CH05 CASH AND RECEIVABLES

CHAPTER FIVE: CASH AND RECEIVABLES

5.1. INTERNAL CONTROL OVER CASH
 CASH: consists of coins, currency, checks, money orders [e.g. Bill of
Exchange-a written order to pay a sum of money to a particular person on a
particular date, and money on hand or on deposit in a bank.
Internal control refers to methods and measures adapted to:
 Safeguard assets.
 Enhance accuracy and reliability of accounting records. Reduce risk of:
a. Errors (unintentional)
b. Irregularities (intentional)
It varies with:
 Size and nature of the business.
 Management’s control philosophy.
Limitations of Internal Control
 Costs should not exceed benefit.
 Human element.
 Size of the business.
5.1.1. Internal Control over Cash Receipt:
1. Establishment of Responsibility
 Only designated personnel are authorized to handle or deal with cash receipts
(cashiers- the person whose job is to receive and pay out money in a bank,
store, organization etc.)
2. Segregation of Duties
 Different individuals receive cash, record cash receipts, and hold the cash
3. Documentation Procedures
 Use remittance advice (mail receipts), cash register tapes, and deposit slips
4. Physical, Mechanical, and Electronic Controls
 Store cash in safes and bank vaults; limit access to storage areas; use cash
registers
5. Other Controls
 Bond personnel who handle cash; require employees to take vacations
5.1.2. Internal control over cash payment or cash disbursement
Generally, internal control over cash disbursements is more effective when companies pay
by check, rather than by cash. It involves the following principles:
1. Establishment of Responsibility
 Only designated personnel are authorized to sign checks (treasurer- a person who is
responsible for the money including check and accounts of a club and organization)
2. Segregation of duties
 Different individuals approve and make payments; check signers do not record
disbursements
3. Documentation Procedures
 Use pre-numbered checks and account for them in sequence; each check must have
an approved invoice
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4. Physical, Mechanical, and Electronic Controls

 Store blank checks in safes, with limited access; print check amounts by machine in
indelible ink
5. Independent Internal Verification
 Compare checks to invoices; reconcile bank statement monthly
6. Other Controls
 Stamp invoices
Applications of systems as internal control over cash payment:
A. Voucher system
 Network of approvals, by authorized individuals, to ensure all disbursements by
check are proper.
A voucher is an authorization form prepared for each expenditure.
A. Electronic funds transfers (EFT) system
 Disbursement systems that uses wire, telephone, or computers to transfer cash
balances between locations.
B. Petty cash fund - Used to pay small amounts.
It involves:
 establishing the fund,
 making payments from the fund, and
 Replenishing the fund
5.2BANK RECONCILIATION
 Cash is the most liquid asset because it is a medium of exchange.
 Cash is easy to conceal, easy to move, and relatively easy to steal.
As a result, most businesses create specific controls for cash. Keeping cash in a bank account helps
because banks have established practices for safeguarding customers’ money. Banks also provide
customers with detailed records of their transactions. To take full advantage, the business should deposit
all cash receipts in the bank and make all cash payments through the bank. An exception is a petty cash
transaction, which we will discuss later.
The documents used to control a bank account include the following:
1. SIGNATURE CARD: Banks require each person authorized to transact business through an
account to sign a signature card. The bank uses the signature card to protect against forgery.
2. DEPOSIT TICKET: Banks supply standard forms such as deposit tickets. The customer fills in
the dollar amount of each deposit. As proof of the transaction, the customer keeps a deposit
receipt.
3. CHECK: To draw money from an account, the depositor writes a check, which is the document
that tells the bank to pay the designated person or business a specified amount of money.
4. BANK STATEMENT: Banks send monthly statements (Bank statements) to customers, which
is document the bank uses to report what it did with the depositor’s cash. Shows the bank
account’s beginning and ending balances and lists the month’s cash transactions conducted
through the bank
5. BANK RECONCILIATION
I. DEFINITION:
It is document explaining the reasons for the difference between a depositor’s cash records and
the depositor’s cash balance in its bank account.
.i.e. there are two records of a business’s cash:
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1. The Cash account in the company’s general ledger

