Ch 4 bank reconciliation 1 Cash debit Acct Receivable credit Collection on Acct 2 Cash Interest Revenue Interest Earned on Bank Balance 3 Miscellaneous Expense Cash Bank Service Charge 4 Acct Receivable Cash NSF check Documents used to control a bank account Signature card Protect against forgery Deposit ticket Proof of deposit transaction Checks maker payee and bank 3 parties Bank statement Report of costumer s cash activity Bank Reconciliation record of A Checks outstanding Checks the company has written that have not been subtracted from the bank s record of the company s balance NSF Checks Checks drawn on nonsufficient funds or bad checks from customers GAAP Generally Accepted Accounting Principles Common set of standards that the accounting proessions has developed and generally accepted and universally praticed Deposits outstanding Cash receipts of the company that have not been added to the company s balance cash 1 Cash acct in company s general ledger 2 Bank statement diff of lag in recording transactions Bus time bank s record of the Ch 8 Long term inv Solar city taking money from investors by bonds Solar city will have liabilities investors have assets Bonds Available for Sale Security Available for sale securities may be debt securities not held to maturity or equity stock securities other than trading securities Cost is used only as the initial amount for recording the purchase of these investments At the end of each reporting period these securities are adjusted to their current fair values because the company expects to sell the investments at these values at some point in the future although not within the next year Available for sale securities may be debt securities not held to maturity or equity stock securities other than trading securities Cost is used only as the initial amount for recording the purchase of these investments At the end of each reporting period these securities are adjusted to their current fair values because the company expects to sell the investments at these values at some point in the future although not within the next year Short term investments are current assets Trading Held to maturity Available for sale If investing company intends to hold a debt security until maturity it accounts for the security at amortized cost Analyze inv in Held to maturity debt security Bond issue price Purchased 10000 at a price 0 952 9520 1 Held to maturity inv debit 9520 Cash credit To purchase bond Investment To record receipt of interest Amortization of the discount 2 Cash purchased 12 debit Interest revenue credit 300 To receive semiannual interest 3 Held to maturity inv debit 10000 9520 48 6 60 Interest Revenue credit Amortize discount on bond investment To record year end adjustment 4 Interest receivable 10000 06 3 12 150 debit Interest revenue credit 5 Held to maturity inv debit 10000 9520 48 3 30 Interest Revenue credit Analyze Available for Sale Security Less than 20 ownership Long term Record at cost Adj to fair value at each reporting period 1 Investment AFSS SHARE DEBIT CASH CREDIT PURCHASE INVESTMENT 2 CASH SHARE DIVIDEND REVENUE RECEIVED CASH DIVIDEND 3 ALLOWNANCE DEBIT FAIR VALUE SHARE S COST UNREALIZED GAIN LOSS ON INVEST IN AFSS 4 UNREALIZED GAIN ON INVEST IN AFSS ALLOWANCE TO ADJUST INVES IN AFSS TO MARKET ELIMNATE UNREALIZED GAIN IN AFSS SOLD WE STILL OWN IT 4 CASH LOSS ON SALE OF INVEST IN AFSS INVEST IN AFSS CREDIT SOLD INVESTMENT WE SOLD IT FAIR VALUE ADJUSMENT FAIR VALUE DECLINE DEBIT UNREALIZED LOSS FAIR VALUE INCREASE CREDIT UNREALIZED GAIN ALLOWNANCE TO ADJUST INVEST AFSS TO MARKET DEBIT FAIR VALUE SHARE S COST UNREALIZED GAIN LOSS ON INVEST IN AFSS FAIR VALUE COST DEBIT ALLOWANCE TO ADJUST INVEST AFSS TO MARKET FAIR VALUE COST CREDIT ALLOWANCE Time Value of Money Money earns interest over time Interest is the cost of using money To borrowers interest is the fee To lenders interest is the revenue earned Principle is amount borrowed or invested Present value also called Discounting is process of calculating present value what something is worth Today which is less than future value JOURNAL 1 INVEST IN AFSS CREDIT 10000 CASH 2 CASH CREDIT DIVIDEND REVENUE 3 UNREALIZED LOSS ON INVEST IN AFSS DEPIT 10000 5000 LOST 5000 ALLOWANCE TO ADJUST INVEST IN AFSS TO MARKET UNREALIZED GAIN LOSS THE CHANGE IN THE MARKET VALUE OF THE INVEST GAIN LOSSES SOLD THE SALE OF THE INVETSMENT PV of 1 single payment Ex 10000 at the end of the next 5 years at 8 5 period 8 681 10000 681 PV of Annuity two or more Ex 10000 at the end of each year for 5 years at 8 The Present Value always less than the Future Value The PV is the current value the future value face value is the maturity value Ch 6 The cost of inventory sold shifts from asset to expense when the seller delivers goods to the buyer Asset on the balance sheet Expense on the income statement Cost of goods sold on income statement of units inventory sold cost per unit Inventory on Balance Sheet of units inventory on hand Cost per unit Company w legal title pays the transportation costs Perpetual Inventory system all type keep a running record and count once a year at least Periodic Inventory system inexpensive type of goods keep a running record and count once a year at least Recording Transaction Perpetual Inventory system Purchase Fright in Land has no expense land is never depreciated Land improvement is subject to depreciated Lump Sum 1 Land value building value equipment value total 2 Land value total L building value Total B equipment value total E 3 Land lump sum L building lump sum B equipment lump sum E 4 Note payable debit the total of 3 Capital expenditures increase the asset s capacity or it s useful life CE is an immediate expense Ch 5 Short Term Investments Receivables The investment is classified as a long term asset use it to pay a current liability Categories of Investments in Securities Purchase return Purchase allowance Purchase discount Net Purchase of inventory cost to the buyer 1 purchases fright in purchases return discount net purchases 2 BI Net purchases EI COGS Acct payable debit Inventory credit To record purchase return Inventory debit Acct payable credit To record Purchase of merchandise Sales Discounts 2 10 means discount 2 in 10 days only Acct payable debit Inventory credit price Cash credit To record payment within discount period The cost of any asset such as inventory is the sum of all the costs incurred to bring the asset to its intended use less any discounts