Day 80: Unit 2 Test

After test:

• Review the Final Exam Preparation Document

Day 78 and 79: Unit 2 Review

Prepare for Unit 2 Test:

• Unit 2 Review Questions PDF
• Unit 2 Review Questions Editable
• Chapter 7 Review
• Chapter 8 Review

Ch 8 Quiz Retake

Study for Unit 2 Test after quiz.

Ch 8 Quiz

AFTER THE QUIZ,
review topics you were unsure of inpreparation for the retake next week

Day 68: Allowance Estimate Practice

Continue to Work on:

• Direct Write-off Problems
• page 403 Exercise 1 
• page 407 Discussion Question 2 
• page 407 BE 8-1 
• page 409 EX 8-3 

• Allowance Problems
• page 403 Exercise 2 and 3
• page 407 Discussion Question 3 
• page 407 BE 8-2
• page 408 BE 8-3
• page 409 EX 8-4 

Watch this video if you need to review the main topics again (14:50)

• Percentage of Sales Problems
• page 388 Check-up Corner 8-1 
• page 403 Exercise 3
• page 408 BE 8-3
• page 409 EX 8-6 A and C

Watch this video if you need to review the percentage of sales topics (9:20)

• Analysis (Aging) of A/R Problems
• page 391 Check-up Corner 8-2
• page 403 Exercise 4
• page 408 BE 8-4
• page 409 EX 8-6 B and D
• page 410 EX 8-8, 8-9, 8-10, 8-11, 8-12

Watch this video if you need to review the analysis of A/R topics (7:21)

Day 69 to 71: Continue Estimating Allowance Practice

Work on: Chapter 8 Textbook Problems

• Direct Write-off Problems
• page 403 Exercise 1 
• page 407 Discussion Question 2 
• page 407 BE 8-1 
• page 409 EX 8-3 

• Allowance Problems
• page 403 Exercise 2 and 3
• page 407 Discussion Question 3 
• page 407 BE 8-2
• page 408 BE 8-3
• page 409 EX 8-4 

• pg 411 Exercises 8-13 & 8-14

Watch this video if you need to review the main topics again

• Percentage of Sales Problems
• page 388 Check-up Corner 8-1 
• page 403 Exercise 3
• page 408 BE 8-3
• page 409 EX 8-6 A and C

Watch this video if you need to review the percentage of sales topics (9:20)

• Analysis (Aging) of A/R Problems
• page 391 Check-up Corner 8-2
• page 403 Exercise 4
• page 408 BE 8-4
• page 409 EX 8-6 B and D
• page 410 EX 8-8, 8-9, 8-10, 8-11, 8-12

Watch this video if you need to review the analysis of A/R topics (7:21)

• Review Problems
• page 411 EX 8-13, 8-14
• page 412 EX 8-17
• page 413 EX 8-18

Day 67: Review Accounting for A/R

Summary

If we need to write off a receivable, we need to lower the asset (A/R) and the Revenue recorded when the credit sale was originally made (by recording Bad Debt Expense). We do not want to overstate assets or revenue (Principle of Conservatism). 

Under the Direct Write-off method we wait until we know who is not going to pass us to do the write-off:

Bad Debt Expense

     A/R - ABC Company

          write-off ABC Company's account as uncollectible

(this will violate the matching principle if the write-off occurs in a different accounting period as the original credit sale and should only be used by company's with few credit sales)

Under the Allowance method, we make an estimate of how much of this year's credit sales will be uncollectible (without affecting a specific customer's account) using either the Percentage of Sales method or the Aging of A/R method.

