Cash and Cash Equivalents

These flashcards cover key concepts related to cash, cash equivalents, financial instruments, and receivables as presented in the lecture notes.

Cash

A standard medium of exchange such as currency and coins which are in circulation and legal tender.

Financial Instruments

Any contract that gives rise to financial assets of one entity (the holder) and a financial liability or equity instrument of another entity (the issuer).

Financial Assets

Assets that include cash, contractual rights to receive cash or another financial asset, rights to exchange financial instruments under favorable conditions, and equity instruments of another entity.

Current Assets

Assets expected to be realized, sold, or consumed within the entity’s normal operating cycle or within twelve months after the reporting period.

Cash Equivalents

Short-term and highly liquid investments readily convertible into cash, typically maturing within three months or less.

Imprest System

A system where cash collections are deposited intact and disbursements are made solely by means of checks.

Bank Reconciliation Statement

A statement prepared to reconcile the cash in bank account balance in the entity’s book with the balance reported by the bank.

Receivables

A financial asset that represents a contractual right to cash or another financial asset.

Allowance Method for Bad Debts

An accounting method used to estimate uncollectible accounts by creating an allowance for doubtful accounts.

Discounting

The sale of note receivable where the maturity value is paid before the due date, usually at a discount.