BUS 251 Chapter Notes - Chapter 6: Accounts Receivable, Internal Control, Subledger
Document Summary
Cash and ar: evaluate liquidity, bad debts => able to meet obligations in short term. Cash and cash equivalent: cash on hand, cash deposit in the bank, cheque received from customers, treasure bills, line on credit, bank overdraft facility. Measured in face value or foreign currencies. Physical controls: protect from theft, diversion, damage, destruction = lock, alarm, fencing, bank deposit assignment of responsibilities separation of duty: authorize transaction, record, custody => collusion independent verification: checking other internally or externally. Sell on accounts: increase sales remain competitive additional revenue (interest) Measured in carrying amount = allowance method + direct write off method control account = ar subledger. Allowance method: significant amount + don"t know specific customer establishing the allowance and recording the bad debt expense (allowance entry) Writing off a specific receivable (write off entry) recovery of a specific receivable that has been preciously written off (recovery entry)