One-Page AccountingII. Accounting for Assets
III. The Present and Future Value of Money IV. Liabilities and Equity
V. Income Measurement and Reporting Cycle VI. Related Booklets
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II. Accounting for Assets Links provide added explanation.
Read, if necessary, upon completing this Part I.
A. Cash and Short-Term Investments
1. When a number of people are responsible for purchasing, vouchers
and other financial controls are used to protect from wastes, fraud,
and insure accurate financials.
2. Cash equivalents are highly liquid assets that mature within 90 days
meaning little interest rate risk, and include T. Bills, short-term
commercial paper, and money markets funds.
B. Accounts Receivable
1. Selling on credit increases sales and customer defaults normally
result in few bad debt expenses.
2. If sales are small and collected quickly, bad debts may be written off
directly when collection fails. Otherwise, an allowance is estimated,
charged to expense, and lowered when appropriate.
3. Bad debts may be estimated as a percentage of credit sales,
a percentage of current receivables, or receivables may be aged
with older receivables estimated to have a higher failure rate.
1. Items purchased, marked up, and stored for later sale may be
inventoried to Goods Available for Sale.
An end of period inventory is subtracted leaving Cost of Good Sold.
2. Periodic Inventory has costing at the end of a period, while a perpetual
inventory has costing continually.
3. Income Statement and Balance Sheet amounts are affected differently
so wanting low taxes would mean a different method than wanting high
asset valuations. IRS frowns on changing methods.
D. Plant and Equipment
Long lasting assets not intended for resale have a value equal to cost,