CASH AND CASH EQUIVALENTS  Offsetting is allowed if entity maintains at least 2

positive account balance in the same bank which is

not restricted
 Money and other negotiable instrument
accepted in bank Stale Check - not presented for payment at certain period of
time (6 months banking practice)
 Req: Unrestricted - readily available for use  If material
 Measurment : Face value  Immaterial
Foreign @ current exchange rate
Bank/Financial Institution at state of  If silent, our stale check
bankruptcy @ NRV
Unused Credit Line - Disclosed to F/S
Composition of Cash
Compensating Balance - came from loan agreement “to
 Cash on Hand - 1. Undeposited Collections ensure credit availability”
2. Other cash items awaiting deposit  Unrestricted : Informal - CASH
 Restricted : Formal : Cash held as compensating bal
 Cash in Bank - 1. Savings Account
2. Current/Checking Account/Demand Cash Fund Set Aside for Certain Purpose
Deposit
 Cash Fund - Money set aside for current purpose
either for existing operation or payment of current
liabilities

Cash Equivalents - Short term and readily convertible into

cash, so near the maturity date that they
present insignificant risk of changes in
value because of changes in interest rates

 Req: Acquired within 3 months before maturity date

 Redeemable Preference Shares - P/S with mandatory
redemption period
 Debt Security provided that they are acquire within 3
months before maturity date

Equity Securities are not included because they don’t

have maturity date

Investment of Excess Cash

Terms : a) ≤ 3 months = CE = if problem is silent default  Classification of Cash Fund : follows the classification of
b)  3 months but ≤ 1 year = Short Term Investment related liability
CA = CL
c)  1 year = Long Term Investment NCA = NCL
 If problem is silent as to term assume: Petty Cash Fund - Money set aside for small expenses
T bills - CE 1. Imprest - 1. Equal to the disbursement
T Notes - STI 1 year 2. Recorded upon replenishment
T Bonds - LTI 10 years
2. Fluctuating - 1. Drawn upon request
Undelivered Check Post-Dated Check 2. Immediately recorded
 No payment made 3. No adjustment is necessary
 Part of Cash

Bank Overdraft
 Issued Check > Deposits
 Current Liability (if offsetting not allowed)
RECEIVABLES
Subsequent Measurement
Receivables are financial assets representing contractual Accounts Receivable = Net Realizable Value

In a reading or manufacturing business setting there Ending Balance of AR xx

are 2 classes of receivables: Allow. For Sales Discount xx
1. Trade - claims arising from sale of merchandise or Allow. For Sales Returns xx
in the ordinary course of business Allow. For Doubtful Accounts xx
- current receivables that are expected to be NET REALIZABLE VALUE xx
collected within 1 year or the normal
operating cycle whichever is LONGER
2. NonTrade - claims arising from sources other than
sale of merchandise or rendering of
services in the ordinary course of
business
- are current receivables if expected to
be collected within 1 year
- NCR if beyond 1 year

Common examples of Non Trade Receivables

1. Advances to/ Rec from SH, Directors, Officers,
Employees
3. Advances to Suppliers
4. Advances to Affiliates Estimation of Doubtful Accounts
5. Subscription Receivable - if expected to be collected  % of Sales = Net Sales x % of DAE
beyond 1 year, it is CONTRA EQUITY account  % of AR = End balance of AR x % Required Allow
deduction to subscribed share capital  Aging of Receivables
6. Special Deposits 0 - 30 xx
31 - 60 xx
7. Accrued Income - Dividend Income, Accrued Rent Inc 61 - 90 xx
8. Claims Receivable - 1. Due to losses and damages
from common carriers
2. Rebates and Tax Refund  DAE are General and Admin Expenses if the problem is
3. Insurance Claims silent
BUT! If credit and collections is administered by a Sales
 If problem is silent Personnel/ Sales Manager, DAE is Selling Expense
1. Always given maturity date. If wala talaga, CURRENT
2. CURRENT
3. NON CURRENT
4. CONTRA EQUITY
5. NON CURRENT
6. CURRENT
7. CURRENT

Initial Measurement
 General Receivable - Fair Value + Transaction Cost

 Specific AR - Face amount