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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Cash Management

The president of Poor Corporation, who likes to have large balances of cash on hand, has recently been reading articles in highly respected financial magazines about very successful businesses. The president noticed that each company stressed the importance of cash management and cash controls in making it a success. The president comes to you, the accountant, and asks you to explain the concept of cash management and controls.

Required:

Explain the concept of cash management and cash controls.

To determine

Describe the concept of cash management and cash control.

Explanation

Cash:

Cash is the money which is readily available in the form of currency. Since cash can be easily converted into other types of assets, it is reported as current assets in the assets section as the most liquid asset.

Cash management:

  • Cash management contains the method and procedures that a company should use as to ensure that the company has adequate cash to meet out their obligations that are going to be matured and invest the used money. A company has to forecast the cash receipts and expenditures as to make use of the money properly in operation of the company.
  • Moreover, cash is a nonproductive resource, when more cash are held back it will have an adverse effect on the company’s profitability.
  • Therefore, the main motive of the company’s management should to hold minimum cash that is needed to operate a business and pursue more profit by investing and earn more cash and return...

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