BU8101

Accounting: A User Perspective

Lecture 3
Sales Revenue, Receivables and Cash

© Lau Yin Kheng

 Learning Outcomes

Once you have completed this lesson, you should be able to:
1. Explain how companies measure and report sales
revenue.
2. Explain how companies measure, report and manage
receivables.
3. Apply internal control principles to cash and explain
reporting of cash.

© Lau Yin Kheng

 Learning Objectives

1. Explain how companies measure and report sales

revenue.
2. Explain how companies measure and report
receivables and impairment of accounts receivable
expenses.
3. Explain how companies manage accounts receivables.
4. Explain and apply internal control principles to cash.
5. Prepare a bank reconciliation and explain its purpose.
6. Explain the reporting of cash.

© Lau Yin Kheng

 Learning Objective 1
EXPLAIN HOW COMPANIES
MEASURE AND REPORT
REVENUE
© Lau Yin Kheng
LO 1 The Effect of Sales of Goods and
Services on the Financial Statements

Income Balance Statement of

Activity
Statement Sheet Cash Flows
Sales of goods Cash Cash received
and services Sales revenue from customers
Accounts
to customers
Receivable

IFRS 15, effective 1 Jan 18, establishes the principles for

reporting information about the nature, amount, timing and
uncertainty of revenue and cash flows from a contract with a
customer.
© Lau Yin Kheng
 Revenue from Contracts with Customers
LO 1

Core Principle
Revenue recognised to depict the transfer of goods or services
5 key steps to apply IFRS 15

Step 1 • Identify the contract with the customer

Step 2 • Identify the performance obligation in the contract

Step 3 • Determine the transaction price

Step 4 • Allocate the transaction price to each performance obligation

Step 5 • Recognise revenue as a performance obligation is satisfied

© Lau Yin Kheng

LO 1

Illustration

On 1 Jan 20x8, A Ltd enters into a contract with B Ltd to sell

30 printers for $450 per printer, and provide a 1-year
maintenance service contract from the date of sales. Credit
terms is 2/10, n30. Based on past practice, B Ltd normally
pays within 10 days to enjoy the discount.

A Ltd normally sells the printers without the service contract

for $400 each while the selling price of the service contract
on its own is $100 per printer.

© Lau Yin Kheng

LO 1 Step 1: Identify the Contract with the
Customer
1. Have parties to the contract approved the contract?
A Ltd & B Ltd have approved contract.
2. Can the rights of parties be identified?
A Ltd will receive payment for goods and service provided.
B Ltd will receive printers & I-year of maintenance service.
3. Can payment terms be identified?
Credit terms is 2/10, n30. B Ltd normally pays within 10 days.
4. Does Contract have commercial substance?
Future cash flow of A Ltd is expected to increase.
5. Consideration is probable of being collectible?
It can be assumed that consideration is probable of being collectible as A
Ltd appears to be a regular customer.

© Lau Yin Kheng

 Step 2: Identify the performance
obligation in the contract
LO 1

Illustration:
 There are two performance obligations.
• Delivery of printers &
• I-year maintenance service
 The two are distinct because
• B Ltd can benefit from use of printers on its own or with other
resources readily available to B Ltd; and
• A Ltd promises to transfer two separately identifiable promises i.e.
delivery of printers and 1-year of maintenance service.
 Not Distinct
• If the printers required specialised modification before it can be
used then the printers and the modification would not be distinct.

© Lau Yin Kheng

 Step 3: Determine the Transaction Price
LO 1

Goal: To determine amount of consideration that an entity

expects to be entitled in exchange for promised goods or
services
 More complex if transaction price include variable
consideration, significant financing amount, non-cash
value or consideration payable to customer.
 For example: in our illustration, the normal credit period
is 30 days and if customer pays within 10 days,
customer will get a sales discount of 2% and based on
past experience, B Ltd normally pays within 10 days.
Agreed selling price = Transaction Price = $450
$450 per printer x 98% = $441 per printer

© Lau Yin Kheng

LO 1 Step 4: Allocate the Transaction Price
to Each Distinct Performance Obligation
Goal: to allocate expected transaction price to each distinct
performance obligation

• Observable price of good or service that is sold separately

1

• Estimate selling prices if not observable

2

• If transaction price includes variable amounts (e.g. discounts):

allocate across all obligations unless variable amount relates to
3 specific performance obligations (2% discount if pays within 10 days)

