WSU ACCTG 230 - Cash Pt. 2 (3 pages)

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Cash Pt. 2

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Cash Pt. 2


Lecture number:
Lecture Note
Washington State University
Acctg 230 - Introduction to Financial Accounting

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Acct 230 1st Edition Lecture 15 Outline of Last Lecture I Cash a Cash Cash equivalents b Controls over Cash Receipts and Cash Disbursements Outline of Current Lecture II Cash a Accounts for Petty Cash b Major Inflows and Outflows of Cash c Earnings quality by comparing net income and cash flows Current Lecture III Cash a Account for Petty Cash i Companies like to keep a small amount of cash on hand at the company s location for minor purchases such as postage office supplies delivery charges and entertainment expense ii To pay for these minor purchases companies keep some minor amount of cash on hand in a petty cash fund iii Management writes a check for cash against the company s checking account and puts that amount of withdrawn cash in the hands of an employee who becomes responsible for it This employee is often referred to as the petty cash custodian iv Accounting for the petty cash fund involves recording transactions v Establish the fund vi Recognize expenditures from the fund vii Replenish the fund as the cash balance becomes sufficiently low viii At any given time the cash remaining in the fund plus all receipts should equal the amount of the fund ix Suppose that at the beginning of May Starlight Drive In establishes a petty cash fund of 500 to pay for minor purchases The entry to establish the fund is These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute b Major Inflows and Outflows of Cash i Companies report cash in two ways 1 First it is reported as an asset in the balance sheet under current assets and represents cash available for spending at the end of the reporting period It provides only the final balance for cash 2 Secondly reports information about cash receipts and payments during the period in a statement of cash flows ii From the statement of cash flows investors know a company s cash inflows and cash outflows related operating investing and

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