RSM220H1 Chapter Notes - Chapter 7: Financial Asset, Promissory Note, Debits And Credits
Document Summary
Rely on cash flow budgets to help anticipate cash needs and minimize borrowing requirements. Companies with surplus cash try to minimize idle cash by putting extra cash resources into st deposits. Control cash by implementing internal control over physical custody of cash on hand and preparation of regular bank reconciliations. Manufacturers and wholesalers have significant amounts of ar. Large ar in oil and gas industry because of extended payment terms (30-60 days) Typical ar categories: trade, loan, nontrade (interest receivables, amounts due from officers, advances to employees) receivables. If sales department is overly aggressive with its credit policy, it could result in significant increases in bad debts and uncollectible accounts. Assess creditworthiness of new customers and grant them a credit limit accordingly. Monitory ar levels carefully to: minimize the stress on working capital and related bank debt, while, encouraging prompt payment from their customers.
