Accounting

Which of the following is NOT true about the accounts receivable turnover?

It is calculated by dividing average accounts receivables by net sales.

The Sarbanes-Oxley Act of 2002 requires top management of publicly traded corporations to ensure the reliability of financial statements. The Act requires all of the following EXCEPT

that the internal control report acknowledge that management is allowed to deny knowledge or understanding of any deceptive financial reporting.

DualPower's total of cash register tapes and other documents supporting the receipt of cash on that day is $8,415.60. DualPower has $8,417.35 prepared for deposit. The entry to record the day's receipts will include a

credit to Cash Over and Short for $1.75.

who is required to certify that they are responsible for establishing and maintaining the system of internal control over financial reporting under the Sarbanes-Oxley Act of 2002?

The principal executive and financial officers of the company

Periodically, the company should verify the petty cash balance. Which of the following equals the petty cash balance?

The sum of the receipts and the petty cash on hand

The stage of the operating cycle and cash management that focuses on inventory levels is

buying inventory

When purchase prices are rising, which of the following inventory costing methods produces the lowest cost for ending inventory?

c.Last-in, first-out (LIFO)

Using the perpetual inventory system, which of the following is the correct journal entry for recording the revenue portion of a customer's return of inventory?

c.Sales Revenue debit; Cash credit

All of the following are true about debit cards EXCEPT

c.a debit card is not at all like a credit card.

Which of the following activities is part of the operating cycle of a business?

collecting cash from customers

When a company applies the average cost method under the periodic inventory system, the weighted average cost per unit is multiplied by the

d.number of units in ending inventory to determine the cost of ending inventory.

All of the following are advantages of factoring EXCEPT

the fees for factoring can be expensive.

Accounting system

the methods and records used to identify, measure, record, and communicate financial information about a business.

Business process risks

threats to the internal processes of a company

the accounting system consists of the methods and records used to accomplish all of the following EXCEPT

to ensure profitability using financial information.

Occasionally, accounts receivable that are written off are later partially or entirely collected.

true

Kibitz Fitness received $24,000 from customers on August 1, 2019. These payments were advance payments of yearly membership dues. Required: At December 31, 2019, calculate what the balances in the Unearned Service Revenue and Service Revenue accounts will be. Round your answers to the nearest dollar.

unearned- 14,000 service revenue- 10,000

Softball Magazine Company received advance payments of $75,000 from customers during 2019. At December 31, 2019, $20,000 of the advance payments still had not been earned.

unearned- 20,000 revenue- 55,000

· Describe how businesses account for and report cash.

· A cash account is debited when cash is received and credited when cash is paid out. · Cash is reported on the balance sheet as the amount of cash and cash equivalents available on the balance sheet date. · The statement of cash flows shows the sources and uses of cash during the accounting period. · Cash equivalents are amounts that are easily convertible in to known amounts of cash and investments that are close to maturity.

· Describe how businesses control cash.

· Keeping control over cash is extremely difficult. · It is important to: safeguard cash, and adequately segregate the custody of cash from the authorization of payments and the accounting records

What does Sarbanes Oxley Act make top management of companies do?

have increased responsibilities for internal controls, must acknowledge and responsibility for financial statements and certify the accuracy of them

The balance sheet typically reports the amount of cash and equivalents available

on the balance sheet date

Accrual Basis Accounting

on the other hand, recognizes revenue when the company's performance obligation is satisfied.

company estimates that 2% of sales will be returned. sales for end of year equal 2,400,000. record entry *company accepts a return of 500

sales return 48,000 estimated returns 48,000 estimated returns 500 A/R 500

what is factoring

selling accounts receivable

FOB shipping point FOB destination

shipping point- buyer destination- seller

Cash equivalents

short-term, highly liquid investments that are readily convertible to cash and have original maturities of three months or less.

Cash is reported on both the balance sheet and the

statement of cash flows

inventory and how is it recorded

tangible resource held for resale in normal course of operations *at acquisition cost

Gross profit margin is calculated by

gross profit/net sales

Safeguards over assets and records

-Both assets and records must be secured against theft and destruction -requires physical protection of the assets

Strategic risks

-possible threats to the organization's success in accomplishing its objectives that are external to the organization such as: competitors, customers, suppliers

NSF check

-a check that is not paid by a bank because of insufficient funds in a bank account -check that has been returned to the depositor because funds in the issuer's account are not sufficient to pay the check (also called a bounced check).

