251Ch6NotesSend

251Ch6NotesSend - Bus 251 D1 & E1 (12-1)...

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Unformatted text preview: Bus 251 D1 & E1 (12-1) Chapter 6 Lecture Notes Anne Macdonald Cash, Short-Term Investments and Accounts and Notes Receivable 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 Bus 251 Ch.6 3 CASH An ASSET on the B/S: How is it valued? How is ownership determined? How is it protected? 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 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 Limiteds 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? 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) 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) 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? 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] Example Bank Reconciliation, conted Adjusting Journal Entries Required: Bus 251 Ch.6 10 DR...
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This note was uploaded on 02/18/2012 for the course BUSE 237 taught by Professor Sf during the Spring '12 term at Simon Fraser.

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251Ch6NotesSend - Bus 251 D1 & E1 (12-1)...

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