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Cash that is not available for general use , but is instead restricted for a particular use
The minimum cash balance required by a bank in support of a bank loan
short-term, highly liquid investments that can be easily sold, net of any bank overdrafts repayable on demand
Supporting documentation for increases (additions) that appear on a bank statement
such as maturing loans.
Supporting documentation for charges (deductions) that appear on a bank statement
such as NSF cheques.
Deposits in Transit
Amounts deposited and recorded by the depositor that have not yet been recorded by the bank.
NSF (not sufficient funds) cheque
(also known as a returned cheque) A cheque that is not paid by a bank, because there are insufficient funds in the bank account of the customer who wrote the cheque.
Cheques issued and recorded by a company that have not yet been paid (cleared) by the bank.
Which of the following is not one of the five primary components of internal control?
(b)Size of business
B) Size of the business
Control activities do not include:
(a)authorization of transactions and activities
(d)independent checks of performance
C) Cost-benefit constraints
Which of the following items in a cash drawer at November 30 is not cash?
(a)Debit card slips from sales to customers
(b)Unsubmitted bank credit card slips from sales to customers
(c)A customer cheque dated December 1
(d)A customer cheque dated November 28
C) a customer cheque dated December 1
Permitting only designated personnel, such as cashiers, to handle cash receipts is an application of which of the following control activities?
(a)Segregation of duties
(b)Authorization of transactions and activities
(c)Independent checks of performance
(d)Human resource controls
B) Authorization of transactions and activities
The use of prenumbered cheques in disbursing cash is an example of which of the following control activities?
(a)Authorization of transactions and activities
(b)Segregation of duties
Davis Corporation had cheques outstanding totalling $5,400 on its June bank reconciliation. In July, Davis Corporation issued cheques totalling $38,900. The July bank statement shows that $26,300 in cheques cleared the bank in July. What is the amount of outstanding cheques on Davis's July bank reconciliation?
Which of the following items on a bank reconciliation would require an adjusting entry on the company's books?
(a)An error by the bank
(c)A bank service charge
(d)A deposit in transit
C) a bank service charge
Which statement correctly describes the reporting of cash?
(a)Restricted cash is listed as the first current asset because it cannot be spent immediately
(b)Restricted cash funds can be combined with cash
(c)Cash is listed as the most liquid asset in the current assets section
(d)Compensating balances are reported as a current liability
C) Cash is listed as the most liquid asset in the current asset section
The principles of cash management do not include:
(a)accelerating the collection of receivables
(b)accelerating the payment of liabilities
(c)keeping inventory low
(d)investing idle cash
B) accelerating the payment of liabilities
Aging the accounts receivable
the analysis of customer balances by the length of time they have been unpaid
A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period
Average Collection period
- The average amount of time that a receivable is outstanding.
- Calc --> 365/ receivable turnover
Concentration of credit risk
The threat of non-payment from a single customer or class of customers that could hurt the company's financial health
An account in the general ledger that summarizes the details for a subsidiary ledger and controls it
A note that is not paid in full at maturity
A finance company or bank that buys receivables from businesses for a fee
Investments and receivables that have a contractual right to receive cash for another financial asset
Net realizable value
The difference between gross receivables and the allowance for doubtful accounts.
Net realizable value measures the net amount expected to be received in cash.
Percentage of receivables basis
A percentage relationship established by management between the amount of receivables and the expected losses from uncollectible accounts
A written promise to pay a specified amount of money on demand or at a definite time
- A measure of the liquidity of receivables
- = Net credit sales / average gross A.R.
- expressed as the number of times per year that the accounts receivable can be collected
The transfer of assets such as receivables to a company that issues securities and uses the receivables as collateral
A group of accounts that provide details of a control account in the general ledger
Notes and accounts receivable that result from sales transactions