Bank reconciliation

-A report that accounts for the differences between the bank statement and a checkbook balance the process of reconciling any differences between a company's accounting records and the bank's accounting records.

Deposit in transit

-Amount received and recorded by the business but which has not been recorded by the bank in time to appear on the current bank statement

Segregation of Duties

-Different individuals should be responsible for related activities. -The responsibility for record-keeping for an asset should be separate from the physical custody of that asset.

Cash Over and Short

-If it does not (and differences will occasionally occur even when cash-handling procedures are carefully designed and executed), the discrepancy is recorded in an account called -Observe that a cash shortage requires a debit to cash over and short, whereas a cash overage would require a credit. -an account that records the discrepancies between deposited amounts of actual cash received and the total of the cash register tape.

Clearly defined authority and responsibility

-The authority to perform important duties is delegated to specific individuals, and those individuals should be held responsible for the performance of those duties in the evaluation of their performance.

Information and Communication

-The internal control system must capture and communicate all pertinent information both down and up the organization, as well as communicate information to appropriate external parties.

Errors

-The previous differences between the accounting records and bank account balances are the result of time lags between the recording of a transaction by the business and its recording by the bank.

Petty cash

-an amount of cash kept on hand and used for making small payments

Operating cycle

-buying, paying, and selling inventory

Outstanding checks

-check issued and recorded by the business that has not been cashed by the recipient of the check. -business has properly recorded the check as lowering cash balance and bank has properly not recorded the check

Control environment

-collection of environmental factors that influence the effectiveness of control procedures includes; philosophy and operating style of management, personnel policies and practices of the business, and overall integrity, attitude, awareness, and actions of everyone concerning the importance of control important feature- recognizing everyone's goals may be different

Porter's 5 Forces

-competitors, customers, substitute products and services, suppliers, and threat of new competitors

5 components of internal control system

-control environment -risk assessment -control activities -information and communication -monitor activities

Risk assessment

-designed to identify, analyze, and manage strategic risks and business process risks

Segregation of Duties Strategic risk Safeguarding Internal control system control environment control activities accounting system business process risk

-duties are split so no one person is doing everything -possible external threats in accomplishing goals -provides physical protection to assets -to ensure employees operate within scope of assigned responsibilities and act for the good of business -collection of environmental factors that influence effectiveness of control procedures -procedures to make sure accounting system and financial statements are accurate -methods to identify, measure and record about business -risks associated with how company allocates resources

Service charge

-fees charged by the bank for checking account services

Business process risk

-internal processes of the company-how company allocates resources to meet its objectives

Management wants to make sure that these employees both:

-operate within scope of their assigned responsibility and act for the good of the business

Control Activities

-policies, procedures top management establishes to help insure that its objectives are met -most directly related to accounting system and financial statements vary from one business to another but can be identified with one of the following 5 categories: clearly defined authority and responsibility, segregation of duties, adequate documents and records, safeguards over assets and records, and checks on recorded amounts.

PEST Factors

-political, economic, social, and technological

Monitoring

-process of tracking potential and actual problems in the internal control system -accomplished through normal supervising activities such as when a manager asks a subordinate how things are going

Cash Basis accounting

-recognizes revenue in the period the cash is received

Checks on recorded amounts

-recorded amounts should be checked by an independent person to determine that amounts are correct and that they correspond to properly authorized activities -includes clerical checks, reconciliations, comparisons of asset inspection reports with recorded amount, computer-programmed controls, and management review of reports

Adequate Documents and Records

-summary records and their underlying documentation must provide information about specific activities and help in the evaluation of individual performance

Internal Control System

-to control employees' activities, management puts in place procedures that collectively are called this. -includes all the policies and procedures established by top management and board of directors to provide reasonable assurance that the company's objectives are being met in the following three areas: Operations, Reporting, and Compliance

When interest is accrued at the end of the year, which of the following entries is made?

