AFM291 Lecture Notes - Lecture 5: General Ledger, Promissory Note, Adverse Selection

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM291
• Professor: Forbes Burkowski

Document Summary

Afm 291 chapter 5 cash and receivables: cash and cash equivalents. Cash: cash on hand and demand deposits. Demand deposits: accounts at banks or credit unions from which funds can be withdrawn on demand of depositor without restrictions, like chequing accounts. Transactions completed by cheques, bank drafts, email transfers, wire transfers, and so on are all considered cash transactions. But it is an idle asset, earns no return. Companies prefer to hold them in accounts that make a return. Thus, allowing firms to combine cash and cash equivalents. Cash equivalents refers to short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to i(cid:374)sig(cid:374)i (cid:272)a(cid:374)t risks of changes in value: exclusions from cash and cash equivalents. Chart on p. 197 on determining whether common items are cash and cash equivalents: cash held in foreign currencies treatment of foreign currency depends on the particular circumstances. few currencies from smaller economies that are thinly traded.