Cash and Receivables
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| 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
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| 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.
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| 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
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| separation of duties | individuals that have physical responsibility for assets should not also have access to accounting records
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| compensating balances | compensate the bank for granting the loan or extending the line of credit
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| receivables | represent a company's claims to the future collection of cash, other assets or services
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| accounts receivable | resulting from the sale of goods or services on account (trade receivables)
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| trade discounts | a way to change prices w/out publishing them or even to disguise them form competitors
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| cash discounts | reduce the amount to be paid if remittance is made w/in a specified short pd of time
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| gross method | views cash discounts not taken as part of sales revenue
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| net method | sales revenue is the net amount, after discount and any discounts not taken by the customer as interest revenue
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| bad debt expense | inherent cost of granting credit
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| net realizable value | amount of cash the company actually expects to receive from their customers
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| allowance method | application of matching in accounting for bad debts
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| income statement approach | balance sheet amount is an incidental result of estimating bad debt expense as a percentage of net credit sales
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| balance sheet approach | determine BDE by estimating the net realizable value of AR to be reported in the BS
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| AR aging schedule | classifies the year-end balances according to their length of time outstanding - assumes older accounts are more likely to prove uncollectible
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| notes receivable | formal credit arrangements between a lender and a borrower
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| interest-bearing notes | face amount x annual rate x fraction of annual period
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| noninterest-bearing note | interest is discounted from the face amount to determine the cash proceeds made available to the borrower at the outset
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