FINANCIAL ASSETS

Financial instrument – any contract that gives rise to both a financial asset of one entity and a
financial liability or equity instrument of another entity

Financial Assets
a. Cash
b. Equity instrument of another entity
c. Contractual right to receive cash or another financial asset from another entity
d. Contractual right to exchange financial instrument with another entity under conditions
that are potentially favorable
e. Contract that will or may be settled in the entity’s own equity instruments

Financial Liability
a. Contractual obligation to deliver cash or another financial asset from another entity
b. Contractual obligation to exchange financial instrument with another entity under
conditions that are potentially unfavourable to the entity
c. Contract that will or may be settled in the entity’s own equity instruments

Equity Instrument – any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities

Initial Recognition
FA – recognized when an entity becomes party to the contractual provisions of the instrument

Initial Measurement
 FV plus transaction costs
 Except for Financial Assets at FV through surplus or deficit, transaction costs are expensed
 Transaction costs – incremental costs that are directly attributable to the acquisition,
issue, or disposal of a financial instrument
o Fees and commissions paid to agents, advisers, brokers and dealers
o Levies by regulatory agencies and securities exchanges
o Transfer taxes

Cash and Cash Equivalents

Cash comprises:
 Cash on hand
 Cash in bank
 Cash treasury accounts

Adjustment for Unreleased Commercial Checks

Cash in Bank, Local Currency – current xx

Accounts Payable or other liability account xx

Accounting for Cancelled Checks

  Checks are cancelled when:
o Stale – outstanding for 6 months
o Voided
o Spoiled
Current Year:
Cash – Modified Disbursement System (MDS) Regular xx
Accounts Payable xx

Prior Year:
Accumulated Surplus/Deficit xx
Accounts Payable xx

Petty Cash Fund

Guidelines:
a. Head of Agency shall approve the amount of PCF to be established, which shall be
sufficient to defray recurring petty expenses for 1 month
b. PCF custodian shall be properly bonded whenever the established amount of PCF
exceeds P5,000
c. Maintained using imprest system
d. PCF shall be kept separately from other advance collections and shall not be used to pay
for regular expenses
e. Payments should not exceed P15,000 per transaction except otherwise authorized by law
f. Canvass from at least 3 suppliers is required for purchases amounting to P1,000 and
above, except for purchases made while on official travel
g. Disbursements shall be supported by properly accomplished and approved PC vouchers,
invoices, ORs or other evidence of disbursement
h. Replenishment shall be made as soon as disbursements reach at least 75% or as needed
i. At the end of the year, PCF custodian shall submit all unreplenished PC vouchers to the
accounting unit for recording in the books of accounts
j. Unused balance of the PCF shall not be closed at the end of the year. It shall be closed
only upon the termination, separation, retirement or dismissal of the PCF Custodian, who
in turn shall refund any balance to close his/her cash accountability

Establishment of PCF
Petty Cash xx
Cash – Modified Disbursement System (MDS) Regular xx

PCF is replenished
Various Expenses xx
Cash – Modified Disbursement System (MDS) Regular xx

PCF is not replenished

Various Expenses xx
Petty Cash xx

PCF Custodian retires and PCF is closed

Cash- Collecting Officer xx
Petty Cash xx
Accounting for cash shortage/overage of Disbursing officer
Disbursing officer – liable for cash shortage, while cash overage is forfeited in favour of the
government

CASH SHORTAGE
Recognition
Due from officers and employees xx
Advances for/to... appropriate account xx

Restitution
Cash- Collecting Officer xx
Due from officers and employees xx

Remittance
Cash- Treasury/Agency Deposit, Regular xx
Cash- Collecting Officer xx

CASH OVERAGE
Recognition
Cash- Collecting Officer xx
Miscellaneous Income xx

Remittance
Cash- Treasury/Agency Deposit, Regular xx
Cash- Collecting Officer xx

Dishonored Checks