bank drafts

Examples of bank drafts in the following topics:

• Types of Cash

  • Types of cash include currency, funds in bank accounts, and non-risky financial instruments that are readily convertible to cash.
  • Cash and cash equivalents are not just the amount of currency that a business has in its cash registers and bank accounts; they also include several different types of financial instruments.
  • Cash equivalents include all undeposited negotiable instruments (such as checks), bank drafts, money orders and certain certificates of deposit.
  • A certificate of deposit, or CD, is a financial product offered by banks to their customers.
  • As a result, demand CDs generally have lower interest rates than CDs that allow the bank to hold onto the money for an agreed upon term.

• Using a Bank for Control

  • Using a bank is one of the best internal controls on a business's cash.
  • As an independent third party, a bank is less susceptible to schemes by a business's employees to steal funds.
  • Banks generally require that every deposit is accompanied by a signed and dated deposit slip.
  • These documents are kept by the bank to resolve any disputes that may arise regarding a transaction.
  • Describe why a bank is one of the best internal controls a business can use

• Reconciling Cash Accounts and Bank Statements

  • A bank statement only reflects a specific period of time, such as one month .
  • However, it takes the banks time to prepare the statement and send it out.
  • A bank reconciliation is a process that explains the difference between the bank statement on the amount shown in the organization's own financial records.
  • A bank reconciliation consists of two columns; one for the book balance, the other for the bank balance.
  • This is why reconciling the bank statement is necessary.

• Basics of Cash Management

  • A company manages its cash primarily through the use of a voucher system and bank reconciliations.
  • Bank reconciliations, or the process of checking to make sure that a business's financial records on cash equals how much is in the business's bank accounts, are especially useful as a control over deposits.

• Debits and Credits

  • We know that cash in the bank is an asset, and when we increase an asset we debit its account.
  • Then how come the credit balance in our bank accounts goes up when we deposit money?
  • Think about the bank's perspective for a moment.
  • It's ours; therefore, from the bank's perspective the deposit is viewed as a liability (money owed by the bank to others).
  • When we deposit money into our accounts, the bank's liability increases, which is why the bank credits our account.

• Current Maturities of Long-Term Debt

  • Examples of long-term liabilities are debentures, bonds, mortgage loans and other bank loans (it should be noted that not all bank loans are long term since not all are paid over a period greater than one year. ) Also long-term liabilities are a way for a company to show the existence of debt that can be paid in a time period longer than one year, a sign that the company is able to obtain long-term financing .

• Differences Between GAAP and IFRS and Implications of Potential Convergence

  • For example, in 2006 senior partners at PricewaterhouseCoopers (PwC) called for convergence to be "shelved indefinitely" in a draft paper, calling for the IASB to focus instead on improving its own set of standards.

• Outputs of Accounting

  • Financial institutions (banks and other lending companies) use statements to decide whether to grant a company fresh working capital or extend debt securities (such as a long-term bank loan or debentures).

• Cash Controls

  • Bank Reconciliations: A process where the cash accounts on a business's books are regularly checked against bank statements.

• Defining Current Liabilities

  • A borrowing of funds from individuals or banks for improving a business or personal income that is payable during a short or long time period.