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Title: Cash and Cash Equivalents
Description: Comprehensive concept map notes for Cash and Cash equivalents including Bank reconciliation and Proof of Cash.
Description: Comprehensive concept map notes for Cash and Cash equivalents including Bank reconciliation and Proof of Cash.
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CASH
and
CASH EQUIVALENTS
CASH
PAS 1, paragraph 66
“refers to money (currency) that is readily available for use
...
In Economics, cash refers
only to money that is in the physical form
...
”
Currencies such as Bills and Coins
Cashier’s check, Official Check, Treasurer’s Check, Manager’s Check
Customer’s Check
Stale Checks made by the entity
...
Tellers in
banks will sometimes reject a check if the date is over 6 months that is
why Stale checks made by the entity is still under cash control of the
company
...
Undelivered and Post-dated checks made by the entity
...
On the other hand, post-dated checks are one that is written with a
future date indicated in it
...
CASH
CASH ON HAND
Demand Deposit/ Checking Account/ Current Account
Savings Deposit
CASH IN BANK
Compensating Balance
If the problem is silent, assume that the Compensating Balance
is UNRESTRICTED (a
...
a Informal), therefore, Compensating
Balance is considered Cash
...
k
...
Restriction that is less than or equal to 12 months, then the
Compensating balance is SHORT TERM INVESTMENT
...
Bank Overdraft
Exception to the General rule:
- If 2 or more accounts with the same bank, then offset Bank
Overdraft from other bank account (take note: It should be the same
bank)
- If bank overdraft is immaterial, then offset Bank overdraft from
other cash accounts
...
Therefore,
an entity should reclassify such noncurrent asset if the related
liability becomes current
...
CASH FUND
For asset acquisition
If asset acquisition is noncurrent asset, then it is
not considered cash but long-term investment
...
If settlement is for noncurrent liabilities, then it is
not considered cash nut long-term investment
...
2
...
4
...
Pension fund
5
...
Acquisition of
Property, Plant and
Equipment
5
...
7
...
Interest fund
Petty cash fund
Dividend fund
Travel fund
1
...
Insurance fund
3
...
Defines cash equivalents as short-term and
highly liquid investments that are readily convertible into cash
and so near their maturity that they present insignificant risk of
changes in value because of changes in interest rates
...
Cash in money market account is
assumed cash and cash equivalents
...
EQUITY INSTRUMENTS
Equity instruments cannot
qualify as cash and cash
equivalents because shares
do not have maturity dates
...
“Only highly liquid investments that are debt
instruments acquired 3 months or less before their
maturity date can qualify as cash equivalents
...
ACCOUNTING FOR PETTY CASH FUND
PETTY CASH – A small amount of cash kept on hand to cover
minor or incidental expenses, such as the small change or bills
kept in a cash register or lockbox
...
IMPREST FUND SYSTEM
FLUCTUATING FUND SYSTEM
An internal control device for cash which requires that all cash receipts should
be deposited intact, and all cash payments should be made by means of check
...
The amount of replenishment may
be equal to, more or less than, the petty cash disbursement
...
Cash balance of the bank statement from
the bank is the source document for
reconciliation
...
Adjusted Balance method
FORMS
Book to Bank method
Bank to Book method
BOOK RECONCILING ITEMS
Credit Memo these are collections
of the bank for the company but not
yet recorded by the company
...
Errors by company that
must be corrected
...
Examples of Credit Memo:
1
...
2
...
3
...
Bank service charge
2
...
Payment of loan
BANK RECONCILING ITEMS
Outstanding Checks are checks that have been issued but not
yet presented for payment or cleared by the bank
...
Deposit in transit these are deposits already recorded in the
company’s book but were taken by the bank only in the next period
Errors by bank that must be corrected
...
Since bank
statement is the source document, it is then called Bank reconciliation
...
A check reduces the cash account of a Company
...
To correct this bank error, P27,300 should be added
back to the bank balance
...
Cash receipt is an increase in the book balance
...
Therefore, the cash book balance is overstated by P1,350
...
PROOF OF CASH
Proof of cash is expanded reconciliation that includes proof of receipt
and disbursement
...
Title: Cash and Cash Equivalents
Description: Comprehensive concept map notes for Cash and Cash equivalents including Bank reconciliation and Proof of Cash.
Description: Comprehensive concept map notes for Cash and Cash equivalents including Bank reconciliation and Proof of Cash.