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Cash and Receivables
| Question | Answer |
|---|---|
| cash | currency and coins, balances in checking, items acceptable for deposit in these accounts. readily available to pay off debt or to use in operations |
| cash equivalents | money market funds, treasury bills, commercial paper. must have a maturity date no longer than 3 months from the date of purchase. also credit and debit card receivables. |
| internal control | companys plan to 1)encourage adherence to company policies and procedures 2)promote operational efficiency 3)minimize errors and theft and 4)enhance the reliability and accuracy of accounting data |
| separation of duties | individuals that have physical responsibility for assets should not also have access to accounting records |
| compensating balances | compensate the bank for granting the loan or extending the line of credit |
| receivables | represent a company's claims to the future collection of cash, other assets or services |
| accounts receivable | resulting from the sale of goods or services on account (trade receivables) |
| trade discounts | a way to change prices w/out publishing them or even to disguise them form competitors |
| cash discounts | reduce the amount to be paid if remittance is made w/in a specified short pd of time |
| gross method | views cash discounts not taken as part of sales revenue |
| net method | sales revenue is the net amount, after discount and any discounts not taken by the customer as interest revenue |
| bad debt expense | inherent cost of granting credit |
| net realizable value | amount of cash the company actually expects to receive from their customers |
| allowance method | application of matching in accounting for bad debts |
| income statement approach | balance sheet amount is an incidental result of estimating bad debt expense as a percentage of net credit sales |
| balance sheet approach | determine BDE by estimating the net realizable value of AR to be reported in the BS |
| AR aging schedule | classifies the year-end balances according to their length of time outstanding - assumes older accounts are more likely to prove uncollectible |
| notes receivable | formal credit arrangements between a lender and a borrower |
| interest-bearing notes | face amount x annual rate x fraction of annual period |
| noninterest-bearing note | interest is discounted from the face amount to determine the cash proceeds made available to the borrower at the outset |
Created by:
cc4661
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