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Financial Accounting - Final.pdf

12 Pages

Management Core
Course Code
MGCR 211
Erica Pimentel

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INTRO TO FINANCIAL ACCOUNTINGLECTURES 1213CASHSHORT TERM INVESTMENTSCash Core of every business Drives decisions and projects that management can undertake Most liquid asset of a company Necessary to survive in the short and long termInternal ControlsCashControls important because cash has value and existence of motives for stealingNeed controls to ensure proper management in the business Physical Measures Clear assignment of responsibilities Segregation of duties Independent verication Effective record keeping systemBank ReconciliationAccounting records based on accrual accounting recorded as they occurBank statements only show transactions when cash is received or paid from accountBank reconciliation reconciles the difference in timingShort Term Investments investments made for a short period of time that could be converted into cash quickly Eg Debt securities Treasury bills Bonds Equity securities Commercial papers etcActive security tradingEasier to determine value and convert security into cashIFRS measured at fair value market priceDividends and Interest Income Investment in shares of another companydividend incomeIncome Statement accountAccounts Receivable amounts owed by the customer from normal business transactions of selling goods or services on creditUncertainty regarding collectability of ARSometimes customers not able to payNo paymentExpense for the companyBad Debt ExpenseIFRS Record amounts entitled to received MINUS amounts expected to be uncollectibleInuences of Collectible Amount Customer credit Companys credit policy Market conditionsBad Dept Expense Valuation1 Direct Write Off MethodRecord bad debt when you realize the account is uncollectible2 Allowance for Doubtful AccountRecord bad debt at time of sale based on estimatedof uncollectibility proper matchingCreation of account Allowance For Doubtful Accounts AFDAAFDA Contra Account credit position Amount future losses to be incurred when realize AR are uncollectible Will be reversed in the future when AR needs to be written down Sales Allowance Method looks at sales made on credit and recordsof sales as uncollectible historical data AR Aging Method looks at AR Aging ledger to make estimate of bad debtestimateGives value that should be in the contra account on the BS of credit Sales Method Aging of Accounts Receivable Method Focus on income measurement Focus on asset valuationuse the sale revenue as the basis of Use AR as the basis for calculation of the calculation for the bad debt AFDA Emphasis on income statement relationship Emphasis on the balance sheet relationship Ensure that the amount of expense is Ensure that the balance in the contra asset logically related to the amount of revenue account is logically related to the balance Better matching in the asset account Notes Receivable similar to AR valued in same mannerMore formal for longer period of timeInterestPossibility of collateral requestFS Analysis Current Assets indicate items that are expected to be turned into cash within 12 monthsIndication of rms short term liquidityVery important for creditors Shareholders also want to ensure rm is not a going concernRatios impacted by Cash ST Investments and AR Current Ratio Quick Asset Ratio AR Turnover RatioLECTURES 1415INVENTORY AND COGSInventory at core of many businessesIncludes direct and indirect costsProper monitoring helps management make decisions and monitor protabilityInventory item purchased by a company for resale to customerItem purchased can be produced modied or sold as isUntil soldAssetOnce soldCOGSCapital Asset Used in businessInventory Resold in course of business Long life Asset created by company for resaleOne persons capital asset is anothers inventory
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