After studying this chapter, you should be able to:
LO1 Define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements.
LO2 Explain the possible restrictions on cash and their implications for classification in the balance sheet.
LO3 Distinguish between the gross and net methods of accounting for cash discounts.
LO4 Describe the accounting treatment for merchandise returns.
LO5 Describe the accounting treatment of anticipated uncollectible accounts receivable.
LO6 Describe the two approaches to estimating bad debts.
LO7 Describe the accounting treatment of short-term notes receivable.
LO8 Differentiate between the use of receivables in financing arrangements accounted for as a secured borrowing and those accounted for as a sale.
LO9 Describe the variables that influence a company’s investment in receivables and calculate the key ratios used by analysts to monitor that investment.
