Example Analysis of a Check
Cash – includes money and any other negotiable instrument that
is payable in money and acceptable by the bank for deposit andi
mmediate credit.
Included in cash:
 Coins and bills in legal tender by BSP
 Checks (subject to certain conditions)
 Bank drafts
 Money orders
Types of checks:
 Post-dated checks (checks dated on future date) – not part of cash
and cash equivalents because they are not yet accepted by the bank for
deposit and immediate encashment.
 Not sufficient fund (NSF) checks – not part of cash and cash
equivalents because the check has insufficient balance not enough
for the amount written in the check.
 Certified checks – part of cash and cash
equivalents because it is certified and insured by the bank to
havesufficiency of fund backed in the check. Examples of certified
checks include:
o Manager’s check – certified by the manager of the bank
o Cashier’s check – certified by the teller or cashier of the bank
o Traveler’s check – certified for travel purposes of the
depositor
 Antedated checks (checks dated on past date) – part of cash and
cash equivalents provided that they are to been cashed or deposited to
the bank six months following the date of the check.
 Stale checks (checks long outstanding) – not part of cash and cash
equivalents because it is deemed to be expired. Checks must be
deposited or encashed six months following the date of the check.
The date of the check is on October 15, 2011 and has an amount
ofP15,000. The check is not certified by the bank. Therefore:
 Before October 15, 2011, the check is post-dated and the maker
should have at least P15,000 in his account.
 On October 15, 2011, if the maker has failed to have at least P15,000
in his account, the check would bounce or marked as NSF check.
Once the check is deposited to
the bank, the drawer will receive a notice of DAIF (drawn
against insufficient funds)
 After October 15, 2011, assuming the check has sufficient funds, it
will be an antedated check.
 On April 15, 2012 (six months after the check date),assuming the
check has not been deposited nor encashed,it is deemed as expired and
it will become a stale check.
Unrestricted cash
PAS 1 (Presentation of Financial Statements) provides that “an
entity shall classify an asset as current when the asset is cash or a cash
equivalent unless it is restricted from being exchanged or used to settle a
liability for at least twelve months after the end of the reporting period.”
The following cash items are included in “cash.”
 Cash on hand – cash collections and cash items
(checks, bank drafts and money orders) awaiting bank
deposit
 Cash in bank – demand or savings deposit, or checking account
which are unrestricted as to withdrawal
 Cash fund – cash set aside for current purposes (petty cash fund,
payroll fund, dividend fund)
Cash equivalents – short and highly liquid instruments (three months Cash in a foreign bank
before maturity) that are readily convertible to cash and so near their  If not subject to foreign exchange restriction, they are included as
maturity that they present insignificant risk of change in value because of cash.
changes in interest rates [PAS 7 (Statement of Cash Flows) definition]  If subject to foreign exchange restriction and material, they are
reclassified as cash restricted in foreign bank which are non-
Included in cash equivalents: current assets.
 Three-month BSP treasury bill
 Three-year BSP treasury bill purchased three months before Cash fund set for a purpose
maturity date  For use in current operation – classified as current asset.
 Three-month bank deposit Examples include: petty cash fund, payroll fund, travel fund,
 Three-month money market instrument interest fund, dividend fund, and tax fund.
 Preference shares with specified redemption date and acquired  For use in non-current operations – classified as long-term
three months before redemption date investment . Examples include sinking fund, contingent fund,
fund for acquisition of PPE, etc. If the fund is set
Measurement
 Cash is measured at face value
 Cash in foreign currency is measured at current exchange date
(balance sheet date)
 Cash is measured at estimated realizable value if bank is in
financial difficulty or bankruptcy and if recoverable amount is
lower than face value (currently, cash account is insured up to
P500,000)

Classification for investments

 If term is three months or less, classified as cash equivalents
 If term is more than three months but within one year, classified as
marketable securities, or short-term investments, and are separate
current assets in the financial statements
 If term is more than one year, classified as long-term investments
which are non-current assets.