Terminologies

• bank draft - a written order addressed to the bank to pay an amount of money to the order of the maker
• bank overdraft - a credit balance in cash in bank account resulting from checks being written for more than the cash amount on deposit
• bank service charge - monthly fee charged by a bank to service the depositor's account
• bank reconciliation - a report that explains the difference between the book (company) balance of cash and the depositor's account balance reported on the bank statement
• bank statement - a bank's report on the depositor's beginning and ending cash balance and a listing of its exchanges, for a period.
• canceled checks - checks that bank paid and deducted from the depositor's account. they are checks drawn.
• cash - an item that is acceptable for deposit at face value by a bank or other financial institution. it includes the following unrestricted and immediately available for use in current operations:

  • currency
  • coins
  • amounts on deposit in bank checking or savings account
  • demand credit instruments
• cash equivalents - short-term, highly liquid investment assets that are readily convertible into a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that the fair value is not sensitive to interest rate changes.
• cash over and short - a profit or loss account used to record cash overages ad cash shortages arising from errors in cash receipts or payments.
• check - document drawn by a depositor instructing the bank to pay a specified amount to a designated recipient or payee.
• compensating balances - minimum amounts that a company agrees to maintain in a bank checking account as support for a loan by the depositor.
• credit memos - deposits or credits made directly by the bank to the depositor's account such as notes collected by bank in favor of the depositor and proceeds of the bank loan and interest earned on the depositor's account.
• debit memos - charges to the company's or depositor's account made directly by the bank such as returned checks, bank service charge, charge for the cost of check booklets, and payment of bank loans.
• demand deposits - funds deposited in a bank that can be withdrawn upon demand.
• deposit in transit - deposit made near the end of the month and recorded on the depositor's book but not received by the bank in time to be reflected on the bank statement.
• drawn against insufficient funds (DAIF) check - a check drawn by a depositor but is subsequently returned by the bank to the payee because the deposit balance is not enough to cover the amount of the check.
• financial asset - any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset or to exchange financial asset or financial liabilities with another entity under conditions that are potentially favorable to the entity.
• financial instrument - any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
• imprest system - a method to account for petty cash fund. under this system, a constant balance is maintained in the fund, which equals cash plus petty cash receipts. when used with general cash control, it means a system of depositing cash collections intact to the bank and making payments through checks.
• internal controls - all policies and procedures used to protect assets ensures reliable accounting, promote efficient operations, and encourage adherence to company policies.
• money order - a demand credit instrument issued and payable by a post office
• not sufficient fun (NSF) check - DAIF
• outstanding checks - checks written by the company and issued to payees but have not been cleared or presented to the bank for payment.
• payroll bank account - a bank account used solely for paying employees' salaries
• petty cash - small amount of cash maintained in a fund to pay minor and immediate expenses
• post-dated check - a check bearing a future date when issued. this check will be honored by the bank only on or after the date indicated on the face of the check.
• proof of cash - a four-column bank reconciliation showing a reconciliation of beginning and ending balances of cash and cash receipts and disbursements during the period.
• voucher system - a system that provides for the control of purchases and cash disbursements. business documents are used to prepare vouchers to support all payments by check. the voucher identifies the person authorizing and the expenditure, explains the nature of the transaction, and names the affected accounts.
• 12-month expected credit loss - the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instruments are possible within 12 months after the reporting date.
• accounts receivable - trade receivables that are not evidenced by a formal agreement or note. this are usually unsecured open accounts.
• aging of receivables - method for establishing an allowance for uncollectible accounts based on outstanding receivables. it involves analyzing individual accounts to determine those not yet due and those past due. past due accounts are classified in terms of the length of the period past due.
• amortized cost - the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using he effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.
• assignment of accounts receivable - a formal borrowing arrangement in which specific accounts receivable are used as security for a promissory note.
• cash discount or settlement discount - an incentive for early payment of amounts owing on credit transactions, generally quoted as a percentage.
• credit loss - the difference between contractual cash flow due to the entity under the contract and all the cash flows that the entity expects to receive discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets)
• credit risk - risk that the payee of the debt instrument will not be able to comply with the obligations in accordance with the agreed terms.
• disclosure - information reported wither on the face or in the notes to the financial statements
• discount - the amount of interest earned by the bank computed as maturity value multiplied to the bank discount rate multiplied to discount period.
• discounting of note receivable - receiving cash from a financial institution in exchange for a note receivable endorsed before maturity the maturity date
• discount rate - the rate of interest used by a bank in computing discount