CASH
CASH AND CASH EQUIVALENTS
1. CASH includes MONEY and ANY OTHER
NEGOTIABLE INSTRUMENT that is payable
in money and acceptable by the bank for
deposit and immediate credit.
2. Cash must be:
a. UNRESTRICTED; and
b. AVAILABLE for use in current
operations
i. Payment of operating
expenses
ii. Settlement of current
liability (Note: check if a
liability is current
noncurrent according to its
due date)
iii. Acquisition of current asset
(If for acquisition
noncurrent assets, fund is
NOT cash regardless of
timing of disbursement of
the fund. Example: “Land
Acquisition Fund” that is
expected to be disbursed a
few months from balance
sheet date is STILL not cash)
3. To be included in Cash, checks must be:
a. RECEIVED on or before balance
sheet date; and
b. DATED on or before balance sheet
date
NOTE: Always check if you’re the payor
or the payee.
4. CASH EQUIVALENTS are:
a. Short term;
b. Highly liquid; and
c. Acquired 3 months or less before
maturity (Look for the acquisition
date and maturity date ONLY.
Balance sheet date is irrelevant.)
i. If an investment was
acquired MORE than 3
months, it is not a cash
equivalent. For classification
of either current
noncurrent, look between
the balance sheet date and
date of maturity. THIS IS
WHEN YOU WILL CONSIDER
BALANCE SHEET DATE.
5. REMEMBER: If the problem asks for Cash,
do not include Cash Equivalents. Only add
them, if CASH and CASH EQUIVALENTS are
asked.
6. A Bank Draft (part of cash) is different from
a Bank Overdraft (liability pertaining to
bank accounts that have a negative
balance).
CASH MANAGEMENT (SIVIB)
or
1. Segregation of duties (CAR)
a. Custody
b. Approval/Authorization
of c. Recording
2. Imprest system
a. Receipts must be deposited daily;
b. Disbursement is through check
(exception is petty cash fund)
3. Voucher system
4. Irregular internal audit
5. Bank reconciliation
PETTY CASH FUND
1. Imprest Fund System (PCF is set at an
imprest balance; replenishment is equal to
disbursements) or Fluctuating Fund System
(PCF balance fluctuates; replenishment
does NOT necessarily need to be equal to
disbursements)
2. To compute for petty cash (assumption: no
replenishment yet), check first if there is
overage (Count > Accountability) or
shortage (Count < Accountability).
a. Overage: deduct the overage from
the cash items in the PCF to
compute for your PCF
b. Shortage: just count the cash items
for the balance of your PCF
or
 CASH

BANK RECONCILIATION Treasury bills acquired 4/15/19; due

1/1/20
Money market placements acquired
Adjusted Book = Unadjusted + CM – DM +/- Book
12/25/19; due 1/1/25
Errors
Negative balance in a bank account
Adjusted Bank = Unadjusted + DIT – OC +/- Bank
IOUs
Errors
Restricted compensating balance
Petty cash fund
Adjusted Balances must be equal. Cash in bank – sinking fund; Bonds
payable is due on 12/15/20
Bank to Book: Just consider bank reconciling items Cash in bank – sinking fund; Bonds
normally; book reconciling items are considered by payable is due on 12/15/21
changing their sign. Customer’s check; received 12/1/19,
Unadjusted Bank + DIT – OC +/- Bank Errors dated 12/1/19
– CM + DM +/- Book errors = Unadjusted Book Customer’s check; received 1/1/20,
dated 12/1/19
Book to Bank: Just consider book reconciling items Customer’s check; received 12/1/19,
normally; bank reconciling items are considered by dated 1/1/20
changing their sign. Company’s check; released 12/1/19,
Unadjusted + CM – DM +/- Book Errors dated 12/1/19
Company’s check; released 12/1/19,
– DIT + OC +/- Bank Errors = Unadjusted Bank
dated 1/1/20
Company’s check; released 1/1/20,
PROOF OF CASH dated 12/1/19
Vouchers paid
Basically an expanded bank reconciliation where Postage Stamps
you reconcile at least 2 dates.
Prepare Proof of Cash
DIT and CM affect RECEIPTS
OC and DM affect DISBURSEMENTS Cash in bank, 3/31 200,000
Book credits in April 720,000
Use the in-a-relationship technique. Couples who Book debits in April 800,000
are together are mad at each other (different Bank Statement, 3/31 330,000
signs); couples who are far from each other miss Bank debits 530,000
each other (same sign) Bank credits 700,000
Note collected by bank in March 60,000
Beginning + Receipts – Disbursements = End Note collected by bank in April 100,000
Service charge in March 8,000
Service charge in April 2,000
EXERCISES
NSF check in March 20,000
Which of the following is Cash? NSF check in April 30,000
Assume BSD is 12/31/19 DIT, 3/31 80,000
DIT, 4/30 220,000
Cash in bank – current account OC, 3/31 178,000
Cash in bank – payroll account OC, 4/30 372,000
Cash in bank – inventory fund
Cash on hand
Cash in bank – land acquisition fund; to
be disbursed 1/1/20
Cash in bank – plant acquisition fund; to
be disbursed 1/1/25
Time deposit acquired 12/15/19; due
3/1/20