会计英语CURRENT-ASSETS.ppt

单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,Chapter 3,CURRENT ASSETS,Learning objectives:,After studying this chapter,you should be able to:,1.Understand cash,cash equivalents,and liquidity,2.Understand internal control over cash,3.Reconcile the bank balance,4.Account for trading securities,5.Understand receivables,6.Account for irrecoverable debts,7.Understand inventory,8.Compute cost of goods sold and ending inventory using different methods.,3.1 Cash,1.Cash,Cash,is King!,What is Cash?,Cash,includes,currency and coins,along with,the amounts on deposit in bank accounts,checking accounts,and many,savings accounts.,Cash also includes,items that are acceptable for deposit in these accounts.,such as customer checks,cashier checks,certified checks,and money orders.,What is cash equivalents,Cash equivalents,are short-term,highly liquid investment assets meeting two criteria:,(1)readily convertible to a known cash amount.,(2)sufficiently close to their due date so that their market value is not sensitive to interest rate changes.,Only investments purchased within three months of their due date usually satisfy these criteria.,Examples of cash equivalents are short-term investments in assets such as Treasury bills and money market funds.,Most companies combine cash equivalents with cash as a single item on the Statement of financial position.,Cash is the usual means of payment when paying for assets,services,or liabilities.,Liquidity refers to a companys ability to pay for its near-term obligations.Cash and similar assets are called liquid assets because they can be readily used to settle such obligations.,A company needs liquid assets to effectively operate.,2 Internal Control over Cash,In accounting for cash and other assets,and in all phases of business operations,procedures that help control business activities are very important.These procedures are called,internal controls,.,Internal control consists of the policies and procedures established and maintained by management to assist in achieving its objective of ensuring,as far as practical,the orderly and efficient conduct of the entitys business.,The responsibility for ensuring adequate internal control is part of managements overall responsibility for the on-going activities of the entity.,The purposes of internal control:,encourage adherence to prescribed managerial policies,promote operational efficiencies,protect business assets from waste,fraud,and theft,ensure accounting data is accurate and reliable,Because cash is readily convertible into any other type of asset,this liquidity makes cash the most likely object for fraud.,An important goal of management is therefore to ensure that a system of internal controls is in place to safeguard cash from waste,theft,or embezzlement.,The internal control procedures should be carefully and consistently followed:,1,Responsibility for handling cash and checks should be separated from the keeping of cash records.,2 All cash receipts should be deposited intact each day.This is necessary in order to safeguard assets and maintain adequate records.,3 All payments should be made by check.Minor payments are made from a petty cash fund,not from cash receipts.,3 The Petty Cash Fund,A petty cash fund,is established to make small cash payments(for example,taxi fares,postage,express charges,and small supplies),so that checks need not to be written every time.,Petty cash is the only exception to the internal control procedure requiring that all disbursements be made by check.,Discuss whether each of the following practices is an example of good internal control over cash?,(a)The bookkeeper is not authorised to make the deposits in the bank.,This practice is an example of good internal control over cash.There is separation of the responsibilities for handling cash and those for accounting for cash.,(b)The employee who approves invoices for payments signs the payments cheques.,This is not good internal cash control.The same person holds responsibility for approving spending and releasing the funds.,(c)The custodian of the petty cash fund has accounting responsibilities.,If the accounting responsibilities include accounting for petty cash this is not good internal control,as there is no separation of duties.However if the accounting responsibilities are quite different from those involving petty cash this may be adequate control.,(d)The office clerk who receives incoming payments also makes the bank deposits.,This is extremely poor internal control over cash and facilitates the misappropriation of funds.,(e)The cashier makes cash deposits,records the cash and prepares the bank reconciliation.,This is very bad internal control over cash,there is no separation of duties for the receiving,banking and accounting for cash.,(f)The manager,who does no recordkeeping,prepares the bank reconciliation each month.,This is good internal cash control.A person not party to receiving,authorizing disbursement