.Debit Interest Receivable, credit Interest Income

Buckeye FanWare sells sports memorabilia, clothing, and gear. The retailer had a beginning inventory of $54,000 on January 1. During the year, the company purchased goods from a supplier costing $967,000. At the end of the year, the cost of the unsold inventory was $62,000. The cost of goods available for sale at the end of the year would be

1,021,000

On January 1, 2019, Hungryman, Inc., has the following balances for accounts receivable and allowance for doubtful accounts: Accounts Receivable$1,275,600Allowance for Doubtful Accounts (a credit balance)40,000 During 2019, Hungryman had $18,800,000 of credit sales, collected $17,945,000 of accounts receivable, and wrote off $60,000 of accounts receivable as uncollectible. At year end, Hungryman performs an aging of its accounts receivable balance and estimates that $52,000 will be uncollectible. 1. Calculate Hungryman's preadjustment balance in accounts receivable on December 31, 2019. 2. Calculate Hungryman's preadjustment balance in allowance for doubtful accounts on December 31, 2019. 3. Prepare the necessary adjusting entry for 2019.

1. 2,070,600 2. 20,000 3. Dad debt expense 72,000 allowance for doubtful accounts 72,000

On January 1, 2019, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts: Accounts Receivable$378,000Allowance for Doubtful Accounts (a credit balance)4,500 During 2019, Smith had $2,855,000 of credit sales, collected $2,905,000 of accounts receivable, and wrote off $3,850 of accounts receivable as uncollectible. At year end, Smith performs an aging of its accounts receivable balance and estimates that $3,800 will be uncollectible. Required: 1. Calculate Smith's preadjustment balance in accounts receivable on December 31, 2019.$ 2. Calculate Smith's preadjustment balance in allowance for doubtful accounts on December 31, 2019. Prepare the necessary adjusting entry for 2019.

1. 324,150 2. 650 3. Bad debt expense 3,150 allowance for doubtful accounts 3,150

Clarissa Company has credit sales of $542,000 during 2019 and estimates at the end of 2019 that 2.5% of these credit sales will eventually default. Also, during 2019 a customer defaults on a $775 balance related to goods purchased in 2018. Prior to the write-off for the $775 default, Clarissa's accounts receivable and allowance for doubtful accounts balances were $402,000 and $129 (credit), respectively. 2. Prepare the adjusting entry to record the bad debt expense for 2019.

1. Allowance for doubtful accounts 775 A/R 775 2. Bad debt expense 13,550 allowance for doubtful accounts 13,550

Link Communications programs voicemail systems for businesses. For a recent project, they charged $135,000. The customer secured this amount by signing a note bearing 7% interest on February 1, 2019. Required: 1. Prepare the journal entry to record the sale on February 1, 2019. 2. Determine how much interest Link will receive if the note is repaid on December 1, 2019. 3. Prepare Link's journal entry to record the cash received to pay off the note and interest on December 1, 2019.

1. Notes receivable 135,000 Sales Revenue. 135,000 2. 7,875 3. Cash 142,875 Interest income. 7,875 N/R 135,000

The Rock has credit sales of $460,000 during 2019 and estimates at the end of 2019 that 2% of these credit sales will eventually default. Also, during 2019 a customer defaults on a $1,800 balance related to goods purchased in 2019.

1. allowance 1800 A/R 1800 2. bad debt expense 9200 allowance 9200

If the accounts receivable balance in the general ledger is $2,000,000 and the accounts receivable (net) reported on the balance sheet is $1,900,000 (the net realizable value), the allowance for doubtful accounts

100,000

A 5% note receivable dated January 31 and due on December 31 of the same year will have interest due for

11 months

Sue's Supplements had sales of $49,500 for the month of July. Cost of goods available for sale was $35,850. Ending inventory would have been $6,450 under FIFO, $5,400 under LIFO, and $6,020 under average cost. The gross margin under LIFO is

19,050

Sales returns and allowances are all of the following EXCEPT

2% cash discount allowed to encourage payment within 10 days.

The accountant for Bellows Corp. was preparing a bank reconciliation as of April 30. The following items were identified: Bellows' book balance$28,750Outstanding checks900Interest earned on checking account70Customer's NSF check returned by the bank371 In addition, Bellows made an error in recording a customer's check; the amount was recorded in cash receipts as $370; the bank recorded the amount correctly as $730. What amount will Bellows report as its adjusted cash balance at April 30, 2019?

28,809

At December 31, 2019, Garner has a $10,000 credit balance in its allowance for doubtful accounts. Garner estimates that 3% of its 2019 credit sales will eventually default. During 2019, Garner had credit sales of $1,110,000. Estimate the bad debt expense under the percentage of credit sales method.

