Cash and Cash Equivalent PDF

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Summary

CASH Most liquid asset Related standards for Cash;I. IAS I (Current assets, liabilities) II. IAS 7 (Statement of cash flows)Cash and Cash Equivalents that is readily available for unrestricted use;a. Readily convertible to known amounts of cash b. Face value is fixed, it never changes (others asset ...

Description

CASH -

Cash 1. Petty Cash Fund 2. Revolving Fund

Most liquid asset

Related standards for Cash; I. II.

3. Payroll Fund

IAS I (Current assets, liabilities) IAS 7 (Statement of cash flows)

Cash and Cash Equivalents that is readily available for unrestricted use; a. Readily convertible to known amounts of cash b. Face value is fixed, it never changes (others asset are sensitive in interest rate)

CASH EQUIVALENTS -

Liquid as cash

General Rules: -

!Current Asset is in balance sheet date

I. 3 months rule Count between from the purchase to maturity Kalian mo siya binili at kalian siya magmature. II. Given in months III. If silent and it is Time Deposit it is cash equivalent

Consider as Cash Equivalent -

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1. 2. 3.

4. 5. 6. 7. 8.

! Important for Internal Control Purposes -

Specific Funds Funds- to allocate certain purpose

More safe from fraudulent Has specific name and date

! Perspective is Important Cash a. Post-dated Checks – pag ikaw ang nagissue b. Undelivered cash

Not Cash a. Post-dated Checks – checks that can’t be encash yet b. Stale Check – due to more than 6months c. No Sufficient Cash – not have enough balance

COMPENSATING BALANCE -

C. Time Deposit Interest-bearing bank deposit account that has a specified date of maturity D. Redeemable Preference Share A special nature of preference share Company recognized this as liability account Can be redeem

4. 5. 6.

CHECKS

A. Treasury bill, Notes or Bonds Issued by the government The government never liquidates, you have the assurance to be paid/receive money B. Money market/ Commercial paper Issued by commercial companies with good credit rating Has good record of paying the loan, gibing assurance to pay

Change Fund Dividend Fund Tax Fund Travel Fund Interest Fund

Not Cash Sinking Fund Depreciation Fund Preference Share Redemption Fund Contingency Fund Insurance Fund Plant expansion Fund

That portion of any demand deposit maintained by a corporation which constitutes support for existing borrowing arrangements of the corporation with a lending institution. Such arrangements would include both outstanding borrowing and the assurance of future credit availability. (Include is cash)

GENERAL RULE: exclude cash only if there is a Legal Restriction

BANK OVERDRAFT -

Your balance will become negative because of the bank issuing a check for more than the amount in accounts

GENERAL RULE: Offsetting is ALLOWED if both accounts came from same bank and current accounts

! TIPS: Always read the Problem -

There is the difference between;  Excluded  Included

BANK RECONCILIATION -

Timing differences Error in recoding by the Bank, Book, or both “Cleaning Period” Bank

Book

Unadjusted

Unadjusted

(+) Deposit in Transit (-) Outstanding checks (+/-) Bank errors

(+) Collection from note (+) Interest income (-) NSF checks (-) Bank charges (+/-) Bank errors

 In bank cash is presented as liability account, it sees as a loan transaction.  Bank and client contract is a loan. Credit Memos – deduction by the bank to the entity’s bank account. Debit Memos – additions by the bank to the entity’s bank account....