Professional Documents
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Chapter_08
Chapter_08
Chapter 8
Cash
Currency, coins and amounts on deposit in bank
accounts, checking accounts, and some savings
accounts. Also includes items such as customer checks,
cashier checks, certified checks, and money orders.
Cash Equivalents
Short-term, highly liquid investments that are:
1. Readily convertible to a known cash amount.
2. Close to maturity date and not sensitive to
interest rate changes.
McGraw-Hill/Irwin Slide 2
CASH, CASH EQUIVALENTS,
AND LIQUIDITY
Liquidity
How easily an asset can be converted into cash
to be used to pay for services or obligations.
Inventory Cash
McGraw-Hill/Irwin Slide 3
CASH MANAGEMENT
The goals of cash management are twofold:
1. Plan cash receipts to meet cash payments when
due.
Handling cash is separated from recordkeeping for cash.
(Segregation of Duties)
Encourage collection of receivables.
Cash receipts are promptly deposited in a bank
Cash disbursements are made by check.
Delay payment of liabilities
McGraw-Hill/Irwin Slide 4
VOUCHER SYSTEM OF
CONTROL
Sender
Sender Receiver
Receiver
Check
Cashier Supplier (Vendor)
Accounting Invoice Approval Cashier
Receiving Report Accounting, Requesting
Receiving
& Purchasing
Supplier (Vendor) Invoice Accounting
Purchasing Purchase Order Supplier, Requesting,
Receiving & Accounting
Purchase Requisition
Requesting Purchasing and
Accounting
Voucher
McGraw-Hill/Irwin Slide 5
BANKING ACTIVITIES AS CONTROLS
QUảN LÝ BằNG CÁC HOạT ĐộNG NGÂN HÀNG
McGraw-Hill/Irwin Slide 6
BANK STATEMENT
McGraw-Hill/Irwin Slide 8
RECONCILING ITEMS
Ending balance as per bank statement: X
+ Deposits in transit (outstanding deposit) X
– Outstanding Cheques (X)
+ / – Bank errors X
= Adjusted cash balance: Bank Statement X
McGraw-Hill/Irwin Slide 9
BANK RECONCILIATION
EXAMPLE
Let’s
Let’s prepare
prepare aa July
July 31
31 bank
bank reconciliation
reconciliation
statement
statement for
for the
the Simmons
Simmons Company.
Company.
The
The July
July 31
31 bank
bank statement
statement indicated
indicated aa
balance
balance of
of $9,610.
$9,610.
The
The cash
cash general
general ledger
ledger account
account on
on that
that
date
date shows
shows aa balance
balance of
of $7,430.
$7,430.
Additional
Additional information
information necessary
necessary for
for the
the
reconciliation
reconciliation is
is shown
shown on
on the
the next
next screen.
screen.
McGraw-Hill/Irwin Slide 10
BANK RECONCILIATION
EXAMPLE
McGraw-Hill/Irwin Slide 11
McGraw-Hill/Irwin Slide 12
McGraw-Hill/Irwin Slide 13
RECORDING ADJUSTING
ENTRIES FROM A BANK
RECONCILIATION
Only amounts shown on the book portion of
the reconciliation require an adjusting entry.
Dr. Cr.
July 31 Cash 30
Interest revenue 30
Adjusted
Adjusted balance
balance on
on July
July 31.
31.
McGraw-Hill/Irwin Slide 15
CASH FLOW STATEMENT
McGraw-Hill/Irwin Slide 16
BUSINESS ACTIVITIES
McGraw-Hill/Irwin Slide 17
DIRECT CASH-FLOW STATEMENT
McGraw-Hill/Irwin Slide 18
GENIS
STATEMENT OF CASH FLOWS
FOR THE MONTH ENDED 31 JANUARY
Cash flows from operating activities
Cash receipt from customers 82,000
Cash Paid to Suppliers (35,000)
Cash paid for Salaries (24,000)
Net cash changes from operating activities 23,000
Cash flows from investing activities
Purchase of equipment (35,000)
Purchase of building (60,000)
Net cash changes from investing activities (95,000)
Cash flows from financing activities
Cash receipt from issuing Shares 75,000
Cash paid for dividends (5,000)
Cash receipt from borrowings 23,000
Net cash changes from financing activities 93,000
Net changes in cash 21,000
Cash balance at prior month end 20,000
McGraw-Hill/Irwin Slide 19
PREPARE CASH-FLOW STATEMENT
+ dividends received x
- payments to suppliers for inventory (x)
- payments to employees and other expenses (x)
McGraw-Hill/Irwin Slide 21
INDIRECT CASH-FLOW STATEMENT
Cash flows from operating activities
Net income X
Adjustments to reconcile net income to net cash provided by
operating activities
Add Decrease in noncash current assets (A.R, Prepaid x
expenses, inventories,...)
Deduct Increase in noncash current assets (A.R, Prepaid (x)
expenses, inventories,...)
Add Increases in current liabilities x
Deduct Decrease in current Liabilities (x)
Add Expenses with no cash outflows (Depreciation, bad debt x
expense,... )
Deduct Revenues with no cash inflows (x)
Add Non-operating losses (loss on disposal of fix assets) x
Thank you!
McGraw-Hill/Irwin Slide 23