or banking cash oversees one part of the accounting for cash.,(g)The finance manager signs all cheques after the accounts clerk prepares the supporting documents.,This practice is good internal control over cash,there is separation of the responsibilities for requesting and,authorising,of cash disbursements.,(h)One assistant prepares cash deposits and the other assistant enters the collections in the journal and ledger.,This is good internal control over cash;there is separation of the responsibilities for banking and accounting for cash.,4 Reconciling the Bank Balance,Good internal control practice requires that cash be deposited daily and payments be made by check.Banks produce,checking account statements,which provide a separate and external record of all cash transactions.These statements can be used to prove the cash balance in the companys own records.,At least once a month,banks provide a statement to each client which shows the cash disbursements,cash deposits,and their effects on the balance of cash account as recorded by the bank.A bank statement is comparable to a ledger account that shows a beginning balance,debits,credits,and an ending balance.,Checks and other deductions are shown as debits;,deposits and other additions are reported as credits.,When we deposit money with a bank,the bank credits our account because the banks liability has increased.The increase side for a liability is the credit side.,items recorded by the company but not yet recorded by the bank include:,1.,Deposit in transit,:Money that has been deposited by the company but not yet recorded by the bank.,2.,Outstanding checks,:Checks that have been issued by the company but not yet paid by the bank.,Items recorded by the bank but not yet recorded by the company include:,Bank collections:,Electronic funds transfer(EFT),Service charges:,Interest revenue earned on the checking account:,Nonsufficient funds checks(NSF):,Checks collected,deposited,and returned to payee by the bank for reasons other than NSF:,Check printing charge:,3.2 Trading Securities,Trading securities,consist of surplus cash invested in government or corporate debt obligations,or in shares(equity securities)that can be readily sold(marketable)and are held as a source of cash to satisfy current operating needs.,These trading securities do not have to mature or be sold within the next year or operating period to be classified as current assets,although it is probable that they will.,Trading securities are considered current assets if,(l)they are marketable,and,(2)managements intent is to hold them as a ready source of cash.,If an organization acquires securities with the intent of holding them for a longer period,they should be classified as long-term investments in securities.,Accounting for trading securities,acquisitions of trading securities are recorded at historical cost,。,For example,if A Company purchases temporary investment in B Company for$1,000,。,Dr:Trading securities$1,000,Cr:Cash$1,000,Sales of trading securities may generate a gain or a loss representing the difference between cost and proceeds.,if the temporary investment in B Company purchased for$1,000 is later sold for$950,。,Dr:Cash$950,Loss on sale of trading securities$50,Cr:Trading securities$1,000,For example,if the trading securities were sold for$1 200.,Dr:Cash$1,200,Cr:Trading securities$1,000,Gain on sale of trading securities$200,3.3 Receivables,Assume that you have decided to,sell your car to a neighbor for,$7500.your neighbor agrees to,pay you$1500 immediately and,remaining$6000 in a year.,Many companies sell,on credit,in order to sell more services or products.The receivables that result from such sale are normally classified as,accounts receivable,or,notes receivable.,(the two most common receivables),Other receivables include interest receivable,rent receivable,tax refund receivables from employees.,1 Accounts receivable,Accounts receivable,are amounts due from customers for,credit sales,.,Credit sales are recorded by,debiting,Accounting Receivable.,Such accounts receivable are normally expected to be collected within a relatively short period,such as 30 or 60 days.They are classified on the balance sheet as a current asset.,transactions,1 credit sale of$950 to A store on July 1.,Dr:Accounts Receivable-A Store$950,Cr:Sales$950,2 collection of$720 from B Store from a prior credit sale.,Dr:Cash$720,Cr:Accounting Receivable-B Store$720,irrecoverable debts,When a company directly grants credit to its customers,it expects that some customers will not pay what they promised.The accounts of these customers are uncollectible accounts,commonly called,irrecoverable debts.,Accounting for uncollectible accounts,Two methods account for uncollectible accounts:,(1)direct write-off method,(2)allowance method.,(1)The direct write-off method,The direct write-off method of accounting for irrecoverable debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.,Entry:,Dr:Irrecoverable debts