© Lau Yin Kheng

LO 1 Step 4: Allocate the Transaction Price
to Each Distinct Performance Obligation
Illustration:

Stand alone selling price

Stand alone selling price
of 1-year maintenance
of each printer = $400
service = $100

Allocated price for:

Printer Maintenance service

= $441 x $400/($400 + = $441 x $100/($400 +
$100) = $352.80 per $100) = $88.20 per
printer printer

© Lau Yin Kheng

LO 1 Step 5 - Recognise Revenue when
each Performance Obligation is Satisfied

Illustration:
 On 1 Jan 20x8, B Ltd gains control over the use of the 30 printers. A
Ltd will recognise revenue of $10,584 (30 x $352.80) only. The
balance $2,646 (30 x $88.20) will be recognised over the one-year
period as A Ltd satisfies the performance obligation.
 On 1 Jan 20x8:
Dr. Cash (30 x 441) $13,230
Cr. Revenue (30 x 352.80) $10,584
Cr. Unearned Revenue (30 x 88.20) $ 2,646
 Each month, A Ltd will recognise revenue from service obligation:
Dr. Unearned Revenue $220.50
Cr. Revenue (2,646/12) $220.50

© Lau Yin Kheng

LO 1
Sales on Credit (on Account)
Sales Discounts
 When selling on credit, companies may offer customers a sales discount to
encourage early payment.
 Read as “two ten, net thirty”.

Terms
Discount Period Credit Period
Time
Full amount Full amount due
Due less discount
Discount Otherwise, Net
Purchase or Sale Period (or All) is Due

Read as: “Two ten, net thirty” Discount

Percent 2/10,n/30 Credit
Period

© Lau Yin Kheng

LO 1
Sales on Credit (on Account)
Payment by Credit Card
Payment by
credit card

Receive cash more Avoid impairment of

quickly accounts receivables

Date Description Debit Credit

Aug 1 Cash – DBS Bank (A+) 196
Credit Card Discount (R-)(OE-) 4
Sales Revenue (R+)(OE+) 200

The credit card discount may be reported as contra revenue to be

deducted from sales revenue or separately reported as selling expense

© Lau Yin Kheng

LO 1

Sales With Rights of Return

If $1,000 worth of goods is sold for $1,500 and
based on experience about 10% of the goods
will be returned. Customer Service
On sale date, the company will recognize Retur Reason
revenue and a refund liability: n for the
return?

Dr. Cash $1,500

Cr. Sales revenue $1,350
Cr. Refund liability $150

And recognize an expense and a recoverable

asset (goods likely to be returned)

Dr. Cost of goods sold $900

Dr. Recoverable assets $100
Cr. Inventory $1,000
© Lau Yin Kheng
 Principal or Agent
LO 1

 Principal controls specified goods or service before

transfer to customers. Indicators are:
 Bears primary responsibility
 Bears customer risk
 Can determine price
 Inventory risk.
 Agent arrange for another party to provide those goods
or services.
 Example: How much revenue should a travel agent
recognize if it collects $1,000 from customers for the
following: Paid to SIA $350 and Marriott Hong Kong
$500? Is it $1,000 or $150?
© Lau Yin Kheng
 End of Learning Objective

You have come to the end of this Learning

Objective!

Try the review questions that follow.

© Lau Yin Kheng

 Learning Objective 2

EXPLAIN HOW COMPANIES

MEASURE AND REPORT
RECEIVABLES AND IMPAIRMENT
OF ACCOUNTS RECEIVABLE
EXPENSES
© Lau Yin Kheng
LO 2

Credit Sales
Current period Future periods

Transfer of goods or Bear risk of

services collecting payments
in the future

Supported by Payment within 30 to 60 days

Entry for credit sales

Date Description Debit Credit
Accounts receivable (asset) Amount
Sales revenue Amount
© Lau Yin Kheng
LO 2

Types of Receivables
Amounts due from individuals and other companies that
are expected to be collected in cash.

Accounts Notes Other

Receivable Receivable Receivables

Amounts owed to Amounts owed to “Nontrade” amounts

the business for the business for owed to the
credit sales of which formal business for other
goods, or services. instruments of credit than business
are issued as proof transactions.
of debt.

© Lau Yin Kheng

LO 2

Impairment of Accounts Receivable

When companies allow customers to purchase
merchandise on credit, and customers promise to pay in
the future, it is inevitable that some of these receivables
might not be collectible.