• Adjusting Entry at year-end:

Bad Debt Expense

     Allowance for Uncollecible Accounts

          estimate current year's uncollectible accounts

• Write-off of specific account after estimating the Allowance:

Allowance for Uncollectible Accounts

     A/R - XYZ Company

          write-off XYZ Company's account as uncollectible

Work on: Chapter 8 Textbook Problems

• Direct Write-off Problems
• page 403 Exercise 1 
• page 407 Discussion Question 2 
• page 407 BE 8-1 
• page 409 EX 8-3 

• Allowance Problems
• page 403 Exercise 2 and 3
• page 407 Discussion Question 3 
• page 407 BE 8-2
• page 408 BE 8-3
• page 409 EX 8-4 

• pg 411 Exercises 8-13 & 8-14

Watch this video if you need to review the main topics again

• Percentage of Sales Problems
• page 388 Check-up Corner 8-1 
• page 403 Exercise 3
• page 408 BE 8-3
• page 409 EX 8-6 A and C

Watch this video if you need to review the percentage of sales topics (9:20)

• Analysis (Aging) of A/R Problems
• page 391 Check-up Corner 8-2
• page 403 Exercise 4
• page 408 BE 8-4
• page 409 EX 8-6 B and D
• page 410 EX 8-8, 8-9, 8-10, 8-11, 8-12

Watch this video if you need to review the analysis of A/R topics (7:21)

• Review Problems
• page 411 EX 8-13, 8-14
• page 412 EX 8-17
• page 413 EX 8-18

Day 66: Bad Debt Practice

Work on: Chapter 8 Textbook Problems

• Direct Write-off Problems
• page 403 Exercise 1 
• page 407 Discussion Question 2 
• page 407 BE 8-1 
• page 409 EX 8-3 

• Allowance Problems
• page 403 Exercise 2 and 3
• page 407 Discussion Question 3 
• page 407 BE 8-2
• page 408 BE 8-3
• page 409 EX 8-4 

• pg 411 Exercises 8-13 & 8-14

Watch this video if you need to review the main topics again

• Percentage of Sales Problems
• page 388 Check-up Corner 8-1 
• page 403 Exercise 3
• page 408 BE 8-3
• page 409 EX 8-6 A and C

Watch this video if you need to review the percentage of sales topics (9:20)

• Analysis (Aging) of A/R Problems
• page 391 Check-up Corner 8-2
• page 403 Exercise 4
• page 408 BE 8-4
• page 409 EX 8-6 B and D
• page 410 EX 8-8, 8-9, 8-10, 8-11, 8-12

Watch this video if you need to review the analysis of A/R topics (7:21)

• Review Problems
• page 411 EX 8-13, 8-14
• page 412 EX 8-17
• page 413 EX 8-18

Day 65: Allowance Method

Discuss Allowance Method

Day 64: Direct Write-off

Discuss Direct Write-off

Day 63: Introduction to Receivables

Receivables

• amount to be collected in future
• not all gets collected
• need to account for uncollectibles
• direct write-off
• violates matching principle
• write off when know who isn't paying
• overstates assets and revenues
• ok to use if small company with few receivables
• allowance method
• estimates bad debt at end of accounting period
• records bad debt in same period as related revenues
• two methods
• % of sales
• aging of A/R

Day 61: Preview Chapter 8

Ch 8 Notes

Ch 8 Review Questions

Ch 8 Topics

​

Ch 8 Exercises

Ch 8 Textbook Pages

Watch Chapter 8 Videos and take notes

• Accounts Receivable (14:51)
• Direct Write Off & Percentage of Sales(9:20)
• % of A/R & A/R Aging (7:21)
• Notes Receivable (6:00)

Notes:

uncollectible acct exp

Sales on Credit

complications and costs

Why sell on credit

increase sales, increase net income, also increases costs

Bad Debt Loss / Uncollectible Acct Expense

write off balance (during period at time account is determined to be uncollectible)

Direct Write off (simplest) debit uncollectible acct exp credit A/R [Not allowed under GAAP]

                                violates the matching principle

                                                distorts Net Income and Assets

Allowance (adjusting enty)

debit Uncollectible Account Expense

                                credit Allowance for Uncollectible Accounts (Contra Asset)

                                [Can’t credit A/R b/c don’t know who won’t pay us]

Net Realizable Value (Net A/R) = A/R minus Allowance

                estimates bad debt (adjusting entry at end of period)

                                percentage of net sales (or net credit sales)

                                                determines write off amount

                                Aging (Analysis) of A/R

                                                brings Allowance up to date

Day 60: Ch 7 Quiz Retake

After quiz, preview chapter 8.

Watch Chapter 8 Videos and take notes

• Accounts Receivable (14:51)
• Direct Write Off & Percentage of Sales(9:20)
• % of A/R & A/R Aging (7:21)
• Notes Receivable (6:00) 

Day 59: Go Over Ch. 7 Quiz Results

Review the chapter 7 quiz results.

Day 58: Ch 7 Quiz

• Take Chapter 7 Quiz
• Watch Chapter 8 Videos and take notes
• Accounts Receivable (14:51)
• Direct Write Off & Percentage of Sales(9:20)
• % of A/R & A/R Aging (7:21)
• Notes Receivable (6:00)

Day 57: Review for Ch. 7 Quiz

Complete the review questions in your green packet.
Chapter 7 Quiz is Tomorrow

Day 56: Intro to Petty Cash

Petty Cash Fund

• small amount of money kept on-hand to pay for small, unexpected purchases
• establishment
• Debit Petty Cash Fund, Credit Cash
• replenishment
• Debit various expense accounts, Credit Cash

Work on:

• Practice Exercise 4 on page 361
• BE 7-4 on page 365
• EX 7-24 on page 370

Day 55: Bank Rec Practice

Work on:

• EX 7-21
• EX 7-22

Day 54: Bank Rec Practice

Work on:

• EX 7-18
• EX 7-19
• EX 7-20

Day 53: Bank Rec Practice

Work on:

• BE 7-3
• EX 7-16
• EX 7-17

Day 52: Bank Reconciliations

Compare Bank's Records to the Company's Records

Reconciling Items

• Outstanding Checks (no journal entry)
• Deposits in Transit (no journal entry)
• Bank Fees       (Debit Misc. Expense,    Credit Cash in Bank)        debit memo
• Interest             (Debit Cash in Bank,     Credit Interest Income)     credit memo
• NSF                  (Debit A/R,                     Credit Cash in Bank)         debit memo
• Notes Proceeds (Debit Cash in Bank,   Credit Notes Receivable)  credit memo

Bank Reconciliations


  Bank Statement Balance   
    Add: Deposits in Transit
    Less: Outstanding Checks
-------------------------------------------------
  Adjusted Bank Statement Balance  
-------------------------------------------------


  Company's Cash Balance  
    Add: Interest
             Note Proceeds
    Less: Bank Fees
             NSF Checks
------------------------------------------------
  Adjusted Company Cash Balance  
------------------------------------------------

Day 51: Cash Payments and Banking

Chapter 7 Problems

Textbook Pages

• pg 359 Multiple Choice Question 1
• pg 360 Exercise 1
• pg 364 Discussion Questions 1, 2, 3, 4, 5
• pg 364 Basic Exercise 7-1
• pg 365 Exercises 7-2 & 7-3

Watch the following videos and take notes:

• Internal Controls for Cash (5:00)
• Bank Reconciliation Intro (7:33)
• Bank Rec - Bank Side (3:41)
• Bank Rec - Book Side (4:36)
• Bank Rec - Adjusting Entries (3:28)
• Bank Reconciliations (13:49)
• Bank Reconciliations (8:50) 
• Reconciliation of Bank Accounts (5:40) 

Preview Next Topics

Types of "Cash"

• Currency (bills)
• Coins
• Money Orders

 Change Fund

• money put in cash registers to make change for customers

 Sources of Cash Receipts:

• Cash Sales at cash register
• Checks received on account through the mail
•  with Remittance Advice
• EFT Receipts
•  faster
•  easier
•  safer
•  more accurate
•  better control

Cash Sales Journal Entry
Cash (asset)                                108
Cash Short and Over (expense)      2
         Sales (revenue)                             100
         Sales Tax Payable (liability)            10

Voucher System

• vouchers show proof of authority to make a payment

Banking Advantages

• Safer
• limits amount of cash on hand at business
• makes it easier to transfer money
• independent (3rd party) verification and recording of cash transactions

Credit Memo = Debit Cash

• EFT receipts
• Collection of note proceeds
• interest earned

Debit Memo = Credit Cash

• EFT payments
• NSF checks
• non-sufficient funds, bounced checks we deposited
• debit A/R, credit Cash
• bank fees

Day 50: Basics of Cash

Chapter 7 Problems

Textbook Pages

• pg 359 Multiple Choice Question 1
• pg 360 Exercise 1
• pg 364 Discussion Questions 1, 2, 3, 4, 5
• pg 364 Basic Exercise 7-1
• pg 365 Exercises 7-2 & 7-3

Preview Next Topics

Types of "Cash"

• Currency (bills)
• Coins
• Money Orders

 Change Fund

• money put in cash registers to make change for customers

 Sources of Cash Receipts:

• Cash Sales at cash register
• Checks received on account through the mail
•  with Remittance Advice
• EFT Receipts
•  faster
•  easier
•  safer
•  more accurate
•  better control

Cash Sales Journal Entry
Cash (asset)                                108
Cash Short and Over (expense)      2
         Sales (revenue)                             100
         Sales Tax Payable (liability)            10

Day 49: Control Procedures

Control Procedures
provide reasonable assurance that business goals will be achieved, including the prevention of fraud.

• Competent personnel, rotating duties, and mandatory vacations
• properly training and supervising personnel
• rotating duties and mandating vacations helps identify irregularities
• Separating duties for related operations
• cashier, cook, waiter
• ticket Sales, ticket-taker
• Separating operations, custody of assets, and accounting
• By separating the responsibilities for operations, custody of assets, and accounting, the accounting records serve as an independent check on the operating managers and the employees who have custody of assets.
• Proofs
• authorization, approval, and reconciliation.
• Security measures
•  locked cases, security guards, mirrors, security tags, cash registers, safes.

Day 48: Control Framework

The Control Environment Overall attitude of management and employees about the importance of controls.
Three factors influencing a company’s control environment include the following:

• Management’s philosophy and operating style
• Management’s philosophy and operating style relates to whether management emphasizes the importance of internal controls.
• The company’s organizational structure
• The business’s organizational structure is the framework for planning and controlling operations.
• The company’s personnel policies
• The business’s personnel policies involve the hiring, training, evaluation, compensation, and promotion of employees.
• In addition, job descriptions, employee codes of ethics, and conflict-of-interest policies are part of the personnel policies.

Risk Assessment
All businesses face risks such as changes in customer requirements, competitive threats, regulatory changes, and changes in economic factors. 

Management should:

• identify such risks,
• analyze their significance, assess their likelihood of occurring,
• and take any necessary actions to minimize them.

Day 47: Internal Controls Discussion

Sarbanes-Oxley Act of 2002

• often referred to as Sarbanes-Oxley or SOX
• applies only to companies whose stock is traded on public exchanges.
• purpose is to restore public confidence and trust in financial reporting of companies
• emphasizes importance of effective internal control.
• requires companies to maintain effective internal controls over the recording of transactions and the preparing of financial statements

Internal control

• procedures and processes used by a company to:
• Safeguard its assets.
• Process information accurately.
• Ensure compliance with laws and regulations.

Objectives of Internal Control are to provide reasonable assurance that:

• Assets are safeguarded and used for business purposes.
• Business information is accurate.
• Employees and managers comply with laws and regulations.

Employee Fraud

• A serious concern of internal control is preventing employee fraud.
• Employee fraud is intentional act of deceiving an employer for personal gain.

Elements of Internal Control
The three internal control objectives can be achieved by applying the five elements of internal control. These elements are as follows

• Control environment
• Risk assessment
• Control procedures
• Monitoring
• Information and communication