33,300

Beginning accounts receivable were $32,250. All sales were on account and totaled $287,530. Cash collected from customers totaled $276,820. Required: Calculate the ending accounts receivable balance.

42,960

A company has net sales of $1,000,000; gross profit of $700,000; operating income of $300,000; net income of $100,000; and average accounts receivable of $50,000. The operating margin is

70

Accrual-basis accounting recognizes revenue when the performance obligation is satisfied. Which of the following statements describes the satisfaction of a performance obligation?

A company buys product from another company on credit and the seller records an account receivable.

Which of the following is not one of the three areas for which internal control systems are intended to provide reasonable assurance?

A)Reliability of financial reporting B)Certification that all revenues and expenses have been properly recorded C)Compliance with applicable laws and regulations D)Company's operational activities are effective and efficient **B

paying inventory

As with all payments, a good cash management principle is to delay payments as long as possible while maintaining a good relationship with the payee. The longer a company keeps cash, the more interest it can collect.

Bolton sold merchandise with a price of $36,000 to Sammy's Wholesale Company. Bolton offered terms of 1/10, n/30 and expects Sammy to pay within the discount period. 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry assuming the payment is made within 10 days (within the discount period).

A/R. 35,640 Sales Revenue 35,640 Cash. 35,640 A/R 35,640

NRV

AR-allowance for bad debt

GAAP requires __ accounting, which recognizes revenue when a performance obligation is satisfied

Accrual basis

Pyramid Corporation is assessed a $38 fee as the result of a $185 NSF check received from a customer for services purchased on account. Neither the fee nor the NSF check has been accounted for on Pyramid's books.

Bank Service Charge Expense $38 Accounts Receivable $185 Cash $223 (Record NSF check and accompanying bank service charge)

Frank's Tattoos and Body Piercing operates near campus. At the end of a recent day, Frank's cash register included credit card documents for the following sales amounts: MasterCard$756Visa486 The merchant's charges are 1.8% for MasterCard and 2.1% for Visa. Frank's also had cash sales of $375 and $600 of sales on credit to a local business. Required: Prepare a journal entry to record these sales. If an amount box does not require an entry, leave it blank. Round intermediate calculations and final answers to two decimal places, if required.

Cash 1593.18 Accounts Receivable 600 Service Charge Expense 23.82 Sales Revenue 2217

A customer of Mutare paid for merchandise originally purchased on account with a check that has been erroneously entered into Mutare's cash account for $250 (it actually has been issued and paid for $520)

Cash 270 A/R 270

Bolton sold a customer service contract with a price of $35,000 to Sammy's Wholesale Company. Bolton offered terms of 1/10, n/30 and expects Sammy to pay within the discount period. Required: Prepare the journal entry assuming the payment is made after 10 days (after the discount period). If an amount box does not require an entry, leave it blank.

Cash 35,000 A/R. 35,650 Sales Revenue 350

If Duke Corporation bills Liberty Advisors $15,000 for product sold during the week with terms of 2/10, n30 under the net method, but Liberty pays after the discount period has ended, which of the following transactions will be a part of the entry to record the receipt of cash?

Credit Sales Revenue for $300

When interest is accrued at the end of the year, which of the following entries is made?

Debit Interest Receivable, credit Interest Income

selling inventory

Good cash management suggests increasing the speed of receivable collections. This is an area that has become increasingly sophisticated over the last 20 years. In fact, many companies sell their receivables rather than wait for their customers to pay. Of course, they sell the receivables for less than they will receive (which represents interest and return for the buyer), but it also allows the company to receive the cash sooner and avoid hiring employees to service the receivables.

Discuss the role of internal controls in managing a business.

Internal control systems provide reasonable assurance that the company's objectives are being met in three areas: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations

company purchased 1250 of bags for 5.50 on account. terms were 2/10, n30. FOB shipping point. avery paid 320 for shipping. customer returned 50 bags and paid the rest. -record purchase -record shipping cost -record return -record payment w in discount -after discount

Inventory 6875 A/P 6875 Inventory 320 Cash 320 A/P 275 Inventory 275 A/P 6,600 Cash 6,468 Sales discount 132 A/P 6,600 Cash 6,600

Murphy, Inc., maintains a balance of $2,100 in its petty cash fund. On December 31, Murphy's petty cash account has a balance of $222. Murphy replenishes the petty cash account to bring it back up to $2,100. Murphy classifies all petty cash transactions as miscellaneous expense.