Example:
Bank loans are receivables.
During the subprime mortgage crisis, borrowers of bank loans
defaulted in their mortgage payments (receivables for banks) due
to increased interest rate.
Banks had to foreclose their homes and write off a portion of the
credit losses ….
hence the term “bad debts” or “Impairment of accounts
receivable expense”

© Lau Yin Kheng

 LO 2

Impairment of Accounts Receivable

Prof: Accounting rules require you
to estimate the amount of doubtful
accounts for each fiscal period.

Barry: We sell biscuits on

credit. It is likely that some
customers may not pay. Best: Why can’t we just
write off accounts after
they turn bad?

Prof: The estimated amounts of

doubtful accounts are expenses and
they should be matched with
revenues in the same fiscal period
that created these accounts.

How do Barry and Best account for impairment of accounts

receivable in their business?
© Lau Yin Kheng
LO 2
Impairment of Accounts Receivable
Allowance Method
Methods of Accounting for Impairment of
Accounts Receivable (AR)

Direct Write-Off Allowance Method

Theoretically undesirable: Losses are estimated:

• No matching. • Matched with sales
• Receivable not stated at revenue in the same
cash realizable value. accounting period.

• Not acceptable for • Receivable stated at cash

financial reporting. realizable value.

NOT GAAP • Required by GAAP.

© Lau Yin Kheng
LO 2
Impairment of Accounts Receivable
Allowance Method
 Assume that up to 30th June 2015, Barry Best Biscuit
Company have unrealistically assumed that all of the
accounts receivable will be collectible.
 At 30th June, accounts receivable amounted to $10,000.

Barry Best makes

most sales on credit
30th June

Accounts receivable $10,000

© Lau Yin Kheng
LO 2
Impairment of Accounts Receivable
Allowance Method
Barry and Best reviews the list of accounts receivable at 30th
June 2015 and estimates that approximately $1,500 of these
accounts will prove to be uncollectible or impaired. NB: there
were no brought forward allowance balance.
Also known as “Uncollectible Account Expense”,
“Doubtful Debts” or “Bad debts”

Date Description Debit Credit

Jun 30 Impairment of Accounts Receivable (E+)(OE-) 1,500
Allowance for Impairment of Accounts
Receivable (A-) 1,500

Selling expense Contra-asset account

© Lau Yin Kheng
LO 2
Reporting Accounts Receivable and
Impairment of Accounts Receivable Expenses
Barry Best Biscuit Company
Balance Sheet at 30 June (partial)
Current Assets:
Also called Allowance for Doubtful Debts
Cash XXX
Accounts receivable $ 10,000
Less: Allowance for impairment of accounts receivable (1,500) 8,500
Inventory XX
Prepaid expense Net realizable value XX
Total current assets XXXX

Barry Best Biscuit Company

Income Statement for June 2015 (partial)
Net sales revenue XXX
Less: Expenses XXX
Impairment of accounts receivable expense 1,500
Utlities XX
Salaries XX

© Lau Yin Kheng

LO 2
Writing Off an Uncollectible
Account Receivable
Barry Best Biscuit Company
 Assume in JulyBalance
2015,Sheet
Barryat Best Biscuit
30 June (partial)Company
learns
that
Current Chill Café has gone out of business and that the $500
Assets:
account receivable from this customer is now worthless.XXX
Cash
Accounts receivable $ 10,000
 When
Less: an account
Allowance is determined
for impairment to be completely
of accounts receivable impaired,
(1,500) 8,500
it no longer qualifies as an asset and should be written off.
Inventory XX
Prepaid expense XX
Total current assets XXXX

Date Description Debit Credit

Allowance for Impairment of Accounts
Jul 15 Receivable (A+) 500

Accounts Receivable (Chill Cafe)(A-) 500

© Lau Yin Kheng

LO 2
Writing Off an Uncollectible
Account Receivable

Before Write-off After

Accounts receivable 10,000 -500 9,500
Less: Allow. for impairment of AR 1,500 -500 1,000
Net realizable value 8,500 8,500

Notice that the $500 write-off did not change the

net realizable value nor did it affect any income
statement accounts.

