Summary Finance chapter 7

Chapter 7 – Financial assets
Cash over and short
- Debited for shortages
- Credited for overages


Bank statement reconciliation
Balance per bank Balance per depositor
+ +
Deposits in transit Deposits by bank (credit memos)
- -
Outstanding checks Service checks and NSF checks
+/- +/-
Bank adjustments Book adjustments
= =
Adjusted balance Adjusted balance


Marketable securities
Buying marketable securities
4,000 shares for $48.98 per share. Brokerage commission is $80
Total Cost: (4,000 x $48.98) + 80 = $196,000
Cost per share: $196,000/4,000=$49.00

Dividends
Cash is debited and dividend revenue credited

Sales at a gain
Sells 500 shares for $50.04 per share. Brokerage commission is $20
Sales proceeds: (500 x $50.04) - $20 = $25,000
Cost basis: 500 x $49 = $24,500
Gain on sale: $25,000 - $24,500 = $ 500

- Cash Debit for $25,000
- Marketable securities credit for $24,500
- Gain on sale of investment credit for $500

Sales at a loss
Sells 2,500 shares for $48.01 per share. Brokerage commission is $25
Sales proceeds: (2,500 x $48.01) - $25 = $120,000
Cost basis: 2,500 x $49 = $122,500
Loss on sale: $120,000 - $122,500 = -$2,500

- Cash debit for $120,000