Miscellaneous Expense. $1878 Cash $1878

Buying inventory

Money that is tied up in inventory sitting on the shelves is not earning any return.

Metzler Communications designs and programs a website for a local business. Metzler charges $33,000 for the project, and the local business signs an 6% note January 1, 2019. Required: 1. Prepare the journal entry to record the sale on January 1, 2019. 2. Determine how much interest Metzler will receive if the note is repaid on July 1, 2019. 3. Prepare Metzler's journal entry to record the cash received to pay off the note and interest on July 1, 2019. If an amount box does not require an entry, leave it blank.

Notes receivable 33,000 Sales revenue 33,000 2. 990 3. Cash. 33,990 Interest Income 990 Notes receivable 33,000

Operations, Reporting, and Compliance Operations

Operations- effectiveness and efficiency of the entity's operations, including financial performance goals and safeguarding assets against loss. Reporting- reliability of reporting. includes internal and external financial and non-financial reporting Compliance- compliance with applicable laws and regulations

Operations objectives ensure the effectiveness and efficiency of the entity's operations. This includes which of the following?

Safeguarding assets against loss and financial performance goals

Sales revenue may be recognized for the sale of goods or the sale of services. Which of the following statements is NOT true?

Sales of product may be recognized when a contract is drawn up for a purchase in three months.

1. Company expects 10,000 in returns for September. Record adjusting entry 2. Company accepts a return of 1,800 on account

Sales return 10,000 estimated returns and liability 10,000 Estimated returns and liability 1,800 A/R 1,800

to encourage prompt payment, businesses may offer a sales discount. The discount is a reduction of the normal selling price. Which of the following is NOT a reason that a seller would offer its customers a 5% cash discount?

The company is able to reduce its revenue, which reduces its taxes.

What is the primary role of internal controls in managing a business?

To place boundaries around employees' activities in order to prevent them from deviating from prudent and effective processes and procedures that are in the best interests of the business.

Upon completion of the bank reconciliation, the accounting records may require some adjustment. Which of the following would NOT require an adjusting entry?

a.A check returned to the company marked NSF b.Error in recording a canceled check in the company's records c.Deposits in transit d.Interest earned and deposited by the bank to the company's account **C

Which of the following is NOT a correct statement?

a.A purchase allowance increases inventory.

Which of the following is not one of the five categories of control activities?

a.Safeguards over assets and records b.Checks on recorded amounts c.Clearly defined authority and responsibility d.Accrual accounting and the matching principle **D

The FASB has issued further guidance on revenue recognition. Which of the following statements is false?

a.Sales on account cannot be recognized as revenue until cash is collected.

Which of the following is NOT a possible indicator of a low inventory turnover ratio?

a.The inventory is low because it is selling so fast and the company will run out of inventory to sell.

Increasing the speed of collecting receivables may be achieved by using all of the following EXCEPT

accepting credit cards

Relationship between control activities and account system

accounting system- consists of methods and records used to identify, measure, record and communicate financial information about business

the __ method makes an estimate of uncollectible accounts at the end of EACH period

allowance

Set Sum $$

amount being borrowed

The Sarbanes-Oxley Act requires all publicly traded corporations to have an internal audit function that reports to the

audit committee of the board of directors.

Sana's Sarees purchased merchandise from her supplier. The invoice price of the purchase was $7,500. She took advantage of the credit terms, 2/10, n/30. The goods were shipped F.O.B shipping point at a cost of $120. Sana had to return some of the merchandise, which cost $300, because it was damaged. What is the amount of net purchases?

b.$7,170

The determination for allocating the cost of goods available for sale between ending inventory and cost of goods sold depends on the inventory cost flow assumption. Which of the following inventory costing methods allocates the cost of purchases according to the physical flow of goods through inventory?

b.Specific identification

Errors that are NOT detected in the inventory cause various problems. For example, the understatement of the 2019 ending inventory causes an error in all of the following EXCEPT the

b.beginning inventory for 2019.