2. The bank statement, which shows the cash receipts and payments transacted
through the bank.
The books and the bank statement usually show different amounts. Differences arise because of a
time lag in recording transactions. The result of updating or reconciling such difference is
called bank reconciliation.
Properly done bank reconciliation:-
 Explains all differences between the company’s cash records and the bank statement
figures.
 It ensures that all cash transactions have been accounted for.
 It also establishes that bank and book (your own) records of cash are correct.
II. PREPARING BANK RECONCILIATION
Here are some common reconciling items. They all cause differences between the bank balance
and the book balance.
1. Items to show on the Bank side of the bank reconciliation:
a) Deposits in transit (Outstanding deposits). The company has recorded these
deposits, but the bank has not.
b) Outstanding checks. The company has issued these checks and recorded them on
its books, but the bank has not yet paid them.
c) Bank errors. Correct all bank errors on the Bank side of the reconciliation.

2. Items to show on the Book side of the bank reconciliation:

a) Bank collections. Banks sometimes collect money for their depositors. Many
businesses have customers pay directly to the company bank account. This
practice, called a lock-box system, reduces theft and circulates cash faster than if
the cash is collected and deposited by company personnel.
An example is a bank’s collecting cash on a note receivable for the depositor.
Bank collections are cash receipts.
b) Electronic funds transfers. The bank may receive or pay cash on behalf of the
depositor. An EFT may be a cash receipt or a cash payment.
c) Service charge. This is the bank’s fee for processing the depositor’s transactions.
It is a cash payment.
d) Interest revenue on checking account. Depositors earn interest if they keep
enough cash in their account. The bank notifies depositors of this interest on the
bank statement. It is a cash receipt.
e) Nonsufficient funds (NSF) checks: are cash receipts that turn out to be
worthless. NSF checks (sometimes called hot checks) should be subtracted on
bank reconciliation.
f) The cost of printed checks. This cash payment is handled like a service charge.
g) Book errors or depositor’s error. Correct all book errors on the Book side of
the reconciliation.
III. JOURNALIZING TRANSACTIONS FROM THE RECONCILIATION
The bank reconciliation is an accountant’s tool separate from the company books. It
explains the effects of all cash receipts and all cash payments made through the bank.
But it does not account for transactions in the journal. To get the transactions into the
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accounts, we must make journal entries and post to the general ledger. All items on
the Book side of the bank reconciliation require journal entries.
Format for Bank Reconciliation:
ABC Company
Bank Reconciliation
Dec. 31, 2008
Cash balance according to bank statement ........................................... $xxx
Add: Additions by depositor not on bank statement ................ $xx
Bank errors ............................................................................... $xx
Sub-total ……………………………………………………………… $xxx
Deduct: Deductions by depositor not on bank statement .......... $xx
Bank errors ................................................................................. $xx
Adjusted balance..................................................................................... $xxx

Cash balance according to depositor’s records...................................... $xxx

Add: Additions by bank not recorded by depositor.................... $xx
Depositor errors........................................................................... $xx
Sub-total……………………………………………………………….. $xxx
Deduct: Deductions by bank not recorded by depositor ............. $xx
Depositor errors................................................………………… $xx
Adjusted balance.............................................................................. $xxx
IV. EXAMPLE OF BANK RECONCILIATIONT
The bank statement for ABC Company for January indicates balance of $ 5931.51. However, the
company’s Cash account has a balance of $3,294.21. This situation calls for a bank
reconciliation. Lists of the reconciling items are given below:-
1. Deposit in transit $1,591.60
2. Bank error: The bank deduced or decreased $100 for a check written by another
company. Add $100 to bank balance.
3. Outstanding checks:
Check No. Amount
337 $286.00
338 $319.47
339 $ 83.00
340 $203.14
341 $458.50
4. EFT receipt of rent revenue $904.03.
5. Bank collection of a note receivable, $2,114, including interest revenue of $114.
6. Interest earned on bank balance, $28.01.
7. Book error: Check no. 333 for $150 paid to Brown Company on account, was recorded
as $510. Add $360 to book balance.
8. Bank service charge, $14.25.
9. NSF check from L. Ross $52.
10. EFT payment of insurance expense, $361
INSTRUCTION:
i. Prepare bank reconciliation.
ii. Journalize the entries that should be made by ABC Company.
ANSWER:
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i. Bank Reconciliation
ABC Company
Bank Reconciliation
January 31, 20X3

Bank Books
Balance, January 31 . . . . . . . . . . . . . . $5,931.51 Balance, January 31 . . . . . . . . . . . . . . $3,294.21

