SSNT7_Cash - Cash and Receivables Cash and Cash Equivalents...

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Cash and Receivables
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Cash and Cash Equivalents Balances in checking accounts Currency and coins Cash equivalents are short-term, highly liquid investments that can be readily converted to cash. Money market funds Treasury bills Commercial paper Cash Items for deposit such as checks and money orders from customers
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Internal Control Encourages adherence to company policies and procedures Promotes operational efficiency Minimizes errors and theft Enhances the reliability and accuracy of accounting data
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Internal Control of Cash Separation of duties is a key aspect of an internal control system Individuals that have physical responsibility for assets should not also have access to accounting records Periodic reconciliation of book balances and bank balances to the correct balance is one of the most important tools used in the control of cash A petty cash system is employed by many business enterprises.
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Internal Control Procedures Cash Receipts Separate responsibilities for handling cash, recording cash transactions, and reconciling cash balances. Match the amount of cash received with the amount of cash deposited. Close supervision of cash-handling and cash-recording activities. Cash Disbursements Separate responsibilities for cash disbursement documents, check writing, check signing, check mailing, and record keeping. All disbursements, except petty cash, made by check.
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Restricted Cash and Compensating Balances Restricted Cash Management’s intent to use a certain amount of cash for a specific purpose – future plant expansion, future payment of debt. Compensating Balance Minimum balance that must be maintained in a company’s bank account as support for funds borrowed from the bank.
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Accounts Receivable Credit sales require: maintaining a separate account receivable account for each customer. accounting for bad debts and sales returns that result from credit sales . Amounts due from customers for credit sales. Credit sales and the resulting accounts receivable are recorded net of trade discounts, not at list price.
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Cash Discounts increase sales encourage early payment increase likelihood of collections Cash discounts
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Cash Discounts 2/10,n/30 Number of days discount is available Otherwise, net (or all) is due Credit period Discount percent
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Cash Discounts Sales are recorded at the invoice amounts. Sales discounts are recorded if payment is received within the discount period. Gross Method Sales are recorded at the invoice amount less the discount . Sales discounts forfeited are recorded if payment is received after the discount period. Net Method
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Cash Discounts On May 10, Eddy, Inc. sold $5,000 of merchandise to a customer subject to a cash discount of 1/10, n/30.
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This note was uploaded on 07/08/2011 for the course ACG 3482C taught by Professor Tinaker during the Fall '09 term at University of Florida.

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SSNT7_Cash - Cash and Receivables Cash and Cash Equivalents...

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