[會計] Week6 Ch6 : Cash
1. Cash, Cash Equivalents, and Liquidity
(1) Cash includes coins (硬幣), paper money (紙幣), money orders (匯票), checks (支票), and money on deposit with banks or savings institutions available for use to satisfy the company’s obligations.
(2) Cash equivalents are short-term, highly liquid investments assets meeting two criteria:
a. Readily convertible to a known cash amount.
b. Sufficiently close to their due date (maturity date) so that market value is not sensitive to interest rate changes.
Usually, only investments purchased within 90 days of their due dates satisfy these criteria. Examples include short-term U.S. Treasury bills (T-bills).
(3) On the balance sheet, companies usually combine cash on hand (庫存現金), cash in banks, petty cash (零用金), and cash equivalents and report the total simply as a single item called “Cash and cash equivalents” on the balance sheet.
(4) Liquidity (流動性) refers to a company’s ability to pay for its near-term obligations. A company needs liquid assets, which include cash and similar assets that can be readily convert to cash and settle such obligations, to effectively operate.
2. Internal Control Over Cash
3. Credit Terms (Discount Terms) 授信條件 (折扣條件)
2/10, n/30
discount 2% in 10 days, otherwise pay the net in 30 days.
4. Petty Cash (零用金)
Petty cash fund allows control over payments that are too small to pay by check.
Petty Cash XX
Cash XX
Use the Petty Cash account only when the fund is established or size of fund is increased or decreased.
(2) When paying cash for some expenses, the employee who paid the bill will go to petty cashier (custodian) for cash. The custodian will prepare a petty cash receipt for every payment. Note that no entry will be made at this point.
(3) At periodic intervals or when the fund reaches a minimum level (or at least at the end of the accounting period), petty cash custodian aggregates all the petty cash receipts during the period and replenishes the petty cash fund. Note that the sum of the amounts in petty cash receipts and residual cash on hand should equal the amount of the fund. If there are differences, such differences will be Cash Over and Short (現金缺溢).
(4) When the fund is replenished, all petty cash payments are recorded in a summary entry such as the one illustrated below:
Miscellaneous Expense XX
Postage Expense XX
Freight-Out XX
Cash Over and Short XX
Cash XX
Note that Cash Over and Short is debited if there is a cash shortage and is credited if there is a cash overage. Also note that this entry does not influence Petty Cash account.
5. Bank Reconciliation (銀行調節表) (最難的部分)
a. A report that explain or reconciles the difference between the balance of a checking account according to the depositor’s records (books) and the balance reported on the bank statement at the end of the period. The bank reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.
b. Bank statement is a copy of the bank’s records sent to the customer for periodic review. It shows activities of a bank account and is used to prove the accuracy of the depositor’s cash records by preparing a bank reconciliation.
Bank balance of Cash at the end of the period in Bank Statement (Bank Statement Balance)
Logic: Adjust for items recorded in books but not in bank balance.
(公司已入帳而銀行尚未入帳)
(1) Add : Deposits in transit (在途存款)
(2) Less : Outstanding checks (未兌現支票)
(3) Others : Bank errors
Book balance of Cash at the end of the period in Ledger (Book balance)
Logic: Adjust for items recorded in bank but not in book balance.
(銀行已入帳而公司尚未入帳)
(1) Less : Non-sufficient fund (NSF) 存款不足退票 (公司存款不足銀行退票)
(2) Less : Bank service charges (3) Add : Notes collected by bank (4) Others : Book errors
c. The company records each reconciling item used to determine the adjusted book balance. If the company does not journalize and post these items, the Cash balance will not show the correct balance.
6. An Overview of Cash Flows Statement
The statement of cash flows summarizes a company’s cash flows for a period a time. The statement of cash flows explains how a company’s cash was generated during the period and how that cash was used. The activities of most businesses can be divided into three categories: operating activities, investing activities, and financing activities.
a. Operating activities (營業活動)
Operating activities involve selling products or services, buying inventory, and incurring and paying for necessary expenses associated with the primary activities of the business.
b. Investing activities (投資活動)
Investing activities involve the purchase of assets for use in the business. The assets purchased as part of investing activities include property, plant, and equipment, as well as financial assets such as investments in stocks or bonds of other companies.
c. Financing activities (籌資活動)
Financing activities involve raising money to finance a business by means other than operations. There are two other ways to fund a business: (1) money can be borrowed from creditors (debt financing) or (2) money can be raised by selling stock or ownership interests in the business to investors (equity financing).
Exercise:
2. Maple Park Company maintains a petty cash fund for small expenditures. Followings are transactions occurred in July.
July 1 Established petty cash fund by writing a check on Cortland Bank for $200.
15 Replenished the petty cash fund by writing a check for $197.00. On this date, the fun consisted of $3.00 in cash and the following petty cash receipts: freight-out $94.00, postage expense $42.40, entertainment expense $46.60, and miscellaneous expense $11.90.
18 Increased the amount of the petty cash fund to $300 by writing a check for $100.
31 Replenished the petty cash fund by writing a check for $187.00. On this date, the fund consisted of $113 in cash and the following petty cash receipts: freight-out $74.60, entertainment expense $43.00, postage expense $33.00, and miscellaneous expense $37.00.
Solutions:
July 1 Petty Cash 200.00
Cash 200.00
July 15 Freight-Out 94.00
Postage Expense 42.40
Entertainment Expense 46.60
Miscellaneous Expense 11.90
Cash Over and Short 2.10
Cash 197.00
July 18 Petty Cash 100.00
Cash 100.00
July 31 Freight-Out 74.60
Postage Expense 33.00
Entertainment Expense 43.00
Miscellaneous Expense 37.00
Cash Over and Short 0.60
Cash 187.00