Add: Add:
1. Deposit of January 31 in transit. . . . . . . 1,591.60 4. EFT receipt of rent revenue. . . . . . . . . . . 904.03
2. Correction of bank error. . . . . . . . . . . . . .100.00 5. Bank collection of note
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,623.11 receivable ($2,000), plus interest
revenue of $114 . . . . . . . . . . . . . . . . . . . . 2,114.00
6. Interest revenue earned on bank
balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.01
7. Correction of book error—
overstated our
check no. 333 . . . . . . . . . . . . . . . . . . . . . . . 360.00
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,700.25
Less:
3. Outstanding checks
No. 337 . . . . . . . . . . . . . . . . . $286.00 Less:
No. 338 . . . . . . . . . . . . . . . . . 319.47 8. Service charge . . . . . . . . . $ 14.25
No. 339 . . . . . . . . . . . . . . . . 83.00 9. NSF checks . . . . . . . . . . . . 52.00
No. 340 . . . . . . . . . . . . . . . . 203.14 10. EFT payment of
No. 341 . . . . . . . . . . . . . . . . 458.50 (1,350.11) insurance expense . . . . . . . 361.00 (427.25)
Adjusted bank balance . . . . . . $6, 273.00 Adjusted book balance . . . . . . . . . $6,273.00

Amounts should agree.

Note that each reconciling item is treated in the same way in every situation. Here is a summary
how to treat the various reconciling items:
BANK BALANCE—ALWAYS BOOK BALANCE—ALWAYS
Add deposits in transit. Add bank collections, interest revenue, and EFT receipts.
Subtract outstanding checks. Subtract service charges, NSF checks, and EFT payments.
Add or subtract corrections of bank errors Add or subtract corrections of book errors.

ii. Journal entries:

They are dated January 31 to bring the Cash account to the correct balance on that
date. Numbers in parentheses correspond to the reconciling items listed in bank
reconciliation.
(4) Jan. 31 Cash . . . . . . . . . . . . . . . . . . 904.03
Rent Revenue . . . . . . . …………904.03
 Receipt of monthly rent.
(5)Jan. 31 Cash . . . . . . . . . . . . . . . . . . 2,114.00
Notes Receivable. . …………….. 2,000.00
Interest Revenue . . . . …………….114.00
 Note receivable collected by bank.
(6) Jan. 31 Cash . . . . . . . . . . . . . . . . . . 28.01
Interest Revenue . . . ……….......... 28.01
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 Interest earned on bank balance.

(7) Jan. 31 Cash . . . . . . . . . . . . . . . . . . 360.00
Accounts Payable—Brown Co. . . . . . . . 360.00
 Correction of check no. 333.
(8) Jan. 31 Miscellaneous Expense……. 14.25
Cash . . . . . . . . . . . . . …….. 14.25
 Bank service charge.
(9) Jan. 31 Accounts Receivable —L. Ross . . . . . . . . . . . . . . 52.00
Cash . . . . . . . . . . . . . . ……………………52.00
 NSF check returned by bank.
(10)Jan. 31 Insurance Expense . . . . . . 361.00
Cash . . . . . . . . . . . . . . 361.00
 Payment of monthly insurance.
These entries update the company’s books.
5.2.1 Petty cash and change funds
Petty cash fund
Cash payments are as important as cash receipts. It is therefore critical to control cash payments.
Companies make most payments by check. They also pay small amounts from a petty cash fund.
Petty Cash Fund:-Fund containing a small amount of cash that is used to pay for minor expenditures.
Even though petty cash payments are small, the business needs to set up controls such as the following:
1. Designate an employee to serve as custodian of the petty cash fund.
2. Keep a specific amount of cash on hand.
3. Support all fund payments with a petty cash ticket.
The petty cash fund is opened when a check for the designated amount is issued to Petty Cash.
Example: Assume that on February 28, the business creates a petty cash fund of $200. The custodian
cashes a $200 check and places the money in the fund. Starting the fund is recorded as follows:
Feb. 28 Petty Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Cash in Bank . . . . . . . . . . . . …………. . . . . . . . 200
 To open the petty cash fund.

