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After a second layer of money emerged, governments moved to take control of the pivotal position between the first and second layers. In the seventeenth and eighteenth centuries, the Bank of Amsterdam and Bank of England inserted themselves into the money pyramid, giving their governments unprecedented power over the peoples' monetary affairs. By mandating the use of their own second- layer monies, governments and their new central bank charters removed the ability for people to have freedom ...

We've covered governmental, proprietary, and internal service funds. The final type of fund you'll see on a government's financial statements is fiduciary funds. _Fiduciary funds_ account for resources held for the benefit of parties outside of the reporting government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the government's own programs. Most fiduciary funds relate to retiree benefits (i.e...

The governmental fund statements are prepared on a different basis of accounting, known as _modified accrual_ accounting. Modified accrual accounting is designed to reflect this unique focus on short-term fiscal accountability. To that end, we rewrite the fundamental equation of accounting for the modified accrual context as follows: ASSETS + DEFERRED OUTFLOWS = LIABILITIES + DEFERRED INFLOWS + FUND BALANCE In the governmental fund statements, we care most about fund balance – the difference ...

The STATEMENT OF ACTIVITIES, the non-profit's income statement, is designed to tell us if an organization's programs and services cover its costs. In other words, is this organization _profitable_? Every income statement will begin with a summary of _revenues_ and a report of _expenses_, either by program or line time. In GAAP, revenue is what the organization earns for delivering services or selling goods. Expenses are the cost of doing business. Whenever possible, think of expenses in terms...

In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of one to 364 days. Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short-term debt obligations (for example, payroll). It is only backed by an issuing bank or a corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recogniz...

Factoring is a financial transaction in which a business sells its accounts receivable to a third party (called a "factor") at a discount. It allows a business to convert a readily substantial portion of its accounts receivable into cash, which provides the funds needed to pay suppliers and improves cash flow by accelerating the receipt of funds. [Several stacks of assorted coins, gold and silver, against a white background.] MONEY Factoring allows a business to readily convert a substantial ...

A credit card is a payment card issued to users as a payment system. It allows the cardholder to pay for goods and services based on the promise to pay for them later and the immediate provision of cash by the card provider. The card issuer creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Credit cards allow consumers a continuing debt balance, subject to charge...

Collecting accounts receivable is the final step in the credit extension process and arguably the most difficult. When dealing with collections, a firm needs to start by monitoring its accounts receivable to determine whether its policy is working to the company's advantage. Accounts receivable days and an aging schedule are the most common monitoring tools. ACCOUNTS RECEIVABLE DAYS Accounts receivable days are the average number of days a firm takes to collect on its sales. By comparing this...