Uses allowance method and estimated 2,700 of bad debt. at the time, company had 25,000 in A/R and 250 in allowance for bad debt. record adjustment *needs to write off an account for 1,100

bad debt expense 2450 allowance for bad debt 2450 allowance for bad debt 1,100 A/R1,100

company has 220,000 of AR and uses DIRECT write-off method. they realize they will not be able to collect 4,500 and write it off. record entry

bad debt expense 4500 A/R4500

controls over these cash accounts include:

bank reconciliations, daily deposits and recording cash over and short amounts, and accounting procedures for petty cash funds

When the net realizable value of inventory is greater than the cost,

d.no adjusting entry is required.

The relationship of inventory and cost of goods sold implies that the measurement of inventory affects both the balance sheet and the income statement. When ending inventory for year 1 is overstated, it causes which of the following balance sheet item(s) to be overstated in year 2?

c.Beginning inventory

the relationship of inventory and cost of goods sold implies that the measurement of inventory affects both the balance sheet and the income statement. When ending inventory for year 1 is overstated, it causes which of the following balance sheet item(s) to be overstated in year 2?

c.Beginning inventory

Which of the following is NOT true of LIFO reserve?

c.It is the cash reserve amount required of companies that use LIFO.

One of the key performance measures is the comparison of inventory growth to sales. In 2016, Wal-Mart shrank its inventory by $672 million while sales growth decreased by 0.7% due to a variety of factors, including lower fuel sales. This is an indication that Wal-Mart

c.is effectively managing and controlling inventory in response to economic pressures.

All of the following are advantages of factoring EXCEPT

c.the fees for factoring can be expensive.

Sold pens to company for 2000 cash. cost of pens sold was 1200 and laura paid 40 to ship to customer. -record sale of pens -adjust inventory -payment of shipping cost -company already paid but now returns $500 of pens that are still in good condition. cost of returned pens was 300. record sales return -adjustment to inventory

cash 2000 sales revenue 2000 COGS 1200 Inventory 1200 Shipping expense (frieght out) 40 Cash 40 Sales revenue 500 cash 500 Inventory 300 COGS 300

Cash accounts include

cash in bank, change funds, and petty cash

An unethical practice by companies that are facing sales shortfalls for the period is

channel stuffing

Sales revenue is such a key component of a company's success that analysts are interested in a large number of ratios that incorporate sales. Many of these ratios attempt to measure the return the company is earning on sales. All of the following ratios are profitability ratios EXCEPT the

current ratio

Under the lower of cost or market (LCM) rule, market is defined as

d.net realizable value.

Inventory accounting systems are very important to wholesalers and retailers. Which of the following is a major difference in the inventory management system under the periodic or the perpetual inventory system?

d.A periodic inventory system does not require companies to keep detailed, up-to-date inventory records.

When a sale for cash is made under the periodic inventory system, the entry would include which of the following accounts?

d.Cash, Sales Revenue

Which of the following statements is NOT true about a periodic inventory system?

d.Cost of goods sold is recorded each time a sale is recorded.

Under the periodic inventory system, which of the following is NOT a common method used for determining the cost of ending inventory?

d.Current cost method

Sequoia Company reported net income of $168,750 at the end of year 1. The balance sheet reported ending inventory of $89,700. Early in year 2, the company discovered that ending inventory should have been reported at $76,200. Which of the following statements is correct?

d.Equity was overstated by $13,500.

Which of the following inventory costing methods results in the more realistic amount for the balance sheet?

d.First-in, first-out (FIFO)

Inventory costing methods are designed to

d.allocate the cost of goods available for sale between ending inventory and cost of goods sold.

Net profit margin percentage is calculated by

dividing net income by net sales

what is lower of cost or market?

example of conservatism you report the value of goods as whichever is lower between what you paid for it and what its worth today

Quantity discounts are

reduction in the selling price granted by the seller because per-unit costs are less when larger amounts are ordered.

describe operating cycle and explain principles of cash management

· The operating cycle of the business starts when the business purchases inventory. When a business sells goods on credit, creating accounts receivable, cash is not replenished until the receivables are collected, which completes the operating cycle. Cash management is an important function at all companies because business is really a continuous cycle of paying and receiving cash. Although aspects of cash management have become extremely sophisticated, basic strategies are: keeping inventory levels low, delaying payment of liabilities as long as possible, speeding up collection of receivables, investing idle cash to earn the greatest possible return while still being available when needed