1. Cash and Receivables Sid Glandon, DBA, CPA Assistant Professor of Accounting

2. Cash and Cash Equivalents Cash coin and currency demand deposits Cash equivalents Short-investments (90 days) Money market funds Treasury bills Commercial paper

3. Internal Controls Separation of duties Checking accounts Petty cash funds Physical protection of cash Protection of the accounting information system records Bank reconciliations

4. Bank Reconciliation Three steps Reconciliation per bank Reconciliation per book Adjusting journal entries

5. Items Not Considered Cash Overdraft without the right of offset Restricted cash accounts Investments Post dated checks from customers Loans to employees

6. Restricted Cash Not available to cover current liabilities Bond sinking funds Compensating balances

7. Receivables Accounts receivable (Trade) Notes receivable Nontrade receivables Advances to officers and employees Advances to subsidiaries Deposits Dividends and interest receivable Claims against others

8. Initial Valuation Converted into cash within operating cycle Initial valuation at the amount expected to be received Trade discounts Selling price less than normal list price Cash or sales discounts Incentive for paying invoice on time gross method net method

9. Subsequent Valuation Sales Returns Uncollectible accounts Allowance method Balance sheet approach Income statement approach

10. Balance Sheet Approach Prepare a schedule of agee accounts receivable Determine amount or percentage that will likely not be collected Adjust the allowance account to reflect the computed amount by Journalize Bad debt expense-debit Allowance for doubtful accounts-credit

11. Journal Entry: Balance Sheet Approach

12. Income Statement Approach Determine net credit sales Calculate estimated percentage of bad debt expense against net credit sales Journalize Bad debt expense-debit Allowance for doubtful accounts-credit

13. Journal Entry: Income Statement Approach

14. Transactions Using the Allowance for Doubtful Accounts Beginning balance Write-off of uncollectible accounts Reinstate accounts previously written- off Analyze ending balance and adjust based on the analysis of year end aged accounts receivables

16. Balance Sheet Presentation

17. Recognition of Notes Receivable Interest-bearing notes Note issued at face value Noninterest-bearing notes Zero-interest-bearing notes Interest is Imputed and the note is sold at a discount

18. Financing with Receivables Secured borrowing Assigned or pledged Sales of receivables Factoring Securitization Sales without recourse Sales with recourse

19. Discounting a Note Sale of note to a financial institution Discount rate (banks market interest rate) is applied to the maturity value The seller receives cash of the maturity value less the discount