, Cash Flow Management, Cash Management, Forwards, Futures, Miller-Orr Model
Level: Level 2

Topic: Cash management
Series: NOV 2021

Question Tag: Cash Management

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AAA – Nov 2023 – L3 – SC – Q6 – Internal Audit and Corporate Governance

Discusses control activities for Reliable Ltd and external auditor responsibilities in light of control gaps and bank requirements.

FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

PSAF – May 2021 – L2 – Q3a – Treasury Management in the Public Sector

Explain strategies to enhance cash management and factors affecting its effectiveness in public finance.

PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

FA – Nov 2022 – L1 – SB – Q4c – Recording Financial Transactions

This question asks for an explanation of how a petty cash book operates for Chief Emeka.

FA – Nov 2022 – L1 – SA – Q14 – Recording Financial Transaction

Identify the correct term for the fixed amount of money given to a petty cashier.

MI – Nov 2014 – L1 – SA – Q5 – Decision-making techniques

Working Capital, Cash Cycle, Inventory, Receivables, Cash Management

FA – May 2024 – L1 – SB – Q2a – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Examines internal control procedures over cash receipts in a business.

FA – May 2024 – L1 – SA – Q16 – Bank Reconciliation

Identifies the primary purpose of performing bank reconciliations in accounting.

AA – Mar 2024 – L2 – Q5b – Internal Audit and Its Relationship with External Audit

Recommend internal control procedures for cheque payments and petty cash systems for Automaga Ltd.

PSAF – Nov 2021 – L2 – Q5a – Public sector financing initiatives

Explain Treasury Single Account (TSA) and discuss its benefits, and explain how GIFMIS supports cash management and budgeting.

PSAF – May 2018 – L2 – Q1b – Public sector fiscal planning and budgeting

Explain four objectives of proper cash management in public financial management.

FM – May 2020 – L2 – Q5a – Cash management

Explain three motives for holding cash.

FM – NOV 2021 – L2 – Q5 – Cash management

Application of the Miller-Orr model to determine cash levels, comparison with the Baumol model, and the differences between futures and forward contracts.

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Question Tag: Cash Management

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AAA – Nov 2023 – L3 – SC – Q6 – Internal Audit and Corporate Governance

Discusses control activities for Reliable Ltd and external auditor responsibilities in light of control gaps and bank requirements.

You're reporting an error for "AAA – Nov 2023 – L3 – SC – Q6 – Internal Audit and Corporate Governance"

FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

You're reporting an error for "FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows"

PSAF – May 2021 – L2 – Q3a – Treasury Management in the Public Sector

Explain strategies to enhance cash management and factors affecting its effectiveness in public finance.

You're reporting an error for "PSAF – May 2021 – L2 – Q3a – Treasury Management in the Public Sector"

PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

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PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

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FA – Nov 2022 – L1 – SB – Q4c – Recording Financial Transactions

This question asks for an explanation of how a petty cash book operates for Chief Emeka.

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FA – Nov 2022 – L1 – SA – Q14 – Recording Financial Transaction

Identify the correct term for the fixed amount of money given to a petty cashier.

You're reporting an error for "FA – Nov 2022 – L1 – SA – Q14 – Recording Financial Transaction"

MI – Nov 2014 – L1 – SA – Q5 – Decision-making techniques

Working Capital, Cash Cycle, Inventory, Receivables, Cash Management

You're reporting an error for "MI – Nov 2014 – L1 – SA – Q5 – Decision-making techniques"

FA – May 2024 – L1 – SB – Q2a – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Examines internal control procedures over cash receipts in a business.

You're reporting an error for "FA – May 2024 – L1 – SB – Q2a – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)"

FA – May 2024 – L1 – SA – Q16 – Bank Reconciliation

Identifies the primary purpose of performing bank reconciliations in accounting.

You're reporting an error for "FA – May 2024 – L1 – SA – Q16 – Bank Reconciliation"

AA – Mar 2024 – L2 – Q5b – Internal Audit and Its Relationship with External Audit

Recommend internal control procedures for cheque payments and petty cash systems for Automaga Ltd.

You're reporting an error for "AA – Mar 2024 – L2 – Q5b – Internal Audit and Its Relationship with External Audit"

PSAF – Nov 2021 – L2 – Q5a – Public sector financing initiatives

Explain Treasury Single Account (TSA) and discuss its benefits, and explain how GIFMIS supports cash management and budgeting.

You're reporting an error for "PSAF – Nov 2021 – L2 – Q5a – Public sector financing initiatives"

PSAF – May 2018 – L2 – Q1b – Public sector fiscal planning and budgeting

Explain four objectives of proper cash management in public financial management.

You're reporting an error for "PSAF – May 2018 – L2 – Q1b – Public sector fiscal planning and budgeting"

FM – May 2020 – L2 – Q5a – Cash management

Explain three motives for holding cash.

You're reporting an error for "FM – May 2020 – L2 – Q5a – Cash management"

FM – NOV 2021 – L2 – Q5 – Cash management

Application of the Miller-Orr model to determine cash levels, comparison with the Baumol model, and the differences between futures and forward contracts.

You're reporting an error for "FM – NOV 2021 – L2 – Q5 – Cash management"

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