Cash Account

What Does Cash Account Mean? The cash account is first explained as part of the ledger system. Some students may already be familiar with the simple recording of receipts and payments of money. The main rule for all cash accounts is that you debit cash coming in and credit cash paid out. Setting Up a … Read more

Aging Method of Accounts Receivable/Uncollectible Accounts

What Is the Aging Method? – Explanation The aging method is based on determining the desired balance in the account Allowance for Uncollectible Accounts. The accountant attempts to estimate what percentage of outstanding receivables at year-end will ultimately not be collected; ‘this amount becomes the desired ending balance in the Allowance for Uncollectible Accounts, and … Read more

Cash and Cash Equivalents

Definition Cash In financial accounting, cash is defined as the sum of (1) currency and coins, (2) balances in checking accounts, and (3) items acceptable for deposit in these accounts, such as checks received from customers. Cash Equivalents n are those short-term investments that can be converted quickly to cash. They include such things as … Read more

Checking Account

A special checking account simplifies the reconciliation of the general account by avoiding a large number of relatively small outstanding checks. It also simplifies recordkeeping in that a separate cash disbursements journal can be maintained for each account. When it is necessary for a company to write a large number of checks for a particular … Read more

Petty Cash

What Is Petty Cash? – Definition A petty cash fund is established by transferring a specified amount of cash from the general checking account to a person who is given custodial responsibility for the fund. Explanation In most companies, there are many occasions in which a small amount of cash must be spent on short … Read more

Restricted Cash

GAAP call for the presentation of information about restricted cash balance. These restrictions may include amounts set aside in escrow accounts which can be used only for a specified purpose. These amounts should be excluded from cash and from current assets if appropriate. There may be an informal restricted cash arising from management intent to … Read more

Cash Equivalents

The accountant has two concerns in reporting on cash equivalents: measurement of income and disclosure of the amount on the balance sheet date. The carrying value is the original amount invested plus accrued income. Depending on the amount of detail needed or desired for the report, highly liquid savings accounts or money market fund holdings … Read more

Accounts Receivable

Accounts Receivable – Definition Accounts receivable result from the credit sales, and for many retailing firms, accounts receivable represents a substantial portion of their current assets. The function of the credit department is to establish and enforce credit policies. Credit policies should protect the firm against excessive bad debts but should not be so restrictive … Read more