Central Bank Functions: Currency, Banking, and Fiscal Roles
Central Bank
1. Legal Currency Provider: The central bank is the sole issuer of a country’s legal currency. While printing may occur at mints or abroad, the central bank controls the process. Damaged notes are typically destroyed in central bank vaults.
2. Bank of Banks: The central bank acts as a lender to other banks facing temporary liquidity issues. With board approval, banks can receive short-term loans, which may be renewed. If a bank’s problems are permanent, the central bank can intervene,
Read MoreTrade Restrictions and Exchange Rates: Impact on Global Commerce
Trade Without Restrictions: Disadvantages of Restrictions
- Higher prices for consumers.
- Fewer choices for consumers.
- Protectionism often leads to retaliation, resulting in higher import prices and, consequently, higher consumer prices.
- Higher prices can lead to lower overall demand, causing job losses in other industries.
Trade With Restrictions
- Protection of national defense and citizens’ health.
- Protection against dumping.
- Potentially lower prices for consumers in specific cases.
- Protection for new and
Accounting Entries: Sales, Returns, and Adjustments
1. Credit Sale with Discount and Returnable Packaging
- A sale of goods on credit for 1,500 euros was made. The invoice includes a discount of 150 euros. The goods are contained in returnable packaging, which is billed at 200 euros.
1,798.00 | 430 | Customers [(1,350 + 200) * 1.16] | to to to | Sales of Merchandise (1,500 – 150) Packaging and Containers to be Returned by Customers Output VAT [(1,350 + 200) * 0.16] | 700 437 477 | 1,350.00 200.00 248.00 |
2. Fire Loss of Returnable Packaging
- A fire in the warehouse destroyed returnable
Financial Accounting: Principles and Practices
1. Financial Accounting Fundamentals
Financial accounting is:
B) An information system for business decision-making
Which of the following users is more interested in profitability?
A) Stockholders
Which of the following users is more interested in liquidity?
B) Creditors
Which is not a financial statement?
C) Ledger
The activity of raising funds for the company is known as:
C) Financing
The activity of purchasing the necessary assets is known as:
A) Investing
The statement which reports the economic and financial
Read MoreEffective Working Capital Management and Cash Flow Analysis
Working Capital
Accrual
- Revenue is recorded when earned (even if the money is not received)
- Expenses are recorded when the goods and services are received (even if the money is not yet paid)
- Do not rely on the income statement, but look at the cash flow statement
- Accounting profit may not reflect the cash flow reality facing the firm
- The cash flow statement helps to provide a clearer picture of where cash is coming from and where it is going
Working Capital Formula
- Current Assets – Current Liabilities
- (
Bond Amortization, Uncollectible Accounts, and Depreciation
Bond Issuance and Amortization
Ashley Addison Company issued $600,000 of 10%, 5-year bonds at 108. Interest is paid annually, and the effective interest method is used for amortization. The market rate is 8%. The bonds are issued on the date of the bonds.
- Amount received for the bonds? $648,000 (600,000 * 1.08)
- Interest paid each interest period? $60,000 (600,000 * 0.10)
- Premium amortization for the first interest period? $8,160 [60,000 – (648,000 * 0.08)]
- Bond interest expense recorded on first interest