I.

Accounting Definition
A. Cash
1. Medium of exchange acceptable by banks for deposit at face value
2. Usual composition of cash in F/S
a. Cash on Hand (BBMMCT) – Bank drafts, bills & coins, money orders,
managers check, customer’s check, travelers check
b. Cash in Bank (Savings & Checking account)
c. Working Funds – separated for current use – (DIPPCT) dividend fund,
interest fund, payroll fund, petty cash fund, change fund, tax fund.
B. Cash Equivalents
1. Short term & highly liquid investment subject to an insignificant risk of
change and value
2. Criterion for determining Cash Equivalent – matures within short period of
time from date of acquisition, not balance sheet date, not date of
instrument (3 months/90 days or less)
3. Equity shares are not Cash Equivalent (they don’t have maturity)
4. Redeemable Preference Share – required to redeem by issuing corporation
– “can” be CE if acquired 3 months before redemption/maturity date
(liability in substance)
5. Examples of Cash Equivalent – treasury bills, commercial paper, money
market instrument with maturity of 3 months or less with date of
acquisition. (If silent – CE)
II. Criteria for Cash Presentation
A. Cash item qualifies to be presented as cash if unrestricted and immediately
available for current operations (purchase of current assets, payment of
current liability, payment of operating expenses.
B. Presentation of cash as to whether current or non-current parallel the intentions
of the management
Presented as
1. Sinking Fund – fund segregated for the bonds (NCL)
Cash
X
2. Plant expansion – for expansion Ex. to be disbursed in
X
3 months
X
to be disbursed in 1 year
X
to be disbursed in 2 years
*regardless the time of disbursement, other non-current financial asset
III. Special Consideration on Presentation & Measurement of Cash in F/S (Inclusion
& Exclusion to Cash)

A. Foreign currency denominated cash
*unrestricted – cash (+) – (Convert using exchange rate at Balance Sheet
date)
*restricted – exclude
B. Cash in Closed Bank – classified to receivable & write down to its
recoverable amount
Ex. 3A6 Corp. has a deposit to ABC bank amounting to 750000. On July 1,
2012, the bank is held under bankruptcy.
Journal Entry: Receivable 500000
Loss
250000
Cash
750000
C. Compensating Balance – amount required by bank to maintain as support
*Cash unless legally restricted

Accounting for Cash and Cash EquivalentsPage 1

Formula: Total Accountability – Total Accounted = (+) Shortage.long term – NCA . Cash Shortage/Overage – Profit and Loss 1. Check 5000 IOU 3000 Postage Stamps Envelope containing collections from other employees that reserve as cash Accounting for Cash and Cash EquivalentsPage 2 . is petty cash custodian of AMV Co. During the month the expense voucher is 25000. Accounting for Petty Cash Fund (Imprest System) A. No Sufficient Fund or I Owe You – reported as receivable (the same as Cust. Journal Entry: Expense/Payable xx AJE: Cash xx Cash xx Payable xx I. Exp. Right of offset exists. E. xx PCF xx CIB xx Expense/AR/Pre. There is another account with the same bank. (-) Overage Example: 3A6 Co. Expense Vouchers 25000 Bills and Coins 15000 Petty Cash Custodian Sal. Customers’ Postdated Check – excludes to cash & reported to cash and recognize as liability. Purpose – for “payment” of small amount expenses B. Increase/Decrease in PCF Balance PCF xx CIB xx CIB xx PCF xx *No entry is being made upon actual disbursement under imprest system C. Replenishment Exp. F. 2. Expense Advances – reported as Prepaid Expense. IV. Company’s Undelivered/Unreleased Check – must be reverted to cash & recognize as liability. At the end of the month the PCF is composed of the ff. Journal Entry: Cash xx AJE: A/R xx A/R xx Cash xx G. Establishment 2. Bank Overdraft – reported as current liability except 1. Petty cash is establish for 48000. PDC) H. CIB xx 3.short term – CA but not cash D.*if silent – unrestricted – cash *if legally restricted – exclude as cash . xx PCF xx 4. Company’s Postdated Check – same as letter H – (even if delivered) *Rule for H and I – deducted to cash only if check is already dated and check is released. Accounting Entries (ERAI) 1. Adjustment – at period end (remove cash items) Expense/AR/Pre.

