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Cash and Receivables Notes

The document contains notes on various accounting topics related to cash and cash equivalents, bank reconciliation, proof of cash, accounts receivable, estimation of doubtful accounts, notes receivable, inventories, and classification of financial assets. The notes provide details on internal controls of cash, forms of bank reconciliation, components of a proof of cash worksheet, measurement of credit sales, methods of estimating doubtful accounts, and accounting for different types of financial assets.

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42 views6 pages

Cash and Receivables Notes

The document contains notes on various accounting topics related to cash and cash equivalents, bank reconciliation, proof of cash, accounts receivable, estimation of doubtful accounts, notes receivable, inventories, and classification of financial assets. The notes provide details on internal controls of cash, forms of bank reconciliation, components of a proof of cash worksheet, measurement of credit sales, methods of estimating doubtful accounts, and accounting for different types of financial assets.

Uploaded by

mendoza3rix
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Notes on IA Chapter 1-16,19-21

Chapter 1: Cash and Cash Equivalents

Bank Overdraft
● Negative balance of cash in the bank.
● Generally, not permitted. Exceptions: can be offset if two bank account
in one bank or if amount is immaterial
Compensating Balance
● Not part of cash if restricted
Checks
● Undelivered check:. Increase cash in bank
● Post Dated Check: Increase cash in bank
● Stale Check: Increase cash in bank
Internal Controls of Cash
● Imprest system
● Fluctuating system

Petty Cash Fund


● Set aside for petty transactions

Chapter 2: Bank Reconciliation


● Not balance cash in bank per book and per bank
● Needed to determine real balance of cash in bank
Forms of Bank Reconciliation
● Adjusted Balance Method
● Book to Bank Method
● Bank to Book Method

Chapter 3: Proof of Cash


● Two date Bank Reconciliation

Company X
Proof of Cash
For the month of January 20XX
Previous Receipts Disbursements Current

Cash Balance per Book

Credit Memos
Unrecorded Collections
Bank Loan Proceeds
Matured Time Deposits

Debit Memos
NSF Checks
Defective Checks
Bank Service Charge
Reduction of Loan

Book Errors

Adjusted Cash Balance per Book

Cash Balance per Bank

Deposit in Transit
Unrecorded Deposits
Undeposited Checks

Outstanding Checks

Bank Errors

Adjusted Cash Balance per Bank


● Adjusted rows must always balance
Chapter 4: Accounts Receivable

● Credit balance on accounts receivables are presented as current


liabilities
● If the account was silent, assume it be non-current assets
Net Realizable Value of Accounts Receivable
● Deduct all allowances
○ Allowance for doubtful accounts
○ Allowance for sales returns
○ Allowance for sales discounts
○ Allowance for freight charge
Measurement of Credit Sales
● Gross Method
○ Recognizes discount at collection
● Net method
○ Recognizes discount forfeited at collection
Accounting for Bad debts
● Allowance method
● Direct write-off method

Chapter 5: Doubtful Accounts Estimation


Percentage of Sales Method
● Amount of sales ✖ Rate = Doubtful Accounts Expense
● Bad debt losses ➗Charge of Sales = Rate
● Income statement approach
● The resulting amount of computation is total doubtful accounts
expense
Percentage of Accounts Receivable Method
● Open accounts ✖ Rate = Required Allowance Balance
● Rate is predetermined by past experience
● Advantage to present at net realizable value
● Violates Matching Principle

Aging of Accounts Receivable


● Analysis of each account categories past due or not
● Each amount per category ✖ Rate = Required Allowance
● Present highly accurate statement of financial position
● Violates Matching Principle

Chapter 6: Notes Receivable

Chapter 10: Inventories


Chapter 15: Financial Assets at Fair Value

Chapter 19: Financial Assets at Amortized Cost

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