© Lau Yin Kheng

LO 2

Recovery of Accounts

 Chill Café comes out of bankruptcy and on 1st November

2015 and sends a cheque to Barry Best for $500.
 When there is recovery of a customer’s account that has
previously been written off, the entry to write off the
account is first reversed and…
Date Description Debit Credit
Accounts Receivable (Chill Cafe)
Nov 1 (A+) 500
Allowance for Impairment of
Accounts Receivable (A-) 500

© Lau Yin Kheng

LO 2

Recovery of Accounts
Then the collection of the account is recorded in the
usual manner:

Date Description Debit Credit

Nov 1 Cash (A+) 500
Accounts Receivable (A-) 500

Account Receivable
(Chill Café)
500 500

© Lau Yin Kheng

LO 2
Estimating Expected Credit losses(ECL)
of Accounts Receivable
Adjust Allowance
Management
for Impairment
review aging Estimate probable
of Accounts
analysis of amount of impaired
Receivable Account
accounts accounts
to the estimated
receivable
amount

How does a company estimate the amount?

Estimate expected credit losses using a

provision matrix

Expected life of trade Forecast of economic

Historical default rate
receivables conditions
© Lau Yin Kheng
LO 2
Estimating Expected Credit Losses
of Accounts Receivable
Let’s look at how Sunny Company made estimates for
impaired accounts.

Example:
Sunny Company assess its accounts receivable for impairment on
the following basis:
• Individually significant: Customers E, G & H
• Not individually significant: Other customers are collectively
assessed and aged. Each age grouping has a different likelihood
of being uncollectible.
• Estimate of impairment is based on historical observed default
rates, the expected life of the receivables and the forecasted
economic conditions…….

© Lau Yin Kheng

LO 2 Sunny Company
Schedule of Accounts Receivable
at 31 December 2014
Days Total
Past Due Estimated
Customer Total AR Current 1-30 31-60 > 60 Impairment
Individually
significant
E $130,000 $120,000 $10,000 $ 10,000
G 150,000 145,000 $3,000 2,000 5,000
H 100,000 80,000 $10,000 5,000 5,000 10,000
Sub-total 380,000 345,000 10,000 8,000 17,000 25,000
Age analysis
A 4,000 3,500 500
B 12,000 10,000 1,000 1,000
C 5,000 5,000
D 20,000 8,000 5,000 4,000 3,000
F 35,000 30,000 3,000 1,500 500
Sub-total 76,000 56,500 9,500 6,500 3,500
x % impairment 1% 3% 5% 10%
Est impairment 565 285 325 350 1,525
Total 456,000 26,525
© Lau Yin Kheng
LO 2
Reporting Accounts Receivable
at Net realizable Value
Method 1 Sunny Company
Balance Sheet at 31 December 2014(partial)
Current Assets:
Cash $ 33,000
Accounts receivable $ 456,000
Less: Allowance for impairment of accounts receivable (26,525) 429,475
Inventory 8,120
Prepaid expense 40
Total current assets 470,635

Method 2 Sunny Company

Balance Sheet at 31 December 2014(partial)
Current Assets:
Cash $ 33,000
Accounts receivable, net of $26,525 allowance 429,475
Inventory 8,120
Prepaid expense 40
Total current assets 470,635
© Lau Yin Kheng
LO 2
Adjustments for Impairment of
Accounts Receivable
Sunny Company
Balance Sheet at 31 December 2014(partial)
Current Assets:
Cash $ 33,000
Accounts receivable $ 456,000
Less: Allowance for impairment of accounts receivable (26,525) 429,475
Inventory 8,120
Prepaid expense 40
Total current assets 470,635

Allowance for
Impairment of AR
Balance before adjustment xx,xxx
Adjustment needed ? compare
Desired balance 26,525

© Lau Yin Kheng

LO 2
Adjustments for Impairment of
Accounts Receivable
Compare the current balance in the Allowance for
Impairment of AR before any adjustments with the desired
balance in the account.

Assume that Allowance for Impairment of AR before any adjustment:

Case 1: $ 10,000 credit balance
Case 2: $ 2,000 debit balance

At 31 December 2014, how much impairment of accounts receivable

expense should be recognized in Case 1 and Case 2 respectively?

© Lau Yin Kheng

LO 2
Adjustments for Impairment of
Accounts Receivable
Allowance for Allowance for
Impairment of AR Impairment of AR
Case 1 Case 2
Balance before adjustment 10,000 2,000
Adjustment needed 16,525 28,525
Desired balance 26,525 26,525
Date (Case 1) Description Dr Cr
Impairment of Accounts Receivable 16,525
Allowance for Impairment of AR 16,525
Date (Case 2) Description Dr Cr
Impairment of Accounts Receivable 28,525
Allowance for Impairment of AR 28,525
© Lau Yin Kheng
 End of Learning Objective

You have come to the end of this Learning

Objective!

