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Cover
Accounting: What the Numbers Mean, 5/e
David H. Marshall, Millikin University
Wayne W. McManus, International College of the Cayman Islands
Daniel F. Viele, Webster University
Accounting for and Presentation of Current Assets

Chapter 5 Outline


Cash and Cash Equivalents

  1. Balance sheet valuation -- amount available
  2. The Bank Reconciliation as a Control Over Cash
    1. Timing differences
      1. Deposits in transit
      2. Outstanding checks
      3. Charges for bank services
      4. Interest added to the account
      5. NSF checks
    2. Errors
    3. Adjusting entry(ies) required

Short-Term Marketable Securities

  1. Reasons for investing in debt and equity securities
  2. Balance sheet valuation -- usually at cost, which approximates market
  3. Interest accrual

Accounts Receivable

  1. Balance sheet valuation -- net realizable value
  2. Bad debts/uncollectible accounts
    1. Expense recognition/valuation adjustment
    2. Write-off of uncollectible accounts
  3. Cash discounts
    1. Credit terms
    2. Cash discounts subtracted from revenues in income statement
    3. Allowance for cash discounts

Notes Receivable

  1. Comparison with accounts receivable
  2. Interest accrual

Inventories

  1. Alternative generally accepted practices exist
  2. Flow of costs from inventory to cost of goods sold
  3. Inventory cost flow assumptions
    1. Specific identification
    2. Weighted average cost
    3. FIFO
    4. LIFO
  4. The impact of changing prices (inflation/deflation)
  5. The impact of inventory quantity changes
  6. Selecting an inventory cost flow assumption
  7. Inventory accounting system alternatives
    1. Perpetual
    2. Periodic
  8. Inventory errors
  9. Balance sheet valuation at the lower of cost or market

Prepaid Expenses and Other Current Assets

  1. Prepaid insurance
  2. Other prepaid items

Deferred Tax Assets

  1. Arise from timing differences: financial accounting income versus taxable income
  2. An application of the matching concept








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