PAGE1

FI
NANCI
ALACCOUNTI
NGANDREPORTI
NG

CASHANDCASHEQUI
VALENTS

CASH – In accounti
ng,cash i
ncl
udesmoneyi nt heform ofcur
rencyand coi
ns,negot
iabl
e
i
nstr
umentsinthef or
m ofchecksandmoneyordersaccept
ablebyt
hebankforimmediat
ecredi
t
andbankdeposit
swhet heri
nasavi
ngsorcur
rentaccount
.

CASHEQUI VALENTS–UnderPAS7,cashequi valent

sareshort
-ter
m andhighl
yli
qui
dinvest
ment
thatar
ereadi
lyconver
tibl
eint
ocashandsoneart heirmat
uri
tythattheypr
esenti
nsi
gni
fi
cantri
sk
i
nchangesinvaluebecauseofchangesi
nint
erestrat
es.

BANKRECONCI LI
ATION- A st atementthatthatset
tles the di
ff
erence bet
ween the bank
stat
ementbalanceandthecashbal
anceperbookwhichi
st hecur
rentbalancei
nthecheckbookof
thedeposi
tor
.

BOOKRECONCI LINGITEMS–Includescr
edi
tmemos,debi
tmemosanderror
st hatneedtobe
cor
rectedoradjust
edbythedeposit
ori
norderf
ort
hebalanceperbookt
or econci
l
ewi t
hthe
adj
ustedbal
ance.

BANKRECONCI
LINGI
TEMS–I
ncl
udesdeposi
tsi
ntr
ansi
t,out
standi
ngchecksander
ror
s.

CERTIFI
ED CHECKS– Checkst hathav
ebeenacceptedbyt hebankandwher ethedrawer
’s
accounthasbeendebi
tedbutthemoneyhasyett
obewithdrawnbythepayee.Thef
undsar
enow
heldbythebankonbehal
fofthepayeeandt
hechecki
snol ongerout
standi
ng.

PETTYCASH FUND – Moneysetasi det opaysmallandr ecur

ringexpenseswhereitwi l
lbe
i
neffi
cienttoset
tlesuchpaymentsbyissui
ngchecks. Account
ingf orpett
ycashinvolv
esan
I
mpr estFundSystem t
hati
smor ecommonlyusedduet oitseff
iciencyandconveni
encerather
thantheFluct
uat
ingFundSy
stem t
hatr
equir
eseachdi
sbursementtober ecor
ded.

IMPREST CONTROLSYSTEM – Impl ement

edasacont rolsyst
em wher eal
lcashreceipt
sis
i
ncludingcheckst
obedeposi
tedi
ntactandal
lcashdisbursementsbemadebyt hei
ssuanceofa
check.Alt
houghapet
tycashf
undwillal
sobeusedtosett
lesmallexpenses.

Cashi
ncl
udest
hef
oll
owi
ngi
temspl
usadj
ust
ment
s:

 Undeposi
tedcur
rencyandcoi
ns

 Checksandmoneyordershel
dunlessthechecksar
epost
-dat
ed,def
ect
iveorst
ale.Such
i
temsshall
sti
l
lbeincl
udedasrecei
vabl
es.

 Unrest
ri
ctedbankdeposits,howev erchecksthathavebeenrecor
dedaspay mentsthat
havenotbeendel i
ver
edorpost-datedmustber est
oredbackt
othebankdeposi
ts’
balance
wit
hacor respondi
ngli
abi
l
ityforthepaymentthatwasmade.

 Fundsonhandanddeposit
st hatar
eforcurr
entuseandhavebeenrest
ri
ctedf
orali
abi
l
ity
thatiscl
assi
fi
edas“cur
rent”.Thisincl
udespett
ycashfund,payr
ollf
undandfundsfor
taxesanddi
vi
dendsasmentionedinPAS1.

Speci
alI
temsofCash

A.BankOverdraf
t–Acr edi
tornegati
vebalanceint
hebankaccountofthedeposi
torr
esul
ti
ng
fr
om anissuanceofacheckthatexceedstheamountoft
hedeposit
.

