Answers and Solutions:22 - 2e. A cash budget is a schedule showing cash flows (receipts, disbursements, and cash balances) for a firm over a specified period. The net cash gain or loss for the period is calculated as total collections for the period less total payments for the same period of time. The target cash balance is the desired cash balance that a firm plans to maintain in order to conduct business. f. Trade discounts are price reductions that suppliers offer customers for early payment of bills. g. An account receivable is created when a good is shipped or a service is performed, and payment for that good is not made on a cash basis, but on a credit basis. Days sales outstanding (DSO) is a measure of the average length of time it takes a firm’s customers to pay off their credit purchases. An aging schedule breaks down accounts receivable according to how long they have been outstanding. This gives the firm a more complete picture of the structure of accounts receivable than that provided by days sales outstanding.
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Generally Accepted Accounting Principles, Discounts and allowances