1ST PAGE

Title of Infographic
Topic: Guide to Cash and Cash Equivalents

2ND PAGE

CASH CASH EQUIVALENT

- Includes money and other negotiable
instrument that is payable in money and
acceptable by the bank for deposit and
immediate credit
 General Rules:
1. Must be readily available for
payment of current obligations
2. Should not be subject to any
restrictions
3. Used in current operations
- Short-term and highly liquid
investments that are readily convertible
to cash
 General Rules:
1. Must be a 3-month instrument;
2. Or investments that are acquired 3
months before maturity
Keyword: 3 MONTHS

 Included in Cash  Included in Cash Equivalents

1. Cash on Hand 1. 3 month BSP Treasury Bill
2. Cash in Bank 2. 3 year Treasury Bill purchased 3
3. Cash Fund months before date of maturity
3. 3 month Time Deposit

3RD PAGE

RULES ON CASH FUND

- Considered as Cash if set aside for current operations
Ex. Petty Cash Fund Dividend Fund
Payroll Fund Tax Fund
Travel Fund Change Fund
Interest Fund

- NOT Considered if set aside for non-current operations or payment for non-current obligations

Ex. Sinking Fund Contingent Fund Shown as long-term

Insurance Fund Preference share redemption fund investment
Funds for acquisition of PPE (Non-current Asset)
*NOTES:
 Classification of Cash Fund as current or non-current should parallel the classification of the
related liability

If Cash Fund is set aside for payment of:

 LOAN PAYABLE
> 1 year – Cash Fund is NON-CURRENT
< 1 year – Cash Fund is reclassified to CURRENT

 PPE
Cash Fund is NON-CURRENT regardless because PPE is always classified as non-current

4TH PAGE

OTHER TERMS TREATMENT EXPLANATION

Should be deducted if there is

Deducted to Cash another bank account with a
BANK OVERDRAFT positive balance within the
same bank
Current Liability If the other account is in
another bank
Cash If unrestricted
Current Asset If legally and formally restricted
COMPENTSATING BALANCE and related loan is short-term
Non-current Asset If legally and formally restricted
and related loan is long-term
UNDELIVERED CHECK Cash If not given before the end of
the reporting period
POSTDATED CHECK Cash If not yet due as of the end of
the reporting period
Checks are considered as stale
STALE CHECK Cash checks if not encashed within 6
months in banking practice
5TH PAGE

CASH SHORTAGE/OVERAGE
- a temporary account called Cash short or over will be used to record excess or shortage of cash

SHORTAGE decrease in Cash

OVERAGE increase in Cash

Journal entries:
CASH SHORTAGE CASH OVERAGE
 To adjust cash balance  To adjust cash balance
Cash Short or Over XX Cash XX
Cash XX Cash Short or Over XX

 To close Cash Short or Over account  To close Cash Short or Over account

If cashier is held responsible If overage is money of cashier

Due from cashier XX Cash Short or Over XX
Cash Short or Over XX Payable to cashier XX

OR OR

If failed to disclose cause of shortage If there is no claim on overage

Loss from cash shortage XX Cash Short or Over XX
Cash Short or Over XX Miscellaneous Income XX