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Financial assets - Short term investments

6 important questions on Financial assets - Short term investments

What do marketable securities consist of, mostly?

Stocks and bonds of publicly traded corporations

What would cause a marketable security to be a long-term asset?

The intention to hold the security longer than a year (one accounting period)

What is the entry if an investment results in a dividend?

Debit Cash, and credit Dividend Revenue.

What if a security is sold for a gain (loss)?

Debit cash, and credit Marketable Security and Gain on Sale of Investments (or debit Loss on Sale of Investments).

What adjustment is made at period end for marketable securities?

Unrealized Holding Gain is credited, or Unrealized Loss debited, to bring the investment to market value.

Eight steps to ensure security of A/R account?

1. Customer Order department prepares receipt of order
2. Credit Department extends the credit
3. Shipping Department sends the goods
4. Billing Department compares shipment with order and prepares bill
5. Accounting Department makes entries
6. If a check is received, it is endorsed only to a company account, and all checks are listed.
7. The Cash Receipts department receives the checks, makes a listing, and deposits the checks.
8. The Accounting Department makes the entries for the bill payment

The question on the page originate from the summary of the following study material:

Financial & Managerial Accounting | 9781259692406 | Mark Bettner, et al

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