Exam 2 Study Guide

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Exam 2 Study Guide


Pages:
5
Type:
Study Guide
School:
Miami University, Oxford
Course:
Acc 221 - Intro to Financial Accounting
Edition:
1
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Exam # 2 Study Guide Lectures: 13 - 20 Lecture 13 (February 24) – The Cash Account What are reconciliations? Verifying that the company’s cash account and the bank’s account match. This is done by adjusting and accounting for various entries within the system. What happens when the bank balance is wrong? Deposit outstanding – bank has not yet added deposits into your account, requires no entry from you. Check outstanding – bank had not yet received checks to take money out of your account. Dr. Expense, Cr. Cash What happens when the Company Balance is wrong? Service Charges – fees owed to bank from various services; bank balance is correct, your balance is incorrect Cr. Cash is decreasing balance Collection of a note – bank will handle collection for company for a fee Dr. Cash, Cr. Note receivable Dr. Cash Cr. Interest receivable Dr. Service Charge, Cr. Cash Lecture 14 (February 27) – Review Cash Account What is the main function of the cash account? Main function is to have the company’s money flowing in and out. However, at the end of the accounting cycle when reconciling the balances, the balance may not always be correct, depending on if all of the transactions have been recorded in both the company’s side and the bank’s side of the balance recordings. Lecture 15 (March 2) – Cash Reconciliation and Accounts Receivable What are Non-Sufficient Funds Checks? Occurs when a customer bounces a check to the company. The check is written into the company accounting system before being brought to the bank to be deposited. At the bank, the money is put into the account, and then taken directly out, because the person had insufficient funds, leaving a net of $0. Must reconcile to match the bank’s statements. Dr. Accounts receivable, Cr. Cash What is a company error in the accounting system? The company has made an error in recording an item: lower cash too much/ too little or deposit too much/ too little through miscalculations or transcribing incorrectly Original: Dr. Rent Expense, Cr. Cash Correcting: Dr. Cash, Cr. Rent Expense How does not getting paid affect Accounts Receivable? If we are not getting paid, we much remove this money from the assets in one of 2 ways: ACC 221 1st Edition Direct Write-off method – remove customer, amount, and entries from accounts receivable sub ledger. This method is generally not used within the accounting system, because it violates the matching principle; expenses and revenue may not match within the period, if events occur within different periods. Dr. allowance of uncollectable accounts, Cr. Accounts Receivable Allowance method – combined estimates with actual numbers: end of accounting period, record estimate of bad debt (Dr. bad debt expense, Cr. Allowance of uncollectable accounts). This allows expenses to be in the same cycle as revenue, while having little impact on the system and balance sheets. Once you know who will not be paying back the company: (Dr. Allowance, Cr. Accounts receivable). Accounts receivable – allowance ...


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