C1 Chapter 07

C1 Chapter 07 - Chapter 7 Cash Short-Term Investments and...

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7-1 Chapter 7 Cash, Short-Term Investments, and Accounts Receivable Financial Accounting 1st Canadian ed. by PNCS-B
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7-2 Cash Coin & currency Chequing, savings & money market accounts Undeposited, cashier, and certified cheques P a y t o h e r d f : A B C .
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7-3 Cash Equivalents Commercial paper Certain money market funds A FEDERAL RESERVE NOTE THE UNITED STATES OF AMERICA THE UNITED STATES OF AMERICA L7074 629F 12 12 12 12 L7074 629F ONE DOLLAR H 293 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 30 31 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 30 31 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 30 31 27 Readily convertible to cash Original maturity to investor of 3 months or less
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7-4 Cash Management Necessary to ensure company has neither too little nor too much cash on hand Tools: Cash Flows Statement Bank Reconciliations Petty Cash Funds Short-Term Investment
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7-5 How to adjust? Bank Book Why Bank Statement and Cash Account May Have Different balances? Deposits in transit Out standing cheques Accounts collected by bank Interest earned NSF cheques Service charges Errors + - + + - - ? ?
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7-6 Adjustments to Bank Statement Outstanding cheques: Cheuqes written but not yet presented to bank P a y t o h e r d f : X Y Z C . A B Deposits in Transit: Late period deposits not yet reflected on bank statement
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Example of Reconciliation Bank Statement Adjustments: Balance per statement, June 30 $3,308.59 Add: Deposit in transit 642.30 Deduct: Outstanding cheques: Cheque No. 496 $ 79.89 Cheque No. 501 213.20 Cheque No. 502 424.75 (717.84 ) Adjusted balance, June 30 $3,233.05 7
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7-8 Adjustment to the Cash Account Credit memoranda: Interest earned, customer accounts collected D a t e N o n - S u f i c F d s Debit memoranda: NSF cheques, service charges, etc.
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Example of Reconciliation Cash Account Adjustments: Balance per books, June 30 $ 2,895.82 Add: Accounts collected $550.00 Interest earned 15.45 Recording error, #498 54.00 619.45 Deduct: NSF cheque $245.72 Collection fee 16.50 Service charge 20.00 (282.22 ) Adjusted balance, June 30 $ 3,233.05 9
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7-10 Bank Reconciliation - errors Identify errors made by the bank or the company in recording transactions during the period.
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Example of Reconciliation Balance per statement, June 30 $ 3,308.59 : Adjusted balance, June 30 $ 3,233.05 Bank Statement Adjustments Balance per books, June 30 $ 2,895.82 : Adjusted balance, June 30 $ 3,233.05 Cash Account Adjustments 11
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Bank Reconciliation Adjusting Entries Bank Reconciliation Balance per bank $$$ : Adjusted balance $$$ Balance per books $$$ : Adjusted balance $$$ Book adjustments are the basis for adjusting entries
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7-13 Bank Reconciliation Adjusting Entries Dr. Cr. Accounts Receivable 245.72 Collection Fee Expense 16.50 Rent Expense - Lockbox 20.00 Cash 337.23 Accounts Receivable 550.00 Interest revenue 15.45 Supplies 54.00 To record bank reconciliation adjustments.
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7-14 Petty Cash A FEDERAL RESERVE NOTE THE UNITED STATES OF AMERICA L7074 629F L7074 629F ONE DOLLAR RECEIPT P a y c h e k f o r D t Dept. of Treasurer J
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This note was uploaded on 10/19/2011 for the course ACCT 2242 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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C1 Chapter 07 - Chapter 7 Cash Short-Term Investments and...

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