Cash and Cash Equivalents

True

If not qualify as cash equivalents will classified as investment either short or long term

Company's check in the payment of a liability

(e.g. utilities)

The petty Cash fund count sheet

1. Accounting for petty cash fund 2. Accountabilities 3. Petty Cashier's acknowledgement 4. Auditor's adjusting entries

Forms of Bank reconciliation

1. Adjusted balance method 2. Book to bank method 3. Bank to book method

Example of checks

1. Employee checks (good, NSF, OR PDC) in the settlement of cash advanced from the petty cash fund. - 2. Checks of the company as a replenishment of petty cash fund (replenishment check) 3. Checks of the company payable to the petty cash custodian representing his/her salary.

Petty Cash fund may be accounted for using the following two methods:

1. Imprest fund System 2. Fluctuating fund system

If the items above are:

1. Originally acquired/invest for more than three months before maturity *remaining term is three months or less from the reporting date - short term investment *remaining term is more than three months but within 1 year - short term investment *remaining term is more than 1 yr. - long term investment 2. Originally acquired/invest for three months before maturity - cash equivalents

Fund for non current operation

1. Pension Fund (noncurrent investment, if current cash) 2. Preferred Redemption fund (noncurrent investment) if mandatory redemption and redeemable: * within 1 yr from reporting period -part of current investment * within 3 months from reporting period - part of current period 3. Acquisition of PPE always non current even disburse nest year 4. Contingent fund - non current investment 5. Insurance Fund - non current investment 6. Sinking fund - non-current investment if the rekated bonds payable is current

Cash Equivalents

1. Time deposit 2. Money market instrument or commercial paper 3. Treasury bills, treasury notes and treasury bonds 4. Redeemable preference shares with mandatory redemption period

If the problem is silent with regard to:

1. Treasury note and bonds - assumed non current investment 2. Cash in money market account - cash and cash equivalent 3. time deposit - cash and cash equivalent

Cash on Hand

Customers checks awaiting deposit Undeposited cash collections (Currencies such as bills and coins Travelers checks, Cashier / official / manager checks Money orders Bank drafts

Bank Reconciliation

A report that accounts for the differences between the bank statement and a checkbook balance

Accounting for petty cash Items

All petty cash items inclusive of the impurities are accounted in the working papers as the presence of the impurities may indicate some weakness in the accounting control system

Bank overdraft netted from cash in bank

Bank overdraft that was netted or deducted from cash in bank but should be presented as current liability should be added back to compute for the correct balance of cash in bank

Reconciling itemgs:

Book reconciling: Credit Memo Debit Memo Errors

Cash collections of accounts receivable or sales

Cash collection of accounts receivable or sales may be evidenced by sales invoices or official receipt that are included in the petty cash box.

cash items

Cash items : 1. Unrestricted and immediately available for use in current operations *For the payment of operating expenses *For the payment of current liabilities *For acquisition of current assets Cash on the current asset 2. Restricted Cash Other non-financial current assets

Cash fund for current operations

Change fund Payroll fund Purchasing fun Revolving fund Interest fund Petty Cash fund ( for small miscellaneous ) Dividend fund Tax fund Travel fund

Computation of adjusted PCF Balance:

Coins and currencies (excluding collections, unexpended employees contribution and unclaimed salaries) ADD: Expenses paid out of the PCF after reporting period date Checks of the company name of the petty cash custodian as a a. replenishment check of the petty cash fund or b. salary of the petty cash custodian Employees' check (good check only, exclude NSF Check) Adjusted PCF Balance

NSF/DAUD/DAIF

Definition: NSF- no sufficient funds DAUD - drawn against uncleared deposits DAIF - drawn against insufficient funds treatment: Reverted back as receivables

Postdated checks

Definition: Checks dated after reporting date Treatment: a. if company own pdc cash accounts payable b. Customer check - remain receivable accounts receivable cash

Escrow deposit

Definition: Restricted amount held in trust for another party e.g deposit required by a court of law for pending case treatment: part of other current/ noncurrent asset and reported as liability

Certificate of deposit for time deposit

Definition: Savings certificate entitling the bearer to receive interest. CD bears maturity date, a specified fixed interest rate and can be issued by any denomination. The term of a CD generally ranges from one month to five years treatment: Invested three months before maturity date - CE Invested three or more - S.L.T.i

Treasury warrants

Definition: a warrant for the payment of money into or from public treasury treatment: included as part of cash

Compensating balance

Definition: is minimum checking account balance that must maintained in connection with a borrowing agreement with bank Treatment: a. not legally restricted - part of cash b. legally restricted if: *short term - presented as cash held as compensating balance - current receivable *long term presented as cash held compensating balance - non current receivable

Replenishment of petty cash payments

Imprest Fund System D. Expenses C. Cash in bank Fluctuating system Petty Cash fund Cash in bank

to adjust the unreplenish expenses

Imprest Fund System Expenses Petty cash fund Fluctuating System No adjusting entries

