Measurement Issue For Cash The major reporting and measurement issue for cash is to determine the items appearing on the bank reconciliation that require entry in the accounting records. The reconciling items from the bank statement section of the bank reconciliation will ultimately be processed through the bank account, and the bank records will then be in agreement with corrected cash balance. However, the reconciling items from the company records section of the bank reconciliation are the result of business transactions not previously recorded in the accounting rec-ords. At the end of the month, each reconciling item from the company records section of the bank reconciliation must be recorded in the company records through an adjusting entry. Each individual item may be separately recorded by the Jordan Company in the following manner: The credits to Notes Receivable for $500 and Interest Revenue for $10 are necessary to record the payment for the note and interest collected by the bank. The credit to Interest Revenue for $51.67 is necessary to record the interest earned by the company on funds deposited in the bank. The $624.25 debit to Accounts Receivable is necessary to reestablish on the books an account for the customer who gave the Jordan Company the NSF check. That is, when the customer originally gave the Jordan Company the check, Accounts Receivable was credited and Cash was debited. Since the customer had insufficient cash to pay the check, Accounts Receivable must be reinstated on the Jordan Company books. The $25 debit to Miscellaneous Expense is necessary to record the bank service charge. Most companies use one combination adjusting entry rather than several separate entries to record the reconciling items. The combination adjusting general journal entry for the Jordan Company is recorded as follows: This combination entry or the individual entries adjust the Cash account in the accounting records to the corrected cash balance of $12,363.42. This is the amount that will be reported as cash on Jordan's November 30, 1992, balance sheet. Temporary Investments Idle cash is a nonproductive resource because it does not yield any revenue. Therefore, excess funds should be temporarily invested until they are needed. Investing excess funds results in revenue from dividends, interest, and perhaps market appreciation. Temporary investments are reported on the balance sheet as current assets if they are readily marketable and intended to be converted into cash within a short period of time (generally less than one year). The key element in this decision is managerial intent. That is, if management intends to convert the investment into cash whenever the need arises, it is classified as a temporary investment. Examples of the types of securities that may be acquired as temporary investments include: 1. Certificates of deposit (CDs). Securities issued by financial institutions that allow investors to receive a guaranteed interest rate for a specified period of time. 2. Treasury bills. Securities issued by the U.S. government that offer a fixed interest rate for a specified period of time (91, 182, or 365 days). These securities are originally issued at an amount below their face value. The interest earned is the difference between the purchase price and the face amount. 3. Corporate bonds. Securities issued by companies with a specified interest rate that promise to repay a specified amount at some future date. 4. Municipal bonds. Securities issued by cities or counties with a specified interest rate that promise to repay a specified amount at some future date. 5. Common stock. The evidence of ownership of a corporation. The holders of these securities receive revenue in the form of dividends. 6. Preferred stock. A special class of stock issued by a corporation. The holders of these securities receive revenue in the form of dividends.