Accounting 312- ch 8 - Accounting 312 Chapter 8- Cash and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Accounting 312 Chapter 8- Cash and Receivables What is Cash? -cash, the most liquid of assets, is the standard medium of exchange and the basis for measuring and accounting for all other items -consists of coin, currency, and available funds on deposit at the bank -negotiable instruments such as money orders, certified checks, cashier’s checks, personal checks, and bank drafts are also viewed as cash -savings accounts -money mkt funds that provide checking acct privileges -companies treat postdated checks and IOUs as receivable, treat travel advances as receivable if collected from employees or deducted from salaries (otherwise, classify the travel advance as ppd exp) -because petty cash funds and change funds are used to meet current operating expenses and liquidate current liabilities, companies include these fund sin current assets as cash Management and Control of Cash -management faces two problems in accounting for cash transactions 1. to establish proper controls to prevent any unauthorized transactions by officers or employees 2. to provide info necessary to properly manage cash on hand and cash transactions -to safeguard cash and to ensure the accuracy of the acctg records for cash, companies need effective internal control over cash *provisions of Sarbanes-Oxley Act call for enhanced efforts to inc quality of internal control -increasing volume of transaction conducted with the swipe of a debit or credit card presents new challenges *contributes to the shift from cold cash to digital cash, and poses new challenges for control of cash Reporting Cash Restricted Cash -petty cash, payroll, and dividend funds are examples of cash set aside for a particular purpose -in most situations, these fund balances re not material and therefore co do not segregate them from cash in the financial statements -when material in amt, companies segregate restricted cash from regular cash for reporting purposes -restricted cash is either current asset or long term asset depending on date of availability or disbursement *current if using cash for payment of existing or maturing obligation *long term if holding cash for a longer pd of time ~frequently set aside for plant expansion, retirement of long term debt or for entry free deposits -require customers to maintain minimum cash balances in checking or savings- compensating balances *companies must separate legally restricted deposits held as compensating balances against short term borrowing arrangements among the “cash and cash equiv items” in current assets *companies should classify long term borrowing arrangement as noncurrent assets in either the investments or other assets sections using a caption such as “cash on deposit maintained as compensating balance” *in acses where compensating balance arrangements exist without agreement that restrict the use of cash amts, co should describe the a arrangements and the amts involved in the notes Bank Overdrafts -bank overdrafts occur when a co writes a check for more than the amt in its cash acct
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/23/2011 for the course ACCOUNTING acc312 taught by Professor Halwhite during the Fall '10 term at University of Michigan.

Page1 / 9

Accounting 312- ch 8 - Accounting 312 Chapter 8- Cash and...

This preview shows document pages 1 - 2. Sign up to view the full document.

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