Chapter 13 - Cash: Lifeblood of the Business
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
Comprehensive budget
also called the master budget, a series of budgets that detail all projected receipts and spending for the budget period
Payable
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)
Money
an accepted medium of exchange
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 has possession of a security
Cash equivalents
assets that may be quickly converted to cash
Trade discounts
percentage discounts from gross invoice amounts provided to encourage prompt payment
Cash flow management
planning and trading the amount and timing of money to be received and aid during the business cycle
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
Clearinghouse
an entity that processes checks and electronic transfers for banks and other financial organizations
Currency
bills and coins printed by governments to represent money
Factoring receivables
borrowing money secured by a firm's accounts receivable
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
Non-core projects
revenue producing tasks and activities related to, but not part of, the primary strategy of a business
Non-cash incentives
rewards that do not require payment of cash, such as stock options, compensating time off, added vacation days
Marketable securities
stocks and bonds that are traded on an open market
Consignment
the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold
Operating 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 (same as cash-to-cash cycle)
Cash disbursement budget
a schedule of the amounts and timings of payments of cash out of a business
Non sufficient funds (NSF)
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
Reconcile
an accounting process to identify the causes of all differences between book and bank balances
Deposits and progress payments
cash payments received before product is delivered or completed
Growth trap
financial crisis that is caused by a business growing faster than it can be financed
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
Cash receipts budget
a schedule of the amounts and timings of the receipt of cash into a business
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
Gaming the payment process
using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided