Module 7

Question 1

3 Types of Liquid Assets?

Answer 1

Cash, Receivables and Temporary Investments

Question 2

What is Account Receivables?

Answer 2

From Trade Sales and often largest account

Question 3

What is Notes Receivables?

Answer 3

Formal recognition of the debt

Question 4

How can a company be profitable and yet be forced into

bankruptcy?

Answer 4

It lacks the liquid assets to pay debts as they come due

Question 5

What is Liquidity?

Answer 5

The ease with which assets can be converted into cash

Question 6

Examples of Temporary Investments?

Answer 6

Stocks & bonds, Money marketed Instruments

Question 7

How do we value these accounts?

Answer 7

Record as amount owed, Value at realistic amount expected to collect

Question 8

How do we value Temporary Investments?

Answer 8

Record at cost of acquisition but value at lower price of current market

Question 9

Direct Write Off Setup

Answer 9

Dr Bad Debt Expenses and Cr Accounts Receivables

Question 10

The Allowance Method (Aging)

Answer 10

As time goes on we transfer our receivables to bad expense