Decrease in the fund

Imprest Fund system. Cash in Bank Petty Cash Fund Fluctuating System Cash in bank Petty Cash Fund

To establish fund

Imprest fund system D. Petty cash fund C Cash in bank Fluctuating system D. Petty Cash Fund C Cash in bank

Increase in the fund

Imprest fund system Petty cash fund Cash in bank Fluctuating systen Petty cash fund Cash in bank

Payment of expenses

Imprest fund: Memo entry in the petty cash journal Fluctuating System D. expenses C. Petty Cash Fund

IOU (I owe you)

Included as part of receivable

Cash

Measured at face value

1. Employee checks (good, NSF, OR PDC) in the settlement of cash advanced from the petty cash fund.

NOT TREATED AS PC ACCOUNTABILITIES

Callable Preference share

Not classified as cash equivalent. Long-term investment of holder in shareholders equity

Petty cash accountabilities

PC Fund ledger balance Petty cash impurities except checks issued in settlement of cash advanced from the PCF Unexpended employees contributions ( Christmas party, birthday party) Collection of accounts receivable or sales (in cash or in check) Unclaimed salaries stale checks Company's check in payment of a liability (e.g utilities ) if among the checks are for deposit

Computation of petty cash accounted and petty cash accountabilities

Petty Cash Accounted Coins and currencies Unexpended employees contributions ( Christmas party, birthday party) Cash collections of accounts receivable and sales Unclaimed Salary Check of deposits Stale checks postdated checks (checks that are dated after reporting date and cash count date) Unreplenished vouchers ( expenses, IO's that are taken from PC Fund)

Computation of petty cash shortage

Petty cash accounted less: Petty cash accountabilities Overage (or shortage)

Unrecorded cash collections/ receipts

Record collection by: Cash Accounts receivable or other appropriate account

Unrecorded cash disbursement

Record the disbursement by: Accounts payable cash

Replenishment check

The amount to be indicated in the replenishment check will be the total expense + cash shortage - cash overage.

Customer checks

These are checks in the name of the client company and the maker is the customer. These represents the collection of accounts receivable from a customer

redeemable preference shares

With specified redemption date: acquired three months before redemption date - cash equivalents acquired for more than three months before redemption date- current investment

petty cash fund

a cash fund used to pay relatively small amounts

Cash in Bank

a. Current account/ checking account/ demand deposit/ commercial deposit - Generally non-interesting bearing - Withdrawal by checks against bank b. Savings deposit/ savings Account -Generally non-interest bearing -Depositor is issued an ATM card or passbook -Withdrawable in ATM Station or within the bank

Deposit in foreign bank

a. Unrestricted - part of cash b. Restricted - if material, classified separate among non current assets as receivables

Petty Cash Impurities

are items do not belong to the fund but for one reason or nevertheless found in the petty cash box. Example a. bills and coins and customer checks from the cashier collection ( as these should have in the general cash) b. Checks issued by the client in the payment of utility bills (as theses should have been delivered to the payee) c. checks issued to the client in payment of personal advances (as these should have in the general cash)

treasury shares

deduction to she

Stale checks/ checks long outstanding

definition: checks not encash by the payee with a relative long period of time. Considered stale if not encash within 6 months from its date. treatment: reverted back Cash Accounts payable (if material) Miscellaneous Income ( if not material)

Bank overdraft

definitions: negative balance in the cash in bank account treatment: If the company maintaining accounts in a. different banks *current liability or may be netted against the other bank if immaterial. * netted against the other aount if part of cash management b. same banks - maybe netted against the account with positive amount but cannot be offset against restricted account

Unused credit line

difference between the amount of line of credit applied for and approved by a bank and the amount actually borrowed treatment: disclosed in the notes

Temporary investments in shares of stocks

either FVTPL or FVTOCI never to include as cash and cash equivalents

Equity securities

generally cannot be classified as cash equivalent because it has no maturity date (with the exception of redeemable preference shares)

Accountabilities

in the count sheet consist of the following: 1. Cash fund balance per ledger 2. Petty Cash impurities except checks issued to the client in the settlement of cash advances from the petty cash fund

Imprest System

is a systen of control of cash which requires that all cash receipts should be deposited intact, and all cash disbursements should should be made by means of check. However, it is impractical for the company to make all payment thru check. Therefore, petty cash fund is established for small and miscellaneous expenditures

Cash in closed bank/ banks in bankruptcy

measured at estimated realizable value and included among non current assets if amount recoverable is lower than face value

Expenses advances ( travel advances)

receivable or prepaid expenses

Undelivered / unreleased checks

reverted back: Cash Account Payable

Postage stamps on hand

should be reported as office supplies or as a prepaid expense

Cash in foreign currency

should be translated to PH peso using the closing rate or spot rate at the reporting date