Cash and Cash Equivalent includes:

- it must available for use anytime

-restricted cash could be part as cash and cash equivalent if it is less than 12 months or less than
the operating cycle of the business.

1. Cash/Checks - cashier's check, traveler's check, manager's check, certified check, and
customer's check. Cash on hand, Cash in bank and cash fund set aside for current purpose.
2. Bank draft - drawn by the bank to the customer.
3. money order -
4. Treasury shares
- purchase 3 months before its maturity date
- 3 months maturity
5. 3 months time deposit
6. 3 months money market instrument and commercial paper
7. Preference shares with specified redemption date
- acquired 3 months before the redemption date.

Note: Equity securities are not consider as cash and cash equivalent because it has no maturity
date.

Measurement of Cash
1. Face value
2. for foreign currency - current exchange rate
3.In state of bankruptcy or financial difficulty - estimated realizable value - if recoverable amount
is lower than face value.

Bank overdraf
-a credit balance resulting from over issuance of check, this will be treated as current liability.
- it can be offset if there's 2 or more account in the same bank.

Compensating balance
1. Not legally restricted
- can be considered as part of cash.
2. Legally restricted
- will be considered as:
-Cash held as compensating balance - if short-term
-Non current investment - if long-term

Undelivered/Unreleased Checks
-should be restored back to cash if issuance of the check was recorded.

Postdated Checks
-is not part of cash and cash equivalent because this check is unacceptable by the bank for
deposit. It must be restored back to cash since there's no enchasment happened.

Stalecheck
- checks that are not encashed by the payee w/n 6 months.
- if amount is immaterial, it will be considered as part of miscellaneous Income.
 - if amount is material, it should be restored back to cash.

Cash Shortage and Overage

Shortage - Loss from cash shortage, if reasonble efforts failed to disclose the caused of the
shortage Otherwise, it will be a receivable from the person who cause the shortage.
Overage - Miscellaneous Income, if there's no claim for the cause of the overage otherwise it will
be a payable to the person who cause the overage.

Petty Cash Fund

- is money set aside for small expenses

1. Imprest Fund System

- Replenishment check is equal to the petty cash disbursement amount.
2. Fluctuating Fund System
- Replenishment check is not equal to the petty cash disbursement amount.

BANK RECONCILIATION
- is necessary only for demand deposit or checking account.
- is a statement that reconciles the cash balance per book and cash balance per bank.

3 kinds of Bank deposits

1. Demand Deposits
- funds is withdrawable on demand through check and it's a non interest bearing.
2. Saving deposits
- the depositor is given a passbook which is also required when making a deposits
and withdrawals and it's an interest bearing.
3. Time deposits
- evidenced by a certificate of deposit, it may be preterminated or withdrawn on
demand or after a certain period of time agreed upon. It is like savings deposit in the
sense that it is interest bearing.

Bank Statement
- is a monthly statement given by the bank to the depositors.

Bank statement shows:

1. Beginning cash balance per bank
2. Deposits by the depositor
3. Withdrawals by the depositor
4. daily cash balance during the month

Bank Statement Attachements:

1. Cancelled checks - are checks issued by deposit and paid by the bank.
2. Debit memo
3. Credit memo

Reconciling Items:
1. Book Reconciling items:
 - Credit Memos - Added
- Debit Memos - Subtructed
- Errors - Subtructed
2. Bank Reconciling Items:
- Deposit in Transit - Added
- Outstanding Checks - Subtructed
- Errors - Subtructed

Computation for Book Balance:

Unadjusted balance per book x

Add: Credit Memo x
Total x
Less: Debit Memo x
Errors x
Adjusted Balance per book x

Computation for Bank Balance:

Unadjusted balance per bank x

Add: Deposits in transit x
Total x
Less: Outstanding Checks x
Errors x
Adjusted Balance per Bank x

Outstanding checks includes:

1. Checks drawn that are not yet present for payment by the payee.
2. Certified checks - this check should be deducted from the outstanding check amount since this
one was already deducted from the cash balance per bank's book for reconciliation purposes.

PROOF OF CASH
- is an expanded bank reconciliation, it includes cash receipts and cash disbursement.
- it is also called as "two-date" bank reconciliation.

Computation of Book Balance:

Unadjusted Balance per book x

Add: Cash Receipts x
Total x
Less: Cash Disbursement x
Errors x
Adjusted Balance per book x

Computation of Bank Balance:

Unadjusted Balance per Bank x
Add: Cash Receipts by Bank x
Total x
Less: Bank charges, checks paid x
Errors x
Adjusted Balance per Bank x

Computation of Deposit in Transit:

Beginning Deposit Balance during the month x

Add: Cash receipts deposited during the month x
Total Deposits to be acknowledged by Bank x
Less: Deposits acknowledged during the month x
Deposits in transit - end of the month x

Computation of Outstanding Checks

beginning outstanding check Balance during the monthx

Add: Checks drawn by depositor during the month x
Total checks to be paid by the bank x
Less: Checks paid by the bank during the month x
outstanding checks - end of the month x