Chapter 7 - Cash and receivables. We begin our study of assets by looking at cash and receivables - the two assets typically listed first in a balance sheet. Internal control and classification in the balance sheet are key issues we address in consideration of cash. For receivables, the key issues are valuation and the related income statement effects of transactions involving accounts receivable and notes receivable. | Cash and Receivables 7 Insert Book Cover Picture Chapter 7: Cash and Receivables Cash Amounts on deposit with financial institutions Coins and currency Petty cash Cashier’s checks Certified checks Money orders Cash includes currency, coins, amounts on deposit with banks in checking accounts and savings accounts, and items ready for deposit such as checks and money orders received from customers. Cash Equivalents Items very near cash but not in negotiable form Money market funds Treasury bills Commercial paper Cash equivalents include short-term, highly liquid investments that are: Easily converted into a known amount of cash. Close to maturity. Not sensitive to interest rate changes. Examples are money market funds, treasury bills, and commercial paper. Learning Objectives Define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements. LO1 Our first learning objective in Chapter 7 is to define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements. Internal Control of Cash Encourages adherence to company policies and procedures Promotes operational efficiency Minimizes errors and theft Enhances the reliability and accuracy of accounting data An internal control system is the company’s plan that encourages adherence to company policies and procedures, promotes operational efficiency, minimizes errors and theft, and enhances the reliability and accuracy of accounting data. Control of Cash Receipts Separate responsibility for handling cash, recording cash transactions, and reconciling cash balances. Agreed cash amounts deposited with cash amounts received. Close supervision of cash-handling and cash-recording activities. Because cash is easily susceptible to theft, internal controls over cash are extremely important. Separation of duties is essential when dealing with cash. Different people should be responsible for . | Cash and Receivables 7 Insert Book Cover Picture Chapter 7: Cash and Receivables Cash Amounts on deposit with financial institutions Coins and currency Petty cash Cashier’s checks Certified checks Money orders Cash includes currency, coins, amounts on deposit with banks in checking accounts and savings accounts, and items ready for deposit such as checks and money orders received from customers. Cash Equivalents Items very near cash but not in negotiable form Money market funds Treasury bills Commercial paper Cash equivalents include short-term, highly liquid investments that are: Easily converted into a known amount of cash. Close to maturity. Not sensitive to interest rate changes. Examples are money market funds, treasury bills, and commercial paper. Learning Objectives Define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements. LO1 Our first learning objective in Chapter 7 is to define what is meant by
