ACG 3103 Chapter 6 (Intermediate Financial Accounting)

Cash Equivalents

1. Post-Dated Checks: Are checks which cannot be depsoited in a future date.

2. IOU's: Represent an amount that is owed to the company

*Both are classfied as receivables.

Restricted Cash: Cash that is restricted for a certain purpose. If it is restricted for a current obligation, then it is considered a current asset, however, if it is restricted for a long-term obligation, then it is considered a long-term asset.

A Compensating Balance is the minimum amount a lender requires a borrower to keep in their account as a condition for receiving a loan.


-Compensating Balances against short-term borrowing should be classfied as a current asset and a part of "Cash and Cash Equivalents"

-Compensating Balances against long-term borrowing should be classied as a noncurrennt asset under investments or other assets section, and naming it "Cash on deposit maintained as compensating balance"

Ban Overdraft: When you spend more money then what is in your account, so the bank covers the transaction and you have to pay it off later

*Classfied as a Current liabiility

1. A Short Term Paper is a short term (under a year) debt agreement (basically a loan)

2.
-When the investment matures in less than 3 months : It is considered a Cash Equivalent
-When the investment matures 3 months - 12 months: It is considered a Short-Term Investment

1. Travel Advance: A travel advance is a pre-approved sum of money given by an employer or organization to an employee before a business trip

2. Classfied as a receivable

1. Postage on Hand: It is postages that the company has not used yet.

2. It is classfied as a Prepaid Expense.

1. Trade Receivable: Amounts owed to a company by customers for good(s) or service(s) sold

2. Non-Trade Receivable: Amounts owed to a company from sources outside of its primary, everyday business operations

1.
Accounts Receivables: Informal agreement based on an invoice
Notes Receivables: Binding by a contract signed by both parties

2.
Accounts Receivables: Typically has no interest
Notes Receivables: Typically has interest

3.
Accounts Receivables: Always Short-term
Notes Receivables: Can be short-term (less than one year) or long-term

Fixed Consideration: Unchaning payment amount

Variable Consideration: Payment amount can flucate based on future events ( (1) trade discounts, (2) cash discounts, (3) sales returns and allowances, and (4) time value of money. )