ch07 part 1 - Chapter 7: Cash and Receivables Part 1 AIM...

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  Chapter 7 1 Chapter 7: Cash and Receivables  Part 1 AIM 3331-0U1 Summer 2009 Xinyi Lu
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  Chapter 7 2 Objective 1. Identify items considered as cash. 2. Indicate how to report cash and related items. 3. Define receivables and identify the different types of receivables. 4. Explain accounting issues related to recognition of accounts  receivable. 5. Explain accounting issues related to valuation of accounts  receivable. 6. Explain accounting issues related to recognition of notes  receivable. 7. Explain accounting issues related to valuation of notes  receivable. 8. Explain accounting issues related to disposition of accounts and  notes receivable. 9. Describe how to report and analyze receivables.
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  Chapter 7 3 Cash Examples:  coin, currency, available  funds on deposit at the bank, money  orders, certified checks, cashier’s  checks, personal checks, bank drafts  and savings accounts. Most liquid asset.
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  Chapter 7 4 Management and Control of  Cash Management faces two problems: (1) to establish proper controls to prevent any  unauthorized transactions, and  (2) to provide information necessary to the  proper management of cash on hand and  cash transactions. Companies need effective internal control  over cash.  Sarbanes-Oxley Act of 2002 call for  enhanced internal control.
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  Chapter 7 5 Reporting Cash Restricted Cash: Examples, restricted for:   (1) plant expansion, (2) retirement of long-term  debt, and (3) compensating balances. Companies segregate restricted cash from  “regular” cash for reporting purposes.
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  Chapter 7 6 Reporting Cash (cont.) Bank Overdrafts : When a company writes a check for more  than the amount in its cash account. Generally   reported   as a current  liability  (account payable).  Offset against cash account  only  when  available cash is present in another account  in the same bank on which the overdraft  occurred.
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  Chapter 7 7 Reporting Cash (cont.) Cash Equivalents Examples: Treasury bills, Commercial  paper, and Money market funds. Short-term, highly liquid investments that  are both:       (1) readily convertible to cash, and        (2) so near their maturity that they present  insignificant risk of changes in interest  rates.
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  Chapter 7 8 Receivables Claims held against customers and  others for money, goods, or services. Trade receivables and nontrade  Receivables.
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  Chapter 7 9 Trade Receivables Written promises to pay a  sum of money on a  specified future date. Claims held against customers and others for 
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ch07 part 1 - Chapter 7: Cash and Receivables Part 1 AIM...

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