FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Control over Cash Disbursements
All cash disbursements should be made by check/debit
card/credit card.
1.
2.
Expenditures should be authorized before purchase and
accuracy of purchase should be verified. The person who
authorizes should not prepare the check.
Use serial numbered checks. Only authorized person(s)
should sign the check.
Debit/Credit card statements should be checked against
3.
4.
purchase receipts. The person verifying the statements should
not be the person who made the purchases.
Set limits on purchases for credit/debit cards.
Separate the duties of the person responsible for making
cash disbursements from the person in charge of cash receipts.
5.
6.
Company Cash Receipts
Recording revenue: the company always recognizes revenue at
the agreed upon price. The amount of revenue recognized is
not impacted by the way the customer pays for the good or
service. Example: Tim purchases $100 of groceries from
Publix. Below are two examples, one where Tim pays with
either currency or a check; and the other example is if Tim pays
with plastic (credit card or debit card).
"CASH" Sales
Cash & Checks
Cash (A+)
100
Sale (R+ à SE+)
100
Credit Cards & Debit Cards
Service fee-an expense
97
Cash (A+)
Service fee (E+ à SE-)
Sale (R+ à SE+)
100
Company Cash Disbursements
Cash/Checks/Debit card-act like cash
Credit Cards
When the company uses a Credit Card to pay for goods or service
it creates a liability to the company.
Office supplies (A+)
500
Credit card payable (L+)|
500
Transcribed Image Text:D Question 3
0.2 pts
From page 4-3 of the VLN, which
statement is true regarding cash sales?
O We always recognize the sale at the agreed
upon transaction price regardless of how
the customer pays for it.
O The company will record a higher sale
amount if the customer pays with paper
cash rather than paying with a debit card.
O If a customer pays with a credit card, it is
not considered a cash sale.
O If a customer pays with a check, we record
the sale as if it was on acCcount.
Expert Solution
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Step 1
Cash refers to the monetary value and resource that is important for the company to operate. It is classified as the most liquid asset and recorded under the head current asset on the balance sheet.
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- Whether a customer uses cash, a check, or a debit card to make a purchase, the company records the transaction as a cash sale. True or Falsearrow_forwardEffective credit management involves establishing credit standards for extending credit to customers, determining the company’s terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. The conditions of the credit sale, including cash discounts and due dates, are indicated by the company’s (______) . Consider the case of Newtown Co.: Newtown Co.’s CFO has decided to take a closer look at the company’s credit policy. Newtown Co. has annual sales of $402.8 million, and it currently has an accounts receivable balance of $47.6 million. The first step in analyzing the firm’s credit policy is to determine its days sales outstanding (DSO). Based on this information, Newtown Co.’s DSO is (_____) . (Note: Use 365 days as the length of a year in all calculations. Do not round intermediate calculations. Round your answer to one…arrow_forwardE8B. ACCOUNTING CONNECTION Developing a convenient means of reimbursing sales representatives with cash for their incidental expenses, such as for meals and supplies, is a problem many companies face. Under one company's plan, the sales representatives submit the receipts for reimbursement to the petty cash custodian. The representative then receives cash from the petty cash fund. What is the weak point in this system? What fundamental principle of internal con- trol is being ignored? What improvement in the procedure can you suggest?arrow_forward
- When a customer uses a credit card such as MasterCard or VISA to buy merchandise in a store, the store owner records the sale as a/an ______________________. Group of answer choices cash sale. debit to sales and a credit to cash. credit to accounts receivable. a credit sale and debits the customer's accounts receivable account.arrow_forwardExplain the primary goal of maintaining a cash book. Use a case study company of your own choice to demonstrate how such a goal (Your arguments must only relate to the main goal of a cash book) can be attained. Provide examples as approperiate Clearly explain how a cash book can be integrated in the extraction/development of the Trial Balance. Are trade discounts included in the cash book? If not or if yes, explain why Are credit transactions included in the cash book? If not or if yes, explain why Ledgers help to organize accounting information into categories normally known as ‘’classes’’. With examples explain the nature and differences between revenue and capital ledgers Using two revenue and capital ledgers, explain how you will treat them in the trial balance. Explain the treatment of the proprietor’s additional contribution to an already existing business. In addition, explain the underlying accounting principle you will apply in answering this question. Thames Cotton Mills…arrow_forwardPlease help me. Thankyou.arrow_forward
- The use of a debit card is similar to: Select one: a. Using currency Ob. Paying with a check c. Using a stored-value card d. Paying with credit card e. None of the abovearrow_forward"We have a contract with our partner bank that they pay us a monthly rebate that is calculated as a portion of the total interchange revenue they receive for each transaction that is run through our platform. As part of our contract/application with our customers we offer cash back rewards that is calculated as a percentage of the revenue that we receive from the bank for each of their transactions."Q: What guidance supports that decision?arrow_forward
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