Principles of Financial Accounting

How many people are responsible for opening the mail with checks included or cash?

2 people

What would be examples of physical controls for cash management?

Security

Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. This item would be included on the bank reconciliation as a(n)

addition to the balance per company's records

A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)

addition to the balance per the bank statement

You received a debit memo from the bank for an NSF (nonsufficient funds) check what is the journal entry?

credit cash, debit revenue

Which are adjusting the books?

notes collected by bank, errors, NSF, fees

In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement, you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will

subtract both values from the cash balance according to the company's records

What does establishment of responsibility mean for internal cash controls?

Assign specific people for each task

The bank sends a credit memo to your company for a short-term note collected, what is the journal entry?

Debit cash, credit notes receivable

When performing a bank reconciliation which items are adjusting the bank statement?

Errors, outstanding checks, deposit in transit

Why are segregation of duties important with internal cash controls? Give an example

One person isn't solely in charge, more accountability

I have a balance in my accounts receivable at the end of the year of $450,000. My bad debt policy for uncollected accounts is 4%. What is my adjustment entry at the end of the year?

a. 18,000 b. Debit bad debt expense, credit accounts receivable

How are days sales outstanding calculated?

a. Average number of days it takes to collect the AR; b. Receivables turnover ratio = net credit sales/avg net receivables c. Avg collection period = 365/receivables turnover ratio

What happens when we write off a bad debt? How does it affect accounts receivable and my asset account? What is my journal entry?

a. Debit bad debt expense, credit accounts receivable b. Bad debt is associated with AR c. On INCOME STATEMENT (AR is on balance sheet)

I have uncollected accounts. What does this mean? How do I account for this? What journal entry do I make?

a. Money I haven't collected yet b. BAD DEBT EXPENSE: credit accounts receivable, debit bad debt

What do I mean by my accounts receivable aging report? Explain how this works and when I write off accounts.

a. Shows the expected time of pay off by tracking each payment towards the full b. Most concerned about 60-90 days, most likely to be uncollected c. Write it as other income

How is the allowance for doubtful accounts posted on the balance sheet? Explain the balance sheet accounts on the balance sheet.

a. The "cushion" just in case there is money that is not paid back. ASSET b. Debit allowance for doubtful accounts, credit accounts receivable

How do I determine an uncollectable rate for my accounts receivable?

a. The percentage of the amount under the 60 or 90 day column divided by the original amount b. Around 7% of the receivables

What do we mean by the realized value of accounts receivable? For example, I have accounts receivable of $150,000 and I have to write off $35,000 what is my realized value?

a. What is the value of my AR as of current state b. $115,000

What is a note receivable? What is the journal entry? How do we account for the interest on the note?

a. When someone owes money after lending money b. Journal entry: debit notes receivable, credit cash c. Notes receivable ASSET d. When paying, debit CASH, credit NOTES e. Credit interest revenue