© Lau Yin Kheng

 Learning Objective 3
EXPLAIN HOW COMPANIES
MANAGE ACCOUNTS
RECEIVABLES
© Lau Yin Kheng
LO 3

Managing Accounts Receivable

 Tight or relax credit policies?
 Tight – reduces risk of uncollectible accounts.

 Relax – increases volume of credit sales but higher

risk.

Factoring
Credit Card
Accounts
Sales
Receivable

© Lau Yin Kheng

LO 3

Managing Accounts Receivable

 A higher turnover ratio suggests:
 the company is managing its credit-granting and
collection activities effectively.
Accounts
= Net Sales
Receivable
Average Net Acc. Receivable
Turnover
This ratio measures how many times a company converts its
receivables into cash each year and is used as an indication
of the liquidity of the company.
Average
(beginning accounts receivable +
Net Acc. =
ending accounts receivable) / 2
Receivable
© Lau Yin Kheng
LO 3

Managing Accounts Receivable

Average 365 Days

Collection = Accounts Receivable Turnover
Period

Average
365 Days
Collection = = 13.50 days
27.03 Times
Period

This ratio measures, on average, how many days it

takes to collect an account receivable.

© Lau Yin Kheng

 End of Learning Objective

You have come to the end of this Learning

Objective!

Try the review questions that follow.

© Lau Yin Kheng

 Learning Objective 4
EXPLAIN AND APPLY INTERNAL
CONTROL TO CASH

© Lau Yin Kheng

LO 4

Internal Control System

$400,000

Net Sales
Best: We are now worried
that we may not be able to be in
control of our business.

Prof: Implement an internal control

system in your business. It will help
to prevent fraud and safeguard
assets and your interests in the
business.

© Lau Yin Kheng

LO 4

Fraud and Internal Control

 A fraud occurs when an employee act dishonestly for
personal benefit at the cost of the employer.
 Three factors contribute to fraudulent activities as depicted
by the fraud triangle below.

Financial Pressure
© Lau Yin Kheng
LO 4

Internal Control System

 Policies and procedures adopted to:

 Safeguard assets.
 Ensure the accuracy and reliability of accounting
records.
 Increase operational efficiency.
 Ensure adherence to company’s policies and
compliance with laws and regulations.

All transactions affect cash and Cash is the asset

most susceptible to theft and fraud.

© Lau Yin Kheng

LO 4

Internal Control Principles

 Establish Responsibility
 Assign responsibility and identify specific individual for
a given task at a time.
 Cash receipts: only cashiers are authorised to handle
cash receipts
 Cash payments: only authorised persons can sign
cheques and authorise payments.
 Segregation of Duties
 Responsibility for record keeping, custody of assets
and authorization should be separate.
 Related activities should be assigned to different
individual.
© Lau Yin Kheng
LO 4

Internal control Procedures

 Documentation Procedures
 Use prenumbered documents to account for all
documents. Source documents should be promptly
given to accounting department for timely recording.
 Physical Controls
 Relate to safeguarding of assets and enhance the
accuracy and reliability of the accounting records.
 Cash and cheques to be deposited in bank account on
a daily basis.

© Lau Yin Kheng

LO 4

Internal Control Procedures

 Independent Internal Verification
 Periodic check by an individual or department on the
work of another.
 For example, Supervisors count cash receipts daily;
assistant treasurer compares total receipts to bank
deposits daily.
 Human Resource Controls
 Conduct background check.

 Require employees to take vacations and rotate

employee’s duties.
 Bond employees who handle cash.

© Lau Yin Kheng

LO 4

Limitations of Internal Control

 Costs should not exceed benefit.

 Human element.
 Ineffective internal control could be caused by
employees’ indifference, fatigue or negligence.
 Employees in collusion can override the best controls.

 Size of the business.

 Small companies find it difficult to segregate duties.

© Lau Yin Kheng

LO 4

Petty Cash Funds

Used for minor

expenditures.

Petty Cash
Funds

Has one Replenished

custodian. periodically.

© Lau Yin Kheng

 End of Learning Objective

You have come to the end of this Learning

Objective!

