Ch 7 and 14 - Chapter 7 and 14 Cash and Receivables and LongTerm Liabilities Learning Objectives 1 Identify items considered as cash 2 Indicate how

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 and 14 Cash and Receivables and Long- Term Liabilities
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Learning Objectives 1. Identify items considered as cash. 2. Indicate how to report cash and related items. 1. Define receivables and identify the different types of receivables. 4. Explain accounting issues related to recognition of notes receivable. 5. Explain accounting issues related to valuation of notes receivable. 6. Explain accounting issues related to disposition of accounts and notes receivable.
Background image of page 2
Nature and Management of Cash Cash consists of coin, currency, bank deposits, and negotiable instruments such as money orders, checks, and bank drafts. Cash that has been designated for some specific use, other than for payment of currently maturing obligations, is segregated from the general cash account. This amount may be classified as a current asset if it will be disbursed within one year or the operating cycle, whichever is longer. Otherwise, the amount should be shown as a noncurrent asset. Management of Cash: Two problems associated with accounting for cash transactions for management: (1) Proper controls must be established to ensure that no unauthorized transactions are entered into by officers or employees; (2) Information necessary to the proper management of cash on hand and cash transactions must be provided.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Restricted Cash It is common practice for an enterprise to have an agreement with a bank concerning credit and borrowing arrangements. When such an agreement exists, the bank usually requires the enterprise to maintain a minimum cash balance on deposit. This minimum balance is known as a compensating balance. Compensating balances that result in legally restricted deposits must be separately classified in the balance sheet. The nature of the borrowing arrangement determines whether the compensating balance is classified as a current asset or a noncurrent asset. Bank overdrafts occur when a check is written for more than the amount in the cash account. Bank overdrafts should be accounted for as accounts payable or, if material, separately disclosed. Cash equivalents are short- term, highly liquid investments that are both (a) readily convertible to known amounts of cash and (b) so near their maturity that they present insignificant risk of changes in interest rates. Problems.
Background image of page 4
Notes Receivable The major differences between trade accounts receivables and trade notes receivables are (a) notes represent a formal promise to pay and (b) notes bear an interest element because of the time value of money. Notes are classified as notes bearing interest equal to the effective rate and those bearing interest different than the effective rate. I nterest-bearing notes have a stated rate of interest, whereas zero-interest bearing notes (noninterest-bearing) include the interest as part of their face amount instead of stating it explicitly. Short-term notes are generally recorded at face value (less allowances) because the interest implicit
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/25/2010 for the course ACCT 300A taught by Professor Bob during the Spring '10 term at University of Arizona- Tucson.

Page1 / 18

Ch 7 and 14 - Chapter 7 and 14 Cash and Receivables and LongTerm Liabilities Learning Objectives 1 Identify items considered as cash 2 Indicate how

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online