RSM219H1 Chapter Notes - Chapter 6: Cash Cash, Accounts Receivable, Bank Reconciliation
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RSM219H1 Full Course Notes
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Cash & accounts receivable = most liquid assets. Cash constitutes of: money physically, amounts in bank accounts, cheques for deposit. Account receivable (trade receivable): amounts due from customers as a result of sales of goods/services and are typically due within 30 days. Uncollectible accounts (doubtful accounts/bad debts): will never be paid by customers. Presenting cash & accounts receivable separately on financial statements help evaluate a company"s liquidity -- its ability to meet its obligations in the short term. Cash physically on hand e. g. in register drawers or safes. Customer"s cheques held by the company for deposit & in the company"s accounts at financial institutions. Cash equivalents: amounts easily converted into cash; e. g. government treasury bill. Amount of cash is measured at its face value at the reporting date. Foreign currencies are converted into the home currency. Management"s key responsibility is to safeguard the company"s assets.
