Principles of Accounting: Chapter Six

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Chapter 6 begins with definitions of cash and cash equivalents. This is not always as obvious as it would seem, and presentation of items and amounts in the Cash account on a company's balance sheet should follow fairly precise guidelines. The initial portion of the chapter also emphasizes the importance of proper cash management and provides insight into tools and opportunities for improved cash management.

A detailed discussion and illustration of the bank reconciliation is presented, along with appropriate accounting adjustments. Another illustration is used to demonstrate the correct methods for managing and accounting for a petty cash fund.

The chapter closes with an examination trading securities. Trading securities are usually short-term type investments that are made with object of generating profits. Oftentimes they are acquired with excess cash funds. Trading securities are measured on a balance sheet at fair value, and fluctuations in value are reported in income as they occur.

Exercises

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Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Fill in the Blanks: Chapter Six

1. ____________ Cashincludes coins, currency, and money orders, but not checks that become payable on a future date (known as ____________ postdated checks ).

2. The ____________cash budget is a major component of a cash planning system, and represents the overall plan of activity that depicts cash inflows and outflows for a stated period of time.

3. Cash receipts should be deposited at the bank on a ____________daily basis.

4. ____________Deposits in transit arise when receipts have been entered on the company records but not as yet posted by the bank.

5. The bank reconciliation is based on the Cash account and a document called a ____________bank statement.

6. The receipts accumulated in a petty cash box are frequently called ____________petty cash vouchers.

7. An investment in trading securities should be classified in ____________current asset section of the balance sheet.

8. Trading securities should be measured and reported at ____________market value.

9. Unrealized gains and losses on trading securities impact ____________income .