1. How much is the PCF? c.3. AJE: Expense 25000 Rec from Employee 3000 1000 Prepaid Expense 1000 PCF 29000 Entry for overage: Cash in Bank 1000 Cash Overage c.2.Cash Overage 5000 (1000) 19000 c. Adjustment: c.5k = 52500 Accounted: 25k+15k+5k+3k+1k+4.3.3. Establishment: PCF 48000 CIB 48000 b.1Formula: Bills and Coins (deduct cash that does not belong to the group) 15000 + Replenishment Check + Certified Check + Dated Employee Check + Custodian Salary Check . Disbursement of 25000 – No entry c.gift for another employee.5k = 52500 Accounted: 25k+15k+5k+3k+1k = -49000 3500 short AJE: the PCF? Expense 25000 Rec from Employee3000 Prepaid Expense 1000 Accounting for Cash and Cash EquivalentsPage 3 How much is Formula: . (Envelope sealed or close) 4500 a.2 T-Account *What if envelope is found to be open? Compute Shortage/Overage: Accountability: 48k+4. Compute Shortage/Overage: Accountability : 48k+4.5K = -53500 -1000 over c.

Bank Reconciling Items – it is reconciling items to be effected in bank balance for purpose of bank recon. Book to Bank Unadjusted Balance per book + Recon Items Unadjusted Balance per bank xxx xxx xxx 2. Purpose . 2 Column Bank Reconciliation / Treatment in Reconciling Items A.Cash Shortage 3500 T- Account PCF 32500 V. CIB Liab. Types of Bank Memo Recon 1. Credit C.to agree bank statement and cash balance for records of company to make sure all cash is accounted B. CIB CIB Liab to dep. Entries Company's Cash in Bank Deposist Disbursem ent Debit Memo A/R A/P or Exp CIB Exp or A/R CIB CIB Inc/Rec/Pa y Bank CIB Liab to dep. Deposit in Transit / Undeposited Collection – receipts already added to the company’s books but not yet reflected in the bank statement DIT – addition to cash balance Accounting for Cash and Cash EquivalentsPage 4 per bank . disbursements and ending cash balance VI. receipts. to dep. Bank to Books Unadjusted Balance per bank + Recon Items Unadjusted Balance per book xxx xxx xxx c. 4 Column / Proof of Cash –reconciliation of beginning cash balance. Unadjusted to Adjusted method per bank per book Unadjusted Balance xxx xxx + Recon Items xxx xxx Adjusted Balance xxx xxx b. 1. Bank Reconciliation A. 2 Column / Single date reconciliation – reconciles ending cash balance a. to dep. Liab.

(delivered and dated check) OC – Journal Entry in book: A/P or Exp xx deduction to Cash xx cash balance *If Company’s PDC – adjust first the book balance before reconciliation per bank Example: Outstanding Check of 30. CIB CIB Liab to dep. Outstanding Check – company’s check already recorded as disbursement in the books but not yet reflected in the bank statement because it is not yet presented to the bank for payment. Book Reconciling Items – require AJE to books 1. xx book  Expense xx Loan’s pay xx CIB xx CIB xx CIB xx b. Liab. NSF / DAIF / DAUD – Bounce check Company Upon Deposit Upon Return Upon Redeposit CIB A/R A/R CIB CIB A/R Accounting for Cash and Cash EquivalentsPage 5 Bank CIB Liab to dep.*good check – check is not yet deposited. . Bank Errors a. included in the OC is Company’s PDC amounting to 10 per bank per book Unadjusted 100 70  80 OC (20) Adjusted 80 80 3. Erroneous Bank Credit – liability to the depositor – (nadagdagdan ang cash) – deduct bank balance b. to dep. Erroneous Bank Debit – add to book balance B. check deposited but didn’t reconcile in the bank (cutoff) Journal Entry in book: Cash xx A/R xx *If Customer PDC – adjust first the book balance before reconciliation Example: Deposit in Transit of 30. Bank Service Charge – cost of check booklet and payment ofbook bank loan bank  Liab. included in the DIT is Customer PDC amounting to 10 per bank per book Unadjusted 100 130 120 DIT 20 Adjusted 120 120 2. Debit Memo – charges or deduction to the depositor’s account made by deducted to bank cash per a.

2. DIT – 5000.3. CIB CIB CIB No Entry: needs AJE Liab to dep. per bank per book Unadjusted 25000 DIT 5000 OC (10000) DM Adjusted 20000 15000 5000 20000 b. Liab. NSF – 5000 Company Upon Deposit DM – no effect CIB CIB Liab to dep. DIT – 5000. Liab. NSF returned & redeposited this month. OC – 10000.1. CIB CIB Liab to dep. DIT – 5000. CIB . NSF returned and redeposited this month. no entry on return and redeposit Unadj bank – 15000. Unadj book – 15000. NSF returned this month and redeposited next month. NSF – 5000 Company Bank CIB Upon Deposit Upon Return Upon Redeposit CIB A/R Liab to dep. A/R Liab. Unadj book – 15000.b. to dep. to dep. no entry made on the return and redeposit Unadj bank – 20000. OC – 10000. made entry for return but no entry on redeposit Unadj bank – 25000. NSF – 5000 DM – deduct to book Company Upon Deposit Upon Return CIB A/R No Entry: needs AJE Accounting for Cash and Cash EquivalentsPage 6 Bank CIB Liab to dep. to dep. OC – 10000. A/R Upon Return No Entry Upon Redeposit No Entry per bank 20000 5000 (10000) 15000 Unadjusted DIT OC Adjusted DM – add to book Bank per book 15000 15000 b. Unadj book – 15000.

