,C H A P T E R 7,CASH AND RECEIVABLES,Intermediate AccountingIFRS EditionKieso, Weygandt, and Warfield,Identify items considered cash.Indicate how to report cash and related items.Define receivables and identify the different types of receivables.Explain accounting issues related to recognition of accounts receivable.Explain accounting issues related to valuation of accounts receivable.Explain accounting issues related to recognition of notes receivable.Explain accounting issues related to valuation of notes receivable.Understand special topics related to receivables.Describe how to report and analyze receivables.,Learning Objectives,RecognitionValuationImpairment evaluation process,Cash,Accounts Receivable,Notes Receivable,Special Issues,What is cash?Reporting cashSummary of cash-related items,RecognitionValuation,Fair value optionDerecognition of receivablesPresentation and analysis,Cash and Receivables,A financial assetalso a financial instrument. Financial Instrument - Any contract that gives rise to a financial asset of one entity and a financial liability or equity interest of another entity.,Cash,LO 1 Identify items considered cash.,What is Cash?,Illustration 7-1 Types of Assets,Most liquid asset.Standard medium of exchange. Basis for measuring and accounting for all other items.Current asset.,Cash,LO 1 Identify items considered cash.,What is Cash?,Examples: coin, currency, available funds on deposit at the bank, money orders, certified checks, cashiers checks, personal checks, bank drafts and savings accounts.,Short-term, highly liquid investments that are both,Cash,LO 2 Indicate how to report cash and related items.,Reporting Cash,readily convertible to cash, and so near their maturity that they present insignificant risk of changes in interest rates.,Examples: Treasury bills, commercial paper, and money market funds.,Cash Equivalents,When material in amount: Segregate restricted cash from “regular” cash.Current assets or non-current assets,Cash,LO 2 Indicate how to report cash and related items.,Restricted Cash,Examples, restricted for: (1) plant expansion, (2) retirement of long-term debt, and (3) compensating balances.,When a company writes a check for more than the amount in its cash account.,Cash,LO 2 Indicate how to report cash and related items.,Bank Overdrafts,Generally reported as a current liability.Offset against cash account only when available cash is present in another account in the same bank on which the overdraft occurred.,Cash,LO 2,Illustration 7-3,Summary of Cash-Related Items,Accounts Receivable,LO 3 Define receivables and identify the different types of receivables.,Written promises to pay a sum of money on a specified future date.,Receivables are claims held against customers and others for money, goods, or services.,Oral promises of the purchaser to pay for goods and services sold.,Accounts Receivable,Notes Receivable,Non-trade Receivables,Advances to officers and employees.Advances to subsidiaries.Deposits to cover potential damages or losses.Deposits as a guarantee of performance or payment.Dividends and interest receivable.Claims against:Insurance companies for casualties sustained.Defendants under suit.Governmental bodies for tax refunds.Common carriers for damaged or lost goods.Creditors for returned, damaged, or lost goods.Customers for returnable items (crates, containers, etc.).,Accounts Receivable,LO 3 Define receivables and identify the different types of receivables.,Non-trade Receivables,Accounts Receivable,LO 3 Define receivables and identify the different types of receivables.,Illustration 7-4Receivables Statementof Financial PositionPresentations,Accounts Receivable,LO 4 Explain accounting issues related to recognition of accounts receivable.,Trade DiscountsReductions from the list priceNot recognized in the accounting recordsCustomers are billed net of discounts,10 % Discount for new Retail Store Customers,Recognition of Accounts Receivable,Accounts Receivable,LO 4 Explain accounting issues related to recognition of accounts receivable.,Cash Discounts(Sales Discounts)Inducements for prompt paymentGross Method vs. Net Method,Payment terms are 2/10, n/30,Recognition of Accounts Receivable,Accounts Receivable,LO 4 Explain accounting issues related to recognition of accounts receivable.,Cash Discounts (Sales Discounts),Illustration 7-5Entries under Gross andNet Methods of RecordingCash (Sales) Discounts,E7-5: On June 3, Bolton Company sold to Arquette Company merchandise having a sale price of 2,000 with terms of 2/10, n/60, f.o.b. shipping point. On June 12, the company received a check for the balance due from Arquette Company. Prepare the journal entries on Bolton Company books to record the sale assuming Bolton records sales using the gross method.,Sales 2,000,Accounts receivable 2,000,June 3,Accounts Receivable,LO 4 Explain accounting issues related to recognition of accounts receivable.,