chapter5-9

Cash equivalents are short-term highly liquid investments that are (1) readily convertible to known amounts of cash, and (2) so near to their maturity (three months or less) that they present insignificant risk of changes in value. (3)Are not held for investment or other long-term purposes, but rather to meet short-term cash commitments.
5.1 Cash and Current Receivables
5.1.4
Classification of Receivables
Trade Receivables & Other Receivables Allowance for doubtful debts???

直接冲（转）销法
①实际发生损失时
5.2 Inventory
st-in, first-out (LIFO) Assumes most recently purchased goods are sold first Inventory based on costs of oldest purchases.

Cost of goods sold usually does not reflect physical flow. Ending inventory may be cost at amounts of years ago.
5.2 Inventory
Inventory
Costing Methods 1.Specific identification Method Big ticket items. Uniquely identified items.

May offer opportunity to manipulate costs.
5.2 Inventory

5.2.1 Classifications of Inventory
Inventories including: ※Goods purchased and held for resale ※ Finished goods produced ※ Working progress being produced ※ Raw materials and supplies
5.2 Inventory
5.2.3 Measurement of Inventories 1.Cost of Inventory: Includes costs directly or indirectly incurred in bringing an item to its present condition and location. As to purchased inventory, it includes purchase price (net of trade discounts, rebates and other similar amounts) plus any other cost directly attributable to acquisition, such as import duties and other taxes, transport, handling, insurance and similar costs.
5.1 Cash and Current Receivables
5.1.2
Control of Cash
Cash Payment=Cash Receipts Adjustment Account: Cash short and Over
5.1 Cash and Current Receivables
5.2.1
Classifications of Inventory
Inventories are assets that are held for sale in the ordinary course of business in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services.

5.2 Inventory
5.2.3
Measurement of Inventories 1.Cost of Inventory: When company manufactures inventory, costs directly related to the units of production (fixed and variable production overheads).



借：坏账准备
贷：应收账款 ②重新收回时 借：应收账款 贷：坏账准备


借：银行存款
贷：应收账款
备抵法

①提取坏账准备金时
③重新收回时



借：资产减值损失
贷：坏账准备 ②发生坏账时
借：应收账款
贷：坏账准备


借：银行存款
贷：应收账款
借：坏账准备
贷：应收账款
5.2 Inventory

Inventory may be well below costs.
Arguments for FIFO



Usually follows physical flow of goods. If prices are based on oldest cost, results in best matching. More accurate balance sheet valuation. Non-theoretical/practical argument:
5.1.3
Bank Reconciliation(?) A Comparison of a bank statement with the cash book.
Differences caused by the following Situations:
1.Deposit in transit. 2.Outstanding checks(?). 3.Bank service charges or bank interest. 4.Deposits made directly by the bank.
Chapter 5 Current Assets
The characteristics of Current Assets: 1.Is expecting to be realized in or is held for sale or consumption in the normal course of the enterprise’s operating circle; 2.Is held primarily for trading purpose or for the short-term and expected to be realized within 12 months of the balance sheet date; 3.Is cash or cash equivalent asset which is not restricted in its use Main items of current assets: Cash, current receivables and inventories.
5.2 Inventory
3.First-in,

first-out (FIFO) Expenses costs of oldest purchases first. Most recently purchased goods are in inventory.

Likely but not necessary to follow actual flow of goods. Ending inventory approximates current cost of goods.

5.1 Cash and Current Receivables
5.1.1 Composition of Cash Cash on hand: Coin and Currency Demand deposits: unrestricted funds available on deposit in a bank
5.2 Inventory
2.Average
Cost Method The average cost of the goods available for sale is computed, and the units in both cost of goods sold and ending inventory are cost at the average cost. (Beginning inventory amount + purchases) / units available for sale = per unit inventory costs = per unit cost of goods sold

However, it is still historical costs and does differ from current costs.