For each petty cash payment, the custodian prepares a petty cash ticket. The custodian keeps all the petty
cash tickets in the fund. The sum of the cash plus the total of the ticket amounts should equal the opening
balance ($200) at all times. Also, the Petty Cash account keeps its $200 balance at all times. This way to
account for petty cash by maintaining a constant balance in the petty cash account, supported by the fund
(cash plus payment tickets) totaling the same amount is called imprest system.
Payments reduce the cash in the fund, so periodically the fund must be replenished. On March 31 this
fund has $118 in cash and $82 in tickets. A check for $82 is issued to replenish the fund. The check is
made payable to Petty Cash. The fund custodian cashes this check and puts $82 in the fund to return its
actual cash to $200. The petty cash tickets identify the accounts to be debited, as shown in the following
entry to replenish the fund:
Mar.31 Office Supplies. . . . . . . . . . . . . . . . . . . . . . 23
Delivery Expense . . . . . . . . . . . . . . . . . . . . 17
Miscellaneous Selling Expense . . . . . . . . . 42
Cash in Bank . . . . . . . . . . . . . . . . . . . 82
 To replenish the petty cash fund.
The Petty Cash account keeps its $200 balance at all times. Petty Cash is debited only when the fund is
started (see the February 28 entry) or when its amount is changed. If the business raises the fund amount
from $200 to $250, this would require a $50 debit to Petty Cash and $50 credit to Cash in Bank.
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Illustration2. Bank Reconciliation

The bank statement for Mr. X Company reported on the next page indicates a balance of Birr 3,359.78 as
of Meskerem 30, 1995. The balance in the cash in Bank in Mr. X Company’s ledge as of some days is Birr
2,234.99 and while accessing the records of the company and the bank statement by using the above
five procedures, the following items were discovered.
Deposit of Meskerem 30 not recorded on Bank Statement Br 816.20
Checks outstanding No 812 Br 1,061.00
878 435.39
833 48.60 Br 1,544.99
Note plus interest of Br 8.00 was collected by Bank (credit memorandum was sent To Mr. X along with
Bank statement and this was not recorded in to cash receipt journal 408.00
Bank service charge /Debit memorandum was sent to Mr.X Company along with Balance sheet)
and this was not recorded in Mr.X cash payment journal. 3.00
Checks No. 879 for Br 732.26 for Mr. Tyler Company on account was erroneously recorded in
the account as 723.26. (The difference is 732.26-723.26 =9) Br 9.00
Then the Bank reconciliation based on the above information is as follows.
Mr. X Company
Bank reconciliation
Meskerem 30, 1995
Balance as per bank statement 3,359.75
Add: deposit of Meskerem 30, 816.20
Deduct: outstanding checks 4,175.98
No. 812 1061.00
878 435.39
883 48.60 (1,544.99)
Adjusted Balance Br 2,630.99
Balance as per depositor’s record 2,234.99
Add notes + interest collected by bank 408.00
Deduct: Bank service charges 3.00 2,642.99
Error in recording ck # 879 9.00 (12.00)
Adjusted Balance 2,630.99
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Entries Based on Bank reconciliation: Bank memorandums not recorded by the depositor and
depositor errors we have seen in the above bank reconciliation should be For the credit
recorded in the
memorandum
depositor’s record. The entries may be recorded in special or general journal as the case may be.
The following entries are recorded by Mr. X company record to bring the cash balance to the
correct and adjusted Balance: -
Meskerem 30, 1995 Cash in bank 408
" Notes relievable 400.00
" Interest income 8.00

Meskerem 30, 1995 Miscellanies expense 3.00

For the error mad in
" Account Payable 9.00 recording Ck. # 879
and bank service
Cash in Bank 12
charge
5.2.2Cash change fund
 Retail stores of other business that receive cash directly from customers must keep some
currency and coins on hand in order to make change. This cash is recorded in a cash
change fund account.
 Accounting procedures in relation to change fund:
a. Check is drawn for the required amount
b. Journal entry is made to record the change fund:
Cash on hand…………………xxx
Cash in bank……………………..xxx
 Note that no additional changes or credits to the cash on hand account are necessary unless the
amount of fund is increased or decreased. The total amount of cash received during the day is
deposited, and the original amount of the change fund is retained.
5.3 Classifications of receivables
 Receivables are monetary claims against businesses and individuals.
 Amounts due from individuals and other companies that are expected to be
collected in cash.
Receivables are majorly classified in to two: trade and non- trade receivables.
1. Trade Receivables: are receivables that arise from the major or normal
operational activities of business such as sales of goods and services. The two
major types of trade receivables are :
a. Accounts Receivables- are claims against customers for goods and services
sold on credit (15-60) maturity date.
b. Notes Receivables- represent claims that are evidenced by formal
instruments of credit (60-90) maturity date.
2. Non-Trade Receivables: - are receivables arising from transactions other than
credit sales of goods and services.
Example: Interest receivable (from lending money), Rent receivable, Loans or
advances to employees, Commission receivable etc.
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5.4 Internal control of receivables

