1. What is the purpose of preparing a bank reconciliation?
2. Do items reported as credits on the bank statement represent (a) additions made by the bank to the company's balance or (b) deductions made by the bank from the company's balance? Explain.
3. Spectacle Inc. has a petty cash fund of $2,000. (a) Since the petty cash fund is only $2,000, should Spectacle Inc. implement controls over petty cash? (b) What controls, if any, could be used for the petty cash fund?
4. (a) How are cash equivalents reported in the financial statements? (b) What are some examples of cash equivalents?