$600,000 × .01 = $6,000 Prepare the adjusting entry. LO4 Focus on Cash Flows Sales Revenue LO4 Gildan reported 2012 net sales of $1,948,253. December 31, 2011, receivables were $191,594 and December 31, 2012, receivables were $260,595. Blue tissue paper This ratio measures how many times average receivables are recorded and collected for the year. Receivables Turnover LO5 Gildan’s Receivables Turnover was 8.62. Blue tissue paper This ratio indicates the average time it takes a customer to pay its accounts.
Average Collection Period LO5 Internal Controls Internal Controls are the processes by which the company’s board of directors, management, and other personnel provide reasonable assurance regarding the reliability of the company’s financial reporting, the effectiveness and efficiency of its operations, and its compliance with applicable laws and regulations. LO6 To guard against the extending credit to non-worthy customers, the following practices can help minimize bad debts: Require approval of customer’s credit history by a person independent of the sales and collection functions. Monitor the age of trade receivables periodically and contact customers with overdue payments. Reward both sales and collection personnel for speedy collections so that they work as a team. Controls Over Trade Receivables LO6 Cash and Cash Equivalents Cheques Money Orders Bank Drafts Certificates of Deposit T-Bills LO6 Internal Control of Cash Cash is the asset most susceptible to theft and fraud. Internal control refers to policies and procedures designed to: LO6 Daily Deposits Purchase Approval Prenumbered Cheques Payment Approval Cheque Signatures Bank Reconciliations
Internal Control of Cash LO6 Balance per Bank + Deposits in Transit – Outstanding Cheques ± Bank Errors = Correct Balance Balance per Book + Deposits by Bank (credit memos) – Service Charge – NSF Cheques ± Book Errors = Correct Balance Bank Reconciliation Explains the difference between cash reported on bank statement and cash balance on company’s books and provides information for reconciling journal entries. LO7 equals Balance per Bank + Deposits in Transit - Outstanding Cheques ± Bank Errors = Correct Balance Balance per Book + Deposits by Bank (credit memos) – Service Charge – NSF Cheques ± Book Errors = Correct Balance Bank Reconciliation All reconciling items on the book side require an adjusting entry to the cash account.
Explains the difference between cash reported on bank statement and cash balance on company’s books and provides information for reconciling journal entries. LO7 Prepare a July 31 bank reconciliation statement and the resulting journal entries for the Simmons Company. The July 31 bank statement indicated a cash balance of $9,610, while the cash ledger account on that date shows a balance of $7,430.
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- Fall '19
- Revenue, Credit card, Cheque, Generally Accepted Accounting Principles