Expense,Cr:Accounts Receivable,If the irrecoverable debts expense is later collected in full,Dr:Accounts Receivable,Cr:Irrecoverable debts Expense,Dr:Cash,Cr:Accounts Receivable,(2)The allowance method,The allowance method,of accounting for irrecoverable debts involves estimating uncollectible accounts at the end of each period.,Companies must use the allowance method for financial reporting purposes when irrecoverable debts are material in amount.,The allowance for doubtful accounts is a,contra asset account,.,A contra account is used instead of reducing accounts receivable directly because at the time of the adjusting entry,the company does not know which customers will not pay.,The allowance method also requires an estimate of irrecoverable debts expense to prepare an adjusting entry at the end of each accounting period.,two common methods,One is based on the,statement of comprehensive income,relation between irrecoverable debts expense and sales.,The percent of sales method,The second is based on the,Statement of financial position,relation between accounts receivable and the allowance for doubtful accounts.,The percent of accounts receivable method,3.3.2 Notes Receivable,A promissory note,is a written promise to pay a specified amount of money,usually with interest,either on demand or at a definite future date.,Table 3-1,Promissory Note,$1,000,July 10,2008,Amount Date,Ninety days,after date,promise to pay to the order of,TechCom,Company,Los Angeles,CA,One thousand and no/100,Dollars,For value received with interest at the annual rate of,12%,payable at,First National Bank of Los Angeles,CA,Julia Browne,The formula for computing interest on,a note is shown as follows.,Interest=,Principal of note,Annual interest rate,Time expressed in years,3.4 Inventory,Inventories,are finished goods or merchandise held by an enterprise for sale in the ordinary course of business,or work in progress in the process of production for such sale,，,or in the form of materials or supplies to be consumed in the production process or in the rendering of services.,For a manufacturing firm,there are three types of inventory:,1.,Raw materials,are goods obtained for use in the manufacturing process.n,2.,Work in process,consists of party-processed materials requiring further work before they can be sold.,The three cost categories that go into work-in-process inventory are raw materials,，,production labor,and manufacturing overhead,3.Finished goods are the manufactured products awaiting sale.,Inventory cost,Inventory cost consists of,all costs,involved in buying the inventory and preparing it for sale.,Proper calculation of inventory cost is absolutely critical for making production,pricing,and strategy decisions.,Inventory Systems,with large-volume,low-priced items,it would be quite difficult to determine quickly the cost of each item so that the cost of goods sold could not be recorded at the time of sale.It needs waiting until the end of an accounting period to make the calculation.At that time,they count their inventory,which is the collection of goods on hand waiting to be sold.This counting process is called taking a,physical inventory,.,periodic inventory system,periodic inventory system,that,the cost of good sold and ending inventory balance are determined only at the end of each accounting period.,Beginning Inventory+Purchases(net)=Cost of Goods Available for Sale,Cost of Goods Available for Sale-Ending Inventory=Cost of Goods Sold,An alternative approach to accounting for inventories and cost of goods sold involves recording the cost of goods sold each time a sale is made and keeping an up-to-date record of the goods on hand.This system is called,perpetual inventory system,。,perpetual inventory system,3,Inventory Cost Flow Assumptions,Accounting for inventory affects both the,statement of financial position,and the,statement of comprehensive income.,However,the major objective in accounting for the goods in the inventory is the matching of appropriate cost against revenue in order that there may be a proper determination of the realized income.At the end of an accounting period,the total inventory cost of goods available for sale must be allocated between inventory still remaining(to be reported in the,statement of financial position as an asset),and inventory sold during the period(to be reported in the,statement of comprehensive income as the expense Cost of Goods Sold).,（,1,）,specific identification method,Assigning cost units in ending inventory is easy when the costs per units do not change.However in the real world,the cost of items changes constantly.,Determining the ending inventory cost valuation is simple when we can identify each item acquired with its special cost.,The specific identification method determines the cost allocation according to the physical inventory flow.,From a theoretical standpoint,the specific identification method is very attractive,especially when each inventory item is unique and has a high