accounting chap 8 and 9 - Cash balance per bank statement...

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Cash balance per bank statement: Add : -deposits in transit -bank error Less : -outstanding checks = adjusted/corrected balance per bank Cash balance per books: Add: -collection of notes receivable -interest earned -notes receivable collected by bank -error in recording check Less: -bank service charge -check printing charges -company error -error in deposit -error in recording -non sufficient fund (NSF/bounced) check/fee = adjusted/corrected balance per book Accounts receivable - amounts owned by customers on account, accounts due from customers for services provided or goods sold to them on account Accounts receivable turnover ratio - a measure of the liquidity of accounts receivable; computed by dividing net credit sales by average new accounts receivable Aging the accounts receivable - the analysis of customer balances by the length of time they have been unpaid Allowance method - a method of accounting for bad debts that involves estimations uncollectible accounts at the end of each period Average collection period - the average amount of time that a receivable is outstanding; calculated by dividing 365 days by the accounts receivable turnover ratio Bad Debts Expense - an expense account to record uncollectible receivables Bank reconciliation - the process of comparing the banks balance of an account with the companies balance and explaining any differences to make them agree Bank service charge - a fee charged by a bank for the use of its services
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Bank statement - a monthly statement from the bank that shows the depositors bank transactions and balances Bonding - Obtaining insurance protection against misappropriation of assets by employees Cash equivalents - short term, highly liquid investments that can be converted to a specific amount of cash Cash realizable value- the net amount a company expects to receive in cash Cash - resources that consist of coins, currency, checks, money orders, and money on hand or on deposit in a bank or similar depository Check - a written order signed by a bank depositor, directing the bank to pay a specified sum of money to a designated recipient. Collection of an account written off : -you collect an account you had previously written off -we need to reverse the entry used to write off the account -only balance sheet is affected -accounts receivable and allowance accounts are increased Compensating balances - minimum cash balances required by a bank in support of bank loans Components of a good internal control system : -control environments -risk assessment -control activities -information and communication -monitoring Deposits in transit - deposits recorded by the depositor but not yet been recorded by the bank Direct write off method
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