© Lau Yin Kheng

 Learning Objective 5
PREPARE A BANK
RECONCILIATION AND EXPLAIN
ITS PURPOSE
© Lau Yin Kheng
LO 5

Bank As A Control Over Cash

 Safeguard cash by using a bank as a depository.
 Bank minimizes the amount of cash on hand.
 Bank creates a double record for all bank transactions.
 Bank reconciliation.

Compare

Cash balance in Cash balance in

bank’s records company’s books

© Lau Yin Kheng

LO 5

Bank As A Control Over Cash

Cash balance in Cash balance in

bank’s records company’s books

Possible Differences
1. Timing 2. Errors

Bank reconciliation steps

1. Reconcile the 2. Reconcile the 3. Update the

bank’s cash company’s cash company’s cash
balance balance account

© Lau Yin Kheng

LO 5

Bank Reconciliation
Explains the difference between cash reported on bank
statement and cash balance on company’s books and
provides information for reconciling journal entries.
Balance per Bank Balance per Book
+ Deposits in Transit (late + Deposits by Bank
deposits not yet reflected in (electronic transfers)
the bank statement)
-Service Charge
– Outstanding Cheques -Giro payments,
(Issued but not yet -NSF or Cancelled Cheques
presented to the bank)
± Interest Revenue/ Expenses
± Bank Errors ± Book Errors

= Adjusted Balance = Adjusted Balance

© Lau Yin Kheng
LO 5

Bank Reconciliation
The bank statement for Simmons Company indicated a cash
balance of $9,610 on 31st July. On this date, the cash ledger account
$7,430 Simmons determine the following
shows a balance of $7,430.
reconciling items:
Item 1: Deposits in transit: Deposit received by bank
on 1st August. $500
Item 2: Outstanding cheques: Totaled $2,417
Item 3: Bank memoranda:
Debit: A customer’s NSF cheque $225
Credit: Interest on bank balance for July $30
Item 4: Errors: Cheque 781 for supplies cleared the bank
for $268 but was erroneously recorded as $240. $28
A $486 deposit by Acme Company was
erroneously credited to our account by the bank. $486
© Lau Yin Kheng
LO 5

Bank Reconciliation
Balance per bank statement, 31st July $ 9,610
Additions:
Deposit in transit (Item 1) 500
Deductions:
Outstanding cheques (Item 2) $ 2,417
Bank error (Item 4) 486 (2,903)
Adjusted cash balance $ 7,207

Balance per depositor's records, 31st July $ 7,430

Additions:
Interest (Item 3) 30
Deductions:
NSF cheque (Item 3) $ 225
Recording error (Item 4) 28 (253)
Adjusted cash balance $ 7,207

© Lau Yin Kheng

LO 5

Reconciling Journal Entries

Balance per depositor's records, 31st July $ 7,430
Additions:
Interest (Item 3) 30
Deductions:
NSF cheque (Item 3) $ 225
Recording error (Item 4) 28 (253)
Adjusted cash balance $ 7,207

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

31 July Cash (A+) 30
Interest Revenue (R+)(OE+) 30

31 July Supplies (A+) 28

Accounts Receivable (A+) 225
Cash (A-) 253

© Lau Yin Kheng

 End of Learning Objective

You have come to the end of this Learning

Objective!

© Lau Yin Kheng

 Learning Objective 6
EXPLAIN THE REPORTING OF
CASH

© Lau Yin Kheng

LO 6

Cash and Cash Equivalents

Cash & Cash Equivalents are disclosed

together in the balance sheet
Cash includes:

Coins and paper money Cheques

Bank debit/credit
Bank drafts
card sales

Deposits in bank accounts - current accounts, savings

accounts, fixed deposits accounts etc.
© Lau Yin Kheng
LO 6

Cash and Cash Equivalents

Cash & Cash Equivalents are disclosed

together in the balance sheet
Cash equivalents are:

Short-term highly Readily convertible

liquid investments to cash

Maturity date of less Little risk of market

than three months value changes

Treasury Bills, Money Market Funds

© Lau Yin Kheng

LO 6
Reporting Other Cash
on the Balance Sheet

Restricted Cash Line of Credit

Including compensating Unused line of credit must
balance must be disclosed be disclosed as a note to
the accounts

© Lau Yin Kheng

 End of Learning Objective

You have come to the end of this Learning

Objective!

Try the review questions that follow.

© Lau Yin Kheng