ACCT3111-receivable1

ACCT3111-receivable1 - Chapter 7 Cash and Receivables I...

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Chapter 7 Cash and Receivables I. Cash a. Cash and cash equivalent b. Cash management c. Compensating balances d. Reconciling the bank account II. Accounting for Accounts Receivable (A/R) a. Recognizing A/R ( when? ) (1). Discount (2). Sales return and allowance b. Valuing A/R—Accounting for uncollectibles ( Amount? ) (1). Direct Write-Off Method (2). The Allowance Method i. Estimating Uncollectible A/R as a percent of credit sales ii. Estimating Uncollectible A/R as a percentage of total receivables --Aging A/R c. Disposing of Accounts Receivable--Using Receivables to Get Cash Immediately (1). Pledging (2). Assigning (3). Factoring --Credit Card sales III. Accounting for Notes Receivable (N/R) a. Recognizing, valuing of N/R b. Disposing of N/R (1). Honor/Dishonor of N/R (2). Sale of (Discounting) N/R IV. Summary (T-account) 1
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I. Cash a. Cash and cash equivalent Cash —must be available immediately to pay its bills and may not be bound by any contractual or legal contract Included in cash?? Excluded from cash?? Cash Equivalents—short term , highly liquid investments that are readily convertible into known amounts of cash (within three months) Example: b. Cash Management Separate handling of cash from recording of cash Deposit all cash receipt daily Make all expenditures with pre-numbered checks (except petty cash) Design budget procedure Keep only minimum balance in non-interest accounts, with other cash in yielding investments. c. Compensating balances A required portion of any amount loaned to a company to remain on deposit in a bank Problem?? d. Reconcile Bank Statements-An important tool of cash control A process of systematically comparing the cash balance as reported by the bank with the cash balance on the company’s books and explaining the difference Why difference exists?-Time period difference, deposits in transit, outstanding checks, band debits, bank credits and accounting errors, NSF (p260). How to do-debits to Cash for all reconciling additions to book balance and credits to Cash for all reconciling deductions from the book balance (not from bank balance) . 2
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Accounting for Accounts receivable a. Recognizing accounts receivable To record cash discount Term: 2/10, n, 30: Q: Price to give up? Gross price method Net price method Gross or Net? 4
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ACCT3111-receivable1 - Chapter 7 Cash and Receivables I...

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