The Journal Entry for a Note Collected by the Bank

question 28

True/False

The journal entry for a note collected by the bank with interest requires a credit to Cash and a debit to both Notes Receivable and Interest Revenue.

Appreciate the different needs for holding cash: transactional, precautionary, and speculative.

Understand the mechanisms to reduce collection float and the role of electronic payments in managing float.

Recognize the costs associated with holding too little or too much cash, and the role of money market instruments in liquidity management.

Learn the effects of environmental factors on float management.

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Definitions:

Compounded Quarterly

A financial calculation where interest is added to the principal four times a year, resulting in an increased amount on which subsequent interest calculations are based.

Lump Sum

A one-time transaction made at a specific moment, rather than several payments spread across a period.

Withdraw

To remove funds from a bank account or investment.

Semi-Annually

Occurring or done every six months or twice a year.