cash

Question 1

compensating balance

Answer 1

minimum amount that a bank requires a company to keep in its bank account as part of a credit-granting arrangement. Such an arrangement restricts cash; in effect, it increases the interest on the loan and reduces a company’s liquidity. The Securities and Exchange Commission therefore requires companies that have compensating balances to disclose the amounts involved

Question 2

5 issues a company may run into in the management of cash

Answer 2

-evaluating level of account receivable
-managing cash needs
-understanding ethics
-financing receivables
-setting appropriate credit trade policies

Question 3

what are the two ways of evaluating level of AR

Answer 3

1. RECEIVABLE TURNOVER
2. DAY SALES UNCOLLECTED

Question 4

RECEIVABLE TURNOVER

Answer 4

net sales/average net AR

Question 5

DAY SALES UNCOLLECTED

Answer 5

365/receivable turnover

Question 6

financing receivables

Answer 6

-discounting
-securitization
-factoring

Question 7

contingent liability

Answer 7

A is a potential liability that can develop into a real
liability if a particular event occurs.

Question 8

securitization

Answer 8

a company groups its receivables in batches and
sells them at a discount to companies and investors

Question 8

securitization

Answer 8

a company groups its receivables in batches and
sells them at a discount to companies and investors

Question 9

DISCOUNTING

Answer 9

Another method of financing receivables is to sell promissory notes held aS notes receivable to a financial lender, usually a bank.

Question 10

uncollectible accounts

Answer 10

BAD DEBT customers who will not pay

Question 11

cash control methods

Answer 11

1. imprest system
2. banking services

Question 12

bank reconcilliation

Answer 12

making adjustments to cash account and companys bank statement to account for differences and adjust them

Question 13

accounts that appear in bank statement but not in cash account

Answer 13

service charges, nsf non-sufficient funds,

Question 14

accounts that appear in bank statement but not in cash account

Answer 14

service charges,
nsf non-sufficient funds,
miscellanous debit credits,
interest income

Question 15

appears in cash accounts and not in bank statement

Answer 15

outstanding checks
deposits in transits

Question 16

Maturity date

Answer 16

: The date on which a promissory note
must be paid

Question 16

Maturity date

Answer 16

: The date on which a promissory note
must be paid

Question 17

Maturity value:

Answer 17

The total proceeds of a promissory
note—face value plus interest—at the maturity
date.

Question 18

Notes payable

Answer 18

Collective term for promissory notes
owed by the entity (maker) who promises payment
to other entities.

Question 19

Allowance method

Answer 19

A method of accounting for uncollectible accounts by expensing estimated uncollectible accounts in the period in which the related
sales take place.