Like cash, Receivables also needs control system since it will result in to future cash collection.
Receivables are controlled by designing a clear boundary that separates the task of proofing
[approving] credit sales, record keeping of credit sales, and collection as well as follow up of
receivables. Thus, the employee who handles the accounting for Receivables should not be involved in
the credit approvals or collection of receivables. Separation of these functions reduces the possibility
of errors and embezzlement.
5.5 Accounting for uncollectible accounts
Selling on credit creates both a benefit and a cost.
a. The benefit: The business increases revenues and profits by making sales to a wide range of
customers.
b. The cost: The Company will be unable to collect from some customers, and that creates an
expense. The expense is called uncollectible-account expense, doubtful-account expense, or
bad-debt expense.
Uncollectible Receivable (Uncollectible Account):- refers to the amount that will not be collected due to
failure of the customers to make payment. In accounting, receivables not collected from customers are
debited to Bad Debt Expense or Uncollectible Accounts Expense.
 Such losses are considered as a normal and necessary risk of doing business on a credit basis.
 From management point of view, a reasonable amount of uncollectible account is evidenced as a
sound credit policy.
 Uncollectible account expense which is an operating expense must be measured, recorded and
reported.
 To account for uncollectible receivables accountants use the allowance method or, in certain
limited cases, the direct write-off method.
1. The Allowance Method
Most companies use the allowance method to measure bad debts. This method records bad-debt expense
in the same period in which sales are made on account. The business doesn’t wait to see which customers
will not pay. Instead, it records bad-debt expense on the basis of estimates developed from past
experience.
Example: - Customers owe Oracle $2,800 million, of which Oracle expects to collect $2,400 million.
Oracle estimates it will not collect $400 million of these accounts receivable. The adjusting entry to
record the estimated uncollectible accounts will be as follows.
Bad Debt Expense………..400
Allowance for Uncollectible Accounts…………400
2. Direct Write-off method
It is a method of accounting for uncollectible receivables, in which the company waits until the
credit department decides that a customer’s account receivable is uncollectible, and then debits
Uncollectible-Account Expense and credits the customer’s Account Receivable.
 The direct write-off method is defective for two reasons:
1. It does not set up an allowance for uncollectible. As a result, the direct write off method
always reports the receivables at their full amount. Assets are overstated on the balance sheet
because the business does not expect to collect the full amount.
2. It does not match uncollectible-account expense against revenue very well.
Example: To write-off uncollectible account
Uncollectible-Account Expense . . . . . . . . 2,000
Accounts Receivable—Mr. Jones . . . . 2,000
To account for the recovery of accounts of customers written-off in earlier times we make two journal
entries to (1) reverse the earlier write-off and (2) record the cash collection, as follows:
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(1) Accounts Receivable—Andrews . . . . . . . . . . . . . . xxx

Uncollectible- Accounts Expense . . . . . . . . . . . . xxx
 To reinstated customer’s account written-off earlier in the year.
[OR ] Allowance for Uncollectible Accounts . . . . . . . . . . . . . xxx
Bad Debt Expenses . . . . . . . .. . . . . . . . . . . . . . . . xxx
 To reinstate customer’s account estimated earlier in the year.[if allowance method was used]
(2) Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .900
Accounts Receivable— Mr. Abel . . . . . . . . . 900
 To record Collection of cash on account. [common for both methods]

5.6 Accounting for Notes Receivable

Credit may also be granted in exchange for a formal credit instrument known as promissory note. A
promissory note is a written promise to pay specified amount of money at a particular future date. It
involves two parties: MAKER & PAYEE.
 MAKER: is the person or business that signs the note and promises to pay the amount required
by the note agreement. The maker is the debtor and thus it is a liability for him/her.
 PAYEE: is the person or business to whom the maker promises future amount. The payee is the
creditor and thus it is an asset for him or her.

