ACCTG 215 Notes 2-4
ACCTG 215 Notes 2-4 ACCTG 215
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This 2 page One Day of Notes was uploaded by Shogo Okuda on Tuesday October 28, 2014. The One Day of Notes belongs to ACCTG 215 at University of Washington taught by Wells in Winter2010. Since its upload, it has received 71 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.
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Date Created: 10/28/14
ACCTG 215 Notes 24 The amount of cash recorded in a companys balance sheet includes currency coins and balances in savings and checking accounts as well as items acceptable for deposit in these accounts such as checks received from customers Cash equivalents short term investments that have a maturity date no longer than 3 months from the date of purchase Cash and equivalents re usually combined and reported as a single asset in the balance sheet of most companies Cash most liquid asset and the one most easily stolen internal control of cash is a key issue 1 Record all cash receipts ASAP Theft is more dif cult once a record of the cash receipt has been made 2 Open mail each day and make a list of checks received along w the amount and payer s name 3 Designate an employee to deposit cash and checks into the company s bank account each day different from the person who receives cash and checks 4 Have another employee record cash receipts in the accounting records Verify cash receipts by comparing the bank deposit slip w the accounting records Debit card good choice Whether a customer uses cash a check or a debit card to make a purchase the company records the transaction as a cash sale From sellers perspective the only difference between a cash sale and a credit card sale is that the company must pay a fee to the credit card company for allowing the customer to use a credit card Important elements of a cash disbursement control system include the following steps 1 Make all disbursements other than very small ones by check debit card or credit card This provides a permanent record of all disbursements 2 Authorize all expenditures before purchase and verify the accuracy of the purchase itself The employee who authorizes payment should not also be the employee who prepares the check 3 Make sure checks are serially numbered and signed only by authorized employees Require two signatures for larger checks 4 Periodically check amounts shown in the debit card and credit card statements against purchase receipts The employee verifying the accuracy of the debit card and credit card statement should not also be the employee responsible for actual purchases 5 Set maximum purchase limits on debit cards and credit cards Give approval to purchase above these amounts only to upper level employees 6 Employees responsible for making cash disbursements should not also be in charge of cash receipts Bank reconciliation matches the balance of cash in the bank account with the balance of cash in the company s own records Timing differences in cash occur when the company records transactions either before or after the bank records the same transaction Errors can be made either by the company or its bank and may be accidental or intentional Petty cash fund minor amount of cash Petty cash fund is replenished at the end of the period and the expenditures are recorded Earnings quality ability of net income to report the true underlying performance of the company Free cash flows operating cash flows plus investing cash flows during the period free cash flows declining relative to the trend in net income likely to have lower quality earnings all else being equal EQUITY INVESTMENTS Percentage of stock held by the investor provides a guideline determining the degree of in uence Over 50 controlling interest Consolidated nancial statements combine the separate nancial statements of the purchasing company and the acquired company into a single set of nancial statements as if there were only one company Signi cant in uence miniconsolidation using only one balance sheet and one income statement account Insigni cant in uence fair value method Fair Value Method Comprehensive income unrealized gains and losses from stock investments most frequent Trading securities exception
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