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Chapter 6 Accounting.docx

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Business Administration
BUS 251
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Chapter 6 – Cash short-term investments and accounts and notes receivable - Company’s most lquid assets - Short term investments: indications that a comp is managing cash; doesn’t need immediately and investing it to generate income rather than lie idle - Monetary assets = those terms ^ are cash or will be cash = value is fixed in current monetary terms Cash - difficult to control in terms of handling and recording  Assets = 1. Controlled by company 2. Expected to provide future economic benefits from use or sale 3. Arose from past event  Ownership of cash is generally evidenced by possession: currency, cheques, money orders, etc, on hand o To solve prob: try to use more electronic such as debit/credit cards and computers o Eliminate physical handling o Therefre control of cash is easier and processes are more efficient  All comps must establish effective internal control procedures to govern how they handle cash o Auditors review internal controls and design special audit procedures to test if controls are safegaurds to handle and record cash  Purchasing power = cash meets future econ benefit criterion – derives its value from ability to be exchanged for goods and services in future o Convert into goods/services o Affected by inflation (cash has loss in value) and deflation Cash Valuation Methods  Record when it’s at face value o As long as cash is helf value is assume to not be changed o Ex. Hav $100 cash, months later and still have $100 = still worth $100 – face value not changed o Face value doesn’t change but purchasing value changes Canadian Practice  Unit of measurement assumption: results of business activities should be measure in terms of monetary unit (ex. Canadain dollar) o Valuing items in terms of purchasing power – cash o Measure at face value *** (no other method) o Due to foreign customers/currencies  Must be converted to canadian $ Internal control and cash Management -main issue: control of cash – ensure not lost, stolen, or management of cash balance  Record how much cash company owns o Cash = currency, cheques, money orderds, bank drafts, amount in bank that can be used with very short notice  Proper (system) control: o Policies – help protect and manage organ’s assets o secure safes,
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