Cash portfolio financial investments, trade recievables

Cash equivalents

are short-term (generally up to 3 months), highly liquid investments that are convertible to known amounts of cash and that have no significant market value risk (for example, short-term deposits and units of money market funds).

On the balance sheet, all liabilities and assets in other currencies

you should indicate in euros (the currency of the country where company operates) and change accordingly to a rate on the balance sheet day. Change value in cash – and adjust it in a profit

Prepayment

not monetary asset. You should adjust only monetary assets!!!

Monetary assets: cash, cash equivalents (investments, deposits), accounts receivables

Possible problems with receivables

Currency exchange, bad debt

Deadlines

Annual report for period from 1 of Jan to 31 of Dec

30 Apr – deadline for publishing report – for public companies

30 June – deadline for private companies

Two methods for looking how to adjust receivables:

1. Look at the companies who overdue on the Internet

2.Based on the experience you had assign the probability of not receiving money back

Securing receivables

minimizing risks of not being able to receive the receivables.

Method for measuring book value of recievables

Recognize initially receivables at cost, subsequent measurement at amortized cost.

Amortized cost = initial cost less payments and impairment.

Impairment = value of (probably) uncollectible receivables. (reduced cost of crashed car f.e.)

Uncollectible accounts

bad debts

Allowance method

An adjustment is made at the end of each accounting period to estimate bad debts based on the business activity from that accounting period.

Contra account

is associated with another T-account. Adjustments to the original account.

Receivable expressed in foreign currency

recognise currency rate changes (same as with cash)!

Secured receivable

secure receivable (take away the car in case of lease)

Write the clause about taking risks by clients

Company is liquid when

Short-term assets>short term liabilities

Not the case, when convertibility of the asset takes longer than term for a liability payment