OC – 10000.2.5.1. add to cash per books a. Stale – checks which were not deposited within 6 months c. Customer’s Check c.4. Unadj book – 15000. Book (AJE) Notes CIB collected by bank A/R CIB Proceeds of bank loan Notes Payable b. NSF returned this month and redeposited next month.2.if not yet reflected in the books at the date of recon. CIB A/R A/R CIB 20000 5000 (10000) 15000 15000 15000 b. Stale – checks which were not deposited b. CIB Liab to dep. DIT – 5000. Mutilated – crampled Initial Entry: Cash xx AJE: A/R xx A/R xx Cash xx 2.1. CIB Liab to dep. within 6 months AJE: Cash xx A/P xx . Liab. Credit memo – credit made directly by the bank . Mutilated – crampled Initial Entry: A/P or Exp xx Cash xx Accounting for Cash and Cash EquivalentsPage 7 Bank CIB Liab to dep.per bank 15000 5000 (10000) Unadjusted DIT OC DM Adjusted per book 15000 (5000) 10000 10000 b. NSF silent as to return or redeposit (NSF during the month treat as normal debit memo) c.additions / deposits made directly by bank . NSF – 5000 DM – no effect Company Upon Deposit per bank per book DM – deduct to book Upon Return Unadjusted DIT OC Adjusted CIB Bank CIB Liab to dep. to dep. CIB Interest Income Interest Income Company’s Check b. entry made on return & no to redeposit Unadj bank – 20000.

DIT / Undeposited collection DIT Beg DIT End undeposite d collection last month & this month Bank Beg xx Receipt Disburseme nt (xx) xx Bank End xx xx xx Bank Beg OC Beg OC End OC beg & End Receipt (xx) Disburseme nt (xx) xx (xx) 2. Erroneous bank credit *last month deposit to Birch Co 10000. Over / Understatement in recording of receipt b. erroneously debited to Bench Bank Dr Beg Bank Dr End Bank Beg Receipt 10000 (10000) B. erroneously credited to Bench Bank Beg Receipt Disbursem ent Bank End Bank Cr (10000) (10000) b. erroneously debited to Bench *this month beg charges to Birch Co 10000. Book Reconciling Items Accounting for Cash and Cash EquivalentsPage 8 Disbursem ent Bank End (10000) 10000 . Bank Error a. Outstanding Check Bank End (xx) (xx) 3. Bank Recon Item 1. Booking Errors a.3. Over / Under recording of disbursement VII. Proof of Cash / Treatment of reconciling items A. erroneously credited to Bench *this month deposit to Birch Co 10000. Beg Bank Cr (10000) (10000) End Erroneous bank dedit *last month beg charges to Birch Co 10000.

3 Bank Beg Add D & Deduct End of books Receipt 10000 Book Beg Receipt Disburseme nt 10000 Bank End Disburseme nt Book End AJE: 10000 AJE: (10000) 10000 b. Bank Service Charges Book Beg BSC Beg Receipt (xx) Disbursem ent (xx) BSC End xx Book End (xx) b.1. NSF b.2 Bank End Book End AJE: 10000 b.1 Bank Add R & D Beg of books Receipt Book Beg Receipt 10000 10000 10000 AJE:Beg 10000 Bank Add R & End of books Book Beg Disburseme nt 10000 Disburseme nt Bank End Book End AJE: 10000 Disburseme Receipt nt 10000 10000 10000 Receipt 10000 AJE: 10000 Disburseme nt 10000 b. Debit Memos a.4 No Adjustment Bank Beg Receipt 10000 Book Beg Receipt 10000 Disburseme nt 10000 Disburseme nt 10000 Accounting for Cash and Cash EquivalentsPage 9 Bank End Book End .

5 – NSF returned last month. Book Error a. Error in recording disbursement *error last month. correct amount 9000. correct amount 9000. correct amount 9000. recorded 8000 Book Beg last month this month Receipt (1000) Accounting for Cash and Cash EquivalentsPage 10 Disburse ment Book End (1000) 1000 (1000) . recorded 8000 last month this month Book Beg Receipt 1000 (1000) Disburse ment 1000 Book End 1000 b. no entry made for return and redeposit Deduct Beg and R of books Bank Beg Receipt Disburseme nt Bank End Disburseme nt Book End 10000 Book Beg Receipt 10000 (10000) 10000 2. redeposit this month. recorded 8000 *error this month.b. recorded 8000 *error this month. Error in recording receipt *error last month. correct amount 9000. Credit Memo CM Beg Book Beg Receipt xx (xx) CM End Disburse ment Book End xx xx 3.