 Asar ul
eanov erdr
aftshal
lbeclassi
fi
edasacur rentliabi
l
ityandnotoff
setagainst
curr
entaccountswithaposi
ti
veordebitbalance.
 Asanexcept i
on,iftheover
draftisi
nabankwher et hereareotheraccountsthat
haveapositi
vebalanceandthoseaccountsaresuffi
cienttocovert
heov er
draf
t,the
tot
alcashshallbeshownnetoftheoverdr
af t
.

B.Compensat
ingBal
anceAgr
eement–Par
tofordeposi
tst
hatabankcanuset
oof
fsetan

10/
16-
19
 PAGE2
exi
stingloan.However,compensati
ngbalancescanalsodescr
ibeami ni
mum amountof
the depositthata deposi
toragrees t
o mai nt
aini
n orderto guar
antee f
utur
e cr
edi
t
avai
labil
i
ty.

 Inthecaseofdeposi t
st hatabankcanusetooff
setal oan,t
heassumpt i
onisthat
thi
samounti slegal
lyrestr
ict
edtowithdr
awalandthereforeexcludedfr
om cash,
howev eri
ncasest hati
tst i
llr
emai
nstobeunrestr
ict
ed,thecompensat i
ngbalance
shallbepartofcash.Ifthecompensati
ngbal
anceislegall
yrest
rictedt
hefol
l
owi ng
rul
esshallbefoll
owed:

a)Ther elatedloanisshort-t
erm:Thecompensat
ingbal
anceshal
lbepartof
curr
entasset sbutseparatel
yfrom cash.
b)The r elated l
oan i
sl ong-ter
m:The compensati
ng bal
ance i
s par
tof
noncur r
entassetsasani nvest
ment .

 Aninformalagr
eementtomaint
ainami ni
mum amountofdeposi
twi
l
lnotbel
egal
l
y
rest
ri
ctedandther
efor
eincl
udedincash.

C.Ti
meDeposits–Banksav i
ngsaccountthatear
nsinter
estbutnotsubj
ectt
oimmedi
ate
wi
thdr
awalorchecki ssuance. A not
icemustbesubmi t
tedbythedeposit
orf
orthe
wi
thdr
awaloffundsandint
erestear
nedshall
beforf
eit
ed.

 Timedeposi t
sareexcl udedfrom cashbecauseofthei
rrestr
ict
iononav ai
l
abil
i
tyas
funds and ar e classifi
ed as i nvest
ments and shallf ol
l
ow t hese specif
ic
classi
fi
cati
ons:
a.Cashequi valentsift
heor i
ginalt
ermis3monthsorless.
b.Shor tt
ermi nvestmentsiftheori
ginalt
ermi
smor ethan3mont hsto1y ear
c. Long-t
erminv estmentsi
ftheor i
ginal
termi
smor ethan1y ear
.

CashEquiv
alents–Thet hr
eeimport
antchar
acter
isti
csforcashequivalent
sasment ionedinPAS
7areshort
-t
er m,highl
yli
quidandnearmatur
it
y.Inot herwords,short
-t
erm debtinst
rumentswit
h
l
owr i
sk(al
sol owy iel
d)andacqui
red3monthsorl essfrom maturi
tydateshallbeconsider
edas
cashequi
valents.

Examplesi
ncludeTreasur
yBil
l
s,BondsandNotes,Ti
meDeposi
ts,Cer
ti
fi
cat
eofdeposi
tsand
Banker
sAcceptancesandCommer
cialPaper
s.

Exampl
eofAdj
ust
edBal
anceReconci
l
iat
ion

Bank Book
Unadj
ust
edBal
ance X Unadj
ust
edBal
ance X
Deposi
tint
ransi
t + Cr
edi
tmemo* +
Out
standi
ngchecks (
-) Debi
tmemo*
* (
-)
Er
ror
s +/
(-) Er
ror
s +/
(-)
Adj
ust
edbal
ance X Adj
ust
edbal
ance X

*Credi
tmemosi ncl
udecol
lect
ionsbythebank;i
nter
estcr
edi
tedbyt
hebankandmat
uredt
ime
deposi
tst
ransf
erredtot
hecurr
entaccount
.

*
*Debi
tmemosi
ncl
udeNSFchecks,
bankser
vicechar
gesandaut
hor
izedbankdebi
ts.

END

10/
16-
19