{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

251Ch6NotesSend - Bus 251 D1 E1(12-1 Chapter 6 Lecture...

Info icon This preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Bus 251 D1 & E1 (12-1) Chapter 6 Lecture Notes Anne Macdonald Cash, Short-Term Investments and Accounts and Notes Receivable
Image of page 1

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

View Full Document Right Arrow Icon
Bus 251 Ch.6 2 LIQUID CURRENT ASSETS Chapter 6 focuses on the accounting for liquid current assets: cash, short-term investments, and accounts and notes receivable. KEY ISSUES PARTICULARLY Control (security, ownership, …) Cash Valuation Short-term investments and accounts receivable
Image of page 2
Bus 251 Ch.6 3 CASH An ASSET on the B/S: How is it valued? How is ownership determined? How is it protected?
Image of page 3

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

View Full Document Right Arrow Icon
Bus 251 Ch.6 4 CASH The following steps may help protect cash: deposit in bank often (daily) use on-premise safes to secure cash pay expenses with cheques require duplicate signatures on cheques limit the number of employees who handle cash prepare bank reconciliations to ensure all cash transactions recorded …
Image of page 4
Bus 251 Ch.6 5 CASH Bank Reconciliation A comparison of what appears in your accounting records as ‘Cash’ and what appears on the statement for your account, prepared by the bank . Any differences must be identified and explained . October Bank Statement Account Number : 1234567 Customer Name: Kinte Products Ltd. Debit Credit Balance Balance, Oct 1st $ 850.00 Deposits + CCC Withdrawals - DDD ….. Balance, Oct 31st $ 42,301.00 Kinte Products Limited’s General Ledger Cash Oct 1 + Deposits AAA - Withdrawals/ Cheques BBB Oct 31st 38,755.00 Why are these not the same? Is this back- wards?
Image of page 5

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

View Full Document Right Arrow Icon
Bus 251 Ch.6 6 CASH For a bank reconciliation : Differences between the cash account balance in the accounting records and the bank statement are usually due to: timing (e.g. cheques written by the company, but which have not yet cleared the bank) amounts known only to one party (bank interest/fees)
Image of page 6
Bus 251 Ch.6 7 Example Bank Reconciliation Kinte Products Limited (Q.6-20 in the text) Balance per bank statement $42,301 Add: Correction of bank error – cheque overstated 27 Deposit not yet processed by the bank 2,650 ????? $44,978 Less: Outstanding cheques, not yet processed by the bank (5,613) Adjusted cash balance $39,365 Balance per general ledger (Cash ‘T-account’) $38,755 Add: Direct deposit from the CRA, 420 Collection of note receivable, not yet recorded by Kinte Products 1,200 40,375 Less: Service fee $34 NSF cheque 376 Correction of error – deposit overstated 600 (1,010)
Image of page 7

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

View Full Document Right Arrow Icon
Bus 251 Ch.6 8 Example Bank Reconciliation From the previous example: What amount SHOULD be recorded in the G/L? What items would require adjusting journal entries to be recorded? The items listed under: Balance per bank statement? Balance per general ledger?
Image of page 8
Bus 251 Ch.6 9 Example Bank Reconciliation Adjusting Journal Entries Required: DR Cash 1,200 CR 1,000 CR 200 [Collection of $1,000 note receivable and $200 of interest on the note] DR 34 CR Cash 34 [Service fee paid to the bank] DR Cash (A↑) 420 CR 420 [Direct deposit from the CRA]
Image of page 9

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

View Full Document Right Arrow Icon
Example Bank Reconciliation, cont’ed Adjusting Journal Entries Required: Bus 251 Ch.6 10 DR 376 CR Cash (A↓) 376 [NSF Cheque from Customer: we need to reinstate the A/R, that would have been reduced when the customer gave us a cheque to deposit – as the customer’s cheque has ‘bounced’.] DR 600 CR Cash (A↓) 600 [Cash sales were incorrectly recorded, the amount recorded in the accounting records was too high, by $600.]
Image of page 10
Bus 251 Ch.6
Image of page 11

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

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern