INVENTORIES AND COST OF SALES参考.ppt

Cash is a necessary asset of every company. Most companies also own cash equivalents (defined later), which are assets similar to cash. Cash and cash equivalents are the most liquid of all assets and are easily hidden and moved. An effective system of internal controls protects these assets and it should meet three basic guidelines: 1. Handling cash is separate from recordkeeping of cash. 2. Cash receipts are promptly deposited in a bank. 3. Cash disbursements are made by check. Good accounting systems help in managing the amount of cash and controlling who has access to it. Cash is the usual means of payment when paying for assets, services, or liabilities. Liquidity refers to a company’s ability to pay for its near-term obligations. Cash and similar assets are called liquid assets because they can be readily used to settle such obligations. A company needs liquid assets to effectively operate. Cash includes currency and coins along with the amounts on deposit in bank accounts, checking accounts (called demand deposits), and many savings accounts (called time deposits). Cash also includes items that are acceptable for deposit in these accounts such as customer checks, cashier checks, certified checks, and money orders. Cash equivalents are short-term, highly liquid investment assets meeting two criteria: (1) readily convertible to a known cash amount and (2) sufficiently close to their due date so that their market value is not sensitive to interest rate changes. Only investments purchased within three months of their due date usually satisfy these criteria. Examples of cash equivalents are short-term investments in assets such as U.S. Treasury bills and money market funds. To increase their return, many companies invest idle cash in cash equivalents. Most companies combine cash equivalents with cash as a single item on the balance sheet. The goals of cash management are twofold: 1. Plan cash receipts to meet cash payments when due. 2. Keep a minimum level o