I am preparing for the CPA exam now and I was a little confused with the concept "float."
Here is the question: Assume that each day a company writes and receives checks totaling
a.$10,000 b.$0 c.$(10,000) d.$25,000
and the answer is a.
According to my text book,float occurs when there is difference bewteen the balance in a company's cash accounts and the balance in the bank's records.Of course I know that the amount is the difference between my company's account and bank's records,which is $10,000,but I don't know how to distinguish between positive and negative float. What do they stand for? Can you tell me the meaning of these two kinds of float? Otherwise I was inclined to choose the answer c. rather than a.
Thanks for your help.
Best Regards, Alberta