Float is defined as the difference between the balance shown on the books and the balance in the bank account. A lag often occurs between the time receipts and disbursements are recorded on the company's books and when the transactions clear the bank. Consider the following scenario: Some of Graham Co.'s customers pay electronically rather than with paper checks. This reduces receipt processing time. What type of float does this scenario describe? Net float Disbursement float Collection float O Next, consider the case of Herman Flooring Company: The management at Herman Flooring has determined that it takes an average of four days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in Herman's bank account an average of two days after the checks are received. On an average day, Herman writes checks that total $10,000, and it receives checks from customers that total $20,000. Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Note: By definition, collection float is always considered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, however, should be shown as positive if it is favorable and as negative if it is unfavorable.) Herman Flooring Company Float Calculations Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Herman Flooring's bank balance is its book balance