Chapter 14

Cash Budget

A cash budget identifies when, how, and why cash is expected to come into the business, and when, how, and why it is expected to leave.

Growth Trap

A financial crisis that is caused by a business growing faster than it can be financed.

Timing Purchases

A method of controlling the timing of cash outflows that is invisible to suppliers and vendors.

Overdraft

A negative balance in a depositor's bank account.

Discounts for Prompt Payment

A reduction in sales price provided to credit customers for paying outstanding amounts in a timely manner.

Charge Back

A reduction in the bank account of a merchant by a credit card company.

Cash Disbursements Budget

A schedule of the amounts and timings of payments of cash out of a business.

Cash Receipts Budget

A schedule of the amounts and timings of the receipt of cash into a business.

Nonsufficient Funds

A situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check.

Money

A store of value that can be saved for later purchases

Payables

Amounts owed to vendors for merchandise or services purchased on credit (see receivables).

Receivables

Amounts that are owed to a business for merchandise that was sold on credit (see payables).

Reconciling

An accounting process that identifies the causes of all differences between book and bank balances.

Clearinghouse

An entity that processes checks and electronic fund transfers for banks and other financial organizations.

Short-term debt

Any debt that must be paid in less than one year from the date of the financial statement on which it is reported.

Bearer

Any person or business entity who possesses a security.

Cash Equivalents

Assets that may be quickly converted to cash.

Factoring Receivables

Borrowing money secured by a firm's accounts receivable.

Deposits and Progress Payment

Cash payments received before product is completed or delivered.

Float

Delays in the movement of money among depositors and banks.

Money held in checking and savings accounts is called

Demand Deposits

A business may obtain cash through...

Financing

____is/are a financial crisis that is caused by a business growing faster than it can be financed.

Growth Trap

Common ways employees steal cash

Larceny Skimming Phony disbursements

Demand Deposits

Money held in checking and savings accounts.

Cash

Money that is immediately available to be spent.

Commercial Paper

Notes issued by credit-worthy corporations.

Trade Discounts

Percentage discounts from gross invoice amounts provided to encourage prompt payment.

Noncore Projects

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business.

Noncash Incentives

Rewards that do not require payment of cash, such as stock options, compensating time off, or added vacation days.

Marketable Securities

Stocks and bonds that are traded on an open market.

Currency

The bills and coins printed by governments to represent money.

Consignment

The practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold.

Barter

The practice of trading goods and services without the use of money.

Company Book Balance

The sum of cash inflows and cash outflows recorded in the firm's accounting records.

Bank Ledger Balance

The sum of deposits and withdrawals recorded in a bank's accounting records.

Bank Available Balance

The sum of money that has actually been received and paid out of a depositor's account.

Cash-to-cash Cycle

The time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale. aka Operating Cycle

Purposes of Money

To keep track of wealth or value

Purposes of Money

To make exchanges

Gaming the Payment Process

Using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided.

Company Book Balance

Usually called the cash account

Cash flow from investing

When Cash can be obtained from investments the business has made, such as stocks, bonds, land, buildings, or equipment

Cash flow from operations

When cash can be obtained by selling the products and services of the business and collecting cash from customers.

Money

a medium of exchange accepted by the community or what people buy things with and sell things for.

Money

provides a standard for measuring value, so that the worth of different goods and services can be compared