Types of note: there are two types of note:
1. Interest Bearing Note- interest is clearly stated on the face of the note.
2. Non-Interest Bearing Note-interest is not clearly stated on the face of the note, but it is
included with the amount to be paid in the future.
Advantage of notes receivable over accounts receivable:
1. It possesses strong legal claim
2. It is a negotiable instrument
3. It earns interest income.
Important terms of a note:
 Principal amount or principal: The amount loaned out by the payee and borrowed by the maker
of the note.
 Interest: The revenue to the payee for loaning money; the expense to the debtor.
AMOUNT OF INTEREST = PRINCIPAL x RATE x TIME
 Interest period: The period of time during which interest is computed. It extends from the
original date of the note to the maturity date. Also called Note term, or simply time.
 Interest rate: The percentage rate of interest specified by the note. Interest rates are almost
always stated for a period of one year. A 9% note means that the amount of interest for one year
is 9% of the note’s principal amount.
 Maturity date: The date when final payment of the note is due. Also called the due date.

Ex. A 120-day note dated September 14, 20X6, matures on January 12, 20X7, as shown here:
Month Number of Days Cumulative Total
Sep. 20X6 30 X- 14 = 16 16
Oct. 20X6 31 47
Nov. 20X6 30 77
Dec. 20X6 31 108
Jan. 20X7 12 120
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In counting the days remaining for a note, remember to count the maturity date and to omit the
date the note was issued.
 Maturity value: The sum of the principal plus interest due at maturity.
Recording of Notes Receivable
Ex. Consider the loan agreement that after Lauren Holland signs the note, Continental Bank gives her
$1,000 cash. At maturity, Holland pays the bank $1,090 ($1,000 principal plus $90 interest).
The bank’s entries are:
Sep. 30, 20X6 Note Receivable—L. Holland . . . . . 1,000
Cash . . . . . . . . . . . . . . . . . . ……….. . . . . . 1,000
 To record Loaned out money.
Sep. 30, 20X7 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,090
Note Receivable—L. Holland. . …………………. 1,000
Interest Revenue ($1,000 *0.09 *1)……………… 90
 To record Collection of note receivable including interest
Honored versus Dishonored Note Receivable
1. A note is honored when its maker pays it in full at its maturity date.
2. Dishonored note is not paid in full at maturity. A dishonored note receivable is no longer
negotiable.
5.7 Factoring Receivables
Factoring is an agreement between a factor and a supplier in which the factor purchases the
supplier’s accounts receivable and, in non-recourse arrangements, assumes responsibility for the
supplier’s customers’ financial inability to pay. (The customer is typically a retailer, but it could be
a wholesaler or a manufacturer as well.)
If a customer is financially unable to pay, the factor makes payment on undisputed, approved invoices.
The factor extends credit to the customers, collects the accounts receivable from customers and performs
the related bookkeeping functions. As needed, the factor may also provide cash advances against open
receivables prior to collection.
 Typically the factor charges a commission to the company that is
selling the receivables.
 The fee ranges from 1-3% of the amount of receivables purchased.
Example: On March 3, Cornwell Appliances sells $680,000 of its receivables to Marsh Factors Inc.
Marsh Factors assesses a finance charge of 3% of the amount of receivables sold.
1. Prepare the entry on Cornwell Appliances’ books to record the sale of the receivables?
Answer:
Cash . . . . . . . . . . . . . . . . . . . . 659,600
Service charge expense . . . . . 20,400
Accounts receivable . . . . . . . . . . . . . . . . 680,000
2. Prepare entries on Marsh Factors Inc. to record the purchase of receivables?
Answer:
Accounts Receivable . . . . . . . . 680,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . 659,600
Commission Income . . . . . . . . . . . . 20,400
*($680,000 x 3% = $20,400)
5.9. Presentation of cash and receivables on the balance sheet
Example Company ABC Company
Balance Sheet
December 31, 20xx
 CH05 CASH AND RECEIVABLES

Assets
Current:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $X, XXX
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . $X, XXX
Less: Allowance for Uncollectible accounts . . . . . . . . (XXX) X, XXX
Notes receivable, short-term . . . . . . . . . . . . . . . . . . . . . X, XXX
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Inventories and long-term receivables:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Notes receivable, long-term . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X, XXX
Plan assets:
Property, plant, and equipment . . . . . . . . . . . . . . . . . . . X, XXX
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $X, XXX

THE END OF THE COURSE

THANK YOU VERY MUCH!!!