ACTG 11 - Chp 6 Learn Smart

The bank will show interest earned on customer's bank statements as a

credit, because a deposit is a liability from the bank's point of view

If the direction of change in Accounts Receivable is a ______ from the prior period, the amount of that change is added to net income in the _____ activities section of the statement of cash flows

decrease ; operating

Outstanding checks written by the company should be a _______ on the company's bank reconciliation

deduction from the bank balance

The benefits of internal control procedures are that they

1. Enhance the reliability of accounting information 2. Protect against theft of assets 3. Improve the efficiency and effectiveness of operations

NSF checks written by customers are _______

1. Not Sufficient Fund checks 2. Subtracted from the company's cash balance

Prescribed internal controls surrounding cash

1. Separate approval of purchase and the actual cash payments 2. Checks should be prenumbered 3. Monthly bank reconciliation should be prepared

Situations that company issues a note receivable

1. The company makes an exception for a financially troubled customer and extends the payment period and charges interest 2. The company lends money to employees or businesses

During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take?

Write off the uncollectible account and its corresponding allowance from the accounting records