Chapter 6 Flashcards
bank reconciliation
A control procedure to establish and verify the correct cash balance via identification of errors, irregularities, and adjustments.
bank statement
The document received from a bank which summaries deposits and other credits, and checks and other debits to a bank account.
cash
Items acceptable to a bank for deposit and free from restrictions to satisfying current debts; includes coins, currency, bank deposits, etc.
cash budget
A major component of a cash planning system that depicts cash inflows and outflows for a stated period of times.
cash equivalents
Short-term interest-earning financial instruments that are deemed to be highly secure and will convert back into cash within 90 days.
compensating balance
An amount that must be left on deposit and cannot be withdrawn.
deposits in transit
Receipts entered on company reocrds but not yet posted by the bank.
derivatives
Investments accounted for a fair value that generally derive their value from some other item; examples include commodity futures, options, and so forth.
fair value accounting
Sometimes called “mark-to-market;” to record an investment at its fair value and recognize changes in value as it occurs.
NSF check
Non-sufficient funds check; a customer check returned for lack of funds (a “hot check”).
outstanding checks
Checks entered on company records but not yet cleared by the bank.
petty cash
A fund established for making small payments that are impractical to pay by check; also known as imprest cash fund.
proof of cash
A detailed bank reconciliation that verifies not only beginning and en balances, but also validates deposits and withdrawals during the month.
trading securities
Investments acquired with the intent of generating profits by reselling the investment in the very near future; classified as current assets.
