ACC 110 Chapter Notes - Chapter 5: Cash Cash

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viridianzebra871

6 Oct 2012

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Cash is needed for the business to survive, without cash the company will not be able to meet its commitments to creditors such as the banks, its shareholders, etc. Cash must be spent before earning cash. The continuous series of invests of investing cash in resources, providing goods or services to customers using those resources and collecting cash is known as the cash cycle. The cash cycle is self sufficient where cash must be spent before earning revenue, and cash earned from selling the products to consumers provides the cash needed to purchase more inventory to sell for more cash. Furthermore, entities earn cash through equity investments and loans. These are needed when the company grows as more cash is needed to finance the growth of the firm, and when the value of inputs increase the company needs more cash to purchase and continue operations.

Related Questions

7. Consider theeffects of the independent transactions, a through i, on acompanyâs balance sheet, income statement, statement of cash flows,and statement of stockholdersâ equity.

a. The company purchasedinventory on credit.

b. The company sold allinventory purchased in transaction a) on credit (and formore than its cost).

c. The company collectedcash from customers from transaction b).

d. The company purchasedequipment with cash.

e. The company paid cash fora note payable that came due.

f. The company paidcash for interest on borrowings.

g. Wages were earned bycompany employees but not yet paid.

h. The company paid cash individends.

i. The companyreceived cash for the issuance of stock.

Complete the table below to explainthe effects and financial statement linkages. Use â+â to indicatethe account increases and âââ to indicate the account decreases (15pts).

Balance sheet

Cash

Noncash assets

Total liabilities

Contributed capital

Retained earnings

Statement of cash flows

Operating cash flow

Investing cash flow

Financing cash flow

Income statement

Revenues

Expenses

Net earnings

Statement of stockholdersâ equity

Contributed capital

Retained earnings

skydog210

An inexperienced accountant for Prestwick Company prepared the following income statement for the month of August 2015:

PRESTWICK COMPANY AUGUST 31, 2015
Revenues:
Services provided to customers	$	17,000
Investment by stockholders		5,000
Loan from bank		15,000	$	37,000

Expenses:
Payments to long-term creditors	$	11,700
Expenses required to provide services to customers		7,800
Purchase of land		16,000		35,500

Net income			$	1,500

Based on the information prepare a statement of cash flows in a form consistent with generally accepted accounting principles. You may assume all transactions were in cash and that the beginning cash balance was $7,200. (List any deduction in cash and cash outflows as negative amounts.)

turquoisewasp286

E12-1 Max Weinberg is studying for an accounting test and has developed the following questions about investments. 1. What are three reasons why companies purchase investments in debt or stock securities? 2. Why would a corporation have excess cash that it does not need for operations? 3. What is the typical investment when investing cash for short periods of time? 4. What are the typical investments when investing cash to generate earnings? 5. Why would a company invest in securities that provide no curren

emeraldsnake707

ACC 110 Chapter Notes - Chapter 5: Cash Cash

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