MGCR 211 Chapter Notes - Chapter 6: Promissory Note, Matching Principle, Bank Reconciliation

• School: McGill University
• Department: Management Core
• Course: MGCR 211
• Professor: Erica Pimentel

Document Summary

An effective record-keeping and reporting system bank reconciliation: ensures that any differences between the accounting records for cash and the bank records are identified and explained. A company"s accounting records are based on accrual accounting transactions are recorded as they occur. However, bank statement shows transactions when cash is received or paid out from the bank account. There can be timing differences between the cash movements at the bank and the accounting records of a company. A bank reconciliation is needed to reconcile the two. Compensating balances: minimum balances that must be maintained in the bank account to avoid significant service charges or to satisy restrictive loan covenants. Major feature of cash management: minimize cash balance b/c there are no returns on current or chequing accounts. > marketable securities: one way to convert cash into an earning asset - - publically traded or otherwise easily converted into cash debt securities and equity securities.