Chapter 5 Current Assets. Bank Reconciliation Balance per bank: +deposits in transit -outstanding checks Balance per books: + interest earned - bank service.

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Presentation transcript:

Chapter 5 Current Assets

Bank Reconciliation Balance per bank: +deposits in transit -outstanding checks Balance per books: + interest earned - bank service charges - NSF checks (not sufficient funds)

Marketable securities Short term marketable securities that will be held until maturity are shown on the balance sheet at cost. Securities expected to be held for several months after the balance sheet dare are shown at their market value. Interest income from marketable securities that has not been received must be accrued

Accounts Receivable Reported on the balance sheet at net realizable value (amount of cash expected to be collected from the accounts receivable) Some people won’t pay! Matching rule

AR (cont) Cost of uncollectible receivables (Bad debt expense) must be estimated Amount of AR not expected to be collected is recorded and reported in Allowance for Bad Debts. Allowance for Bad Debts is a contra AR asset account, reported on the balance sheet as a subtraction from AR

Presentation of AR on BS Accounts Receivable$20,000 Less: Allowance for bad debt (500) Net accounts receivable$19,500 OR Accounts receivable, less allowance for bad debts of $500$19,500

Inventory Specific Identification Weighted average FIFO (first in first out) LIFO (last in first out) See example in Exhibit 5-3 on p

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