Cash

Brief history of cash

 barter system
 gold is the standard of wealth
 Gold was the equivalent of cash
 Gold smith-recognized/initiated by the government
 Nowadays if u have a gold, gov’t will buy it as it has no value.
 Cash originated from gold.

Definition of cash:
 The standard medium of exchange
 Currency and coins (paper and coins) that is circulating and is legal tender (pag inabot
okay agad yan).
 In accounting, it includes money and any other negotiable instruments that is payable in
money and accepted by the bank for deposit and immediate credit.
 Most liquid asset cos u can use it anywhere.

Presentation- when we present cash, it is a current asset (unrestricted)

EXCEPTION: cash is not a current asset when it is restricted for at least 12 mos at the end of the
reporting period.
Example is when a bank closes cos it is under litigation or for whatever reason, u cannot
withdraw the cash immediately cos as mentioned the bank is under the said matter.

Measurement- face value (paglalagay ng value-like when u record a trans like for ex debit cash,
the amount u place there is what u call the measurement)
Has 2 periods:
1. Initially-how much sya nung when u first see it.
-recorded at face value (like literally how u can see the documents or the actual cash)
2. Subsequently- when the time passes, it changes, right? For example, initially it was just 10
pesos, then time has passed, it only costs 5 nlng.
Recorded also at face value based on how much it is.
NOTE: it can be recorded not as face value using estimated recoverable or realizable value
amount- when there is a problem at face value
If u have foreign currency, u have to convert it to peso, the valuation to be used is the current
exchange rate. Like ung palitan at a specific time that u will be exchanging.

Cash includes:
1. Cash on hand
 Undeposited collection- bills and coins
 Customer’s check- not assured that it is funded.
 Manager’s check- automatic may fund na. it means na it is approved and there is already
fund. To have this, u have to go to a bank first then ask for manager’s check. When u
deposit a 1m and ask for this check, the 1m will be deducted na then 1ook will be a
manager’s check.
 Cashier’s check- purpose is the same as manager’s check.
 Traveller’s check- a person goes to a bank and nag pa approve. Traveller’s check is
carried by a traveller instead of carrying a cold cash and alsready funded.
 Bank draft – a dpcument written by bank. Like manager’s checnk and the like in a sense
that is is funded but mas mabigat kasi ang nag guarantee mismo is ung bank parang check
sya ni bank na mismo.
 Money order- magbibigay ka ng pera tas magbibigay sila ng money order. Like western
union and other remittances. Gcash us somewhat considered as this.

2. cash in bank
 checking account (demand deposit) – You did not deposit to earn or save but rather u
want to use it for transaction. U can get it anytime kasi demand, right? Checking account
kasi it includes other negotiable instruments like check.
Example: u have 1M and u deposited in the bank d the bank credited u for that since they
have debt to u. everytime u wanna get it and u have a check, u just put the amount there
and the person will go to the bank to claim such amount then maleless ung 1m. Hence,
convenient siya.

 Savings deposit – pang-ipon lang. u have atm card or sometimes even passbook. It earns
interest.

 Example: u have 1m in bank and instead of paying cold cash, u pay in check. Like when
u pay the electricity, the endtry would be dr electricity exp and cr cash in bank

Checks
1. undelivered checks-supposedly ibabbayad pero d naibagay sa dapat recipient. D ka nawalan
ng money here.
Prior this is the entry:
a/p
cib
To correct, Reverse lng:
cib
a/p
2. Post-dated check- the date is higher or later than today. D sya cash out kasi on a later date pa.
for ex today is nov 12 and the date posted is nov 18.
Prior this is the entry:
a/p
cib
To correct, Reverse lng:
cib
a/p

3. stale checks- checks na nasira na. kunware u have a check and antagal na d pa na encash in
bank. Dapat within the reasonable time iclaim ung check when it is received. Usually 6 mos ung
ma stale.
If ever you issue a check an the recipient happens to lose it, you have the option to issue again as
it has not deducted your cash in bank. However, the law states that you can also disapprove to
replace the lost check without getting imprisoned. The same matter applies to stale check.
If you decided not to replace the stale check the entry would be:
CIB
Misc. fees

If you replace it just reverse the dr a/p and cr cib:

CIB
A/P
Bank overdraft
- is not legally allowed in the Philippines.
- Are like check drawn more than the deposited account.
- is a current liability since it is a debt to the bank.
- offsetting (isa negative isa positive) is NOT allowed in overdraft
- so for example:
A. (200,000)
B. 1,000,000
C. 2,000,000
Ang recorded mo is 2.5M, so, u only add the positive ones – b & c
With the exception of closing bank, for example u have a current and savings account. For
example u have a savings account of 200,000 and current account of 800,000, You can offset
kasi u have a utang of 200,000 and savings account. This could only happen within the same
bank.
Another exception is the immateriality

Example the depositor has deposited 1M in a bank and issued 1.2M to a person. If the recipient
of the check went to a bank, he/she could not claim it and the bank would penalize the depositor
and could affect the financial relationship. (there are instances where the bank could give the
excess amount if ever the bank and the depositor has already developed a financial relationship).

3. Cash Fund – classification is cash BUT under restriction. Pwedeng bills and coins. Change
fund, tax fund, payroll fund, dividend fund.
Restricition
No restriction-cash
Current operation- can be considered as cash fund.

The f.f. are not considered as cash fund

Long term
Non-current liab (bonds) – sinking fund
Non-current asset

Plant expansion fund(long term asset)

Connection of cash in bank and cash fund:

Compensating balance – kunware pautangin ka ng bank, they’’ll give u 10mdebt but ur deposit
should not go lower than 200k. the 200k is the compensating balance. This one is a restriction.
If formal ung restriction, it is not a cash but is held for compensating balance as long term
investment. If the restriction is informal, it is considered as cash and can be withdrawn anytime.

If the problem is silent and it only states that it is a compensating balance, it is to be considered
as informal. Hence, it is cash.

Lecture 01: Cash

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Pibikit Company provided the following information at year-end comprising the cash account:
Bills and coins       400,000
Cash in bank – demand deposit 5,000,000
Cash in bank – savings deposit 1,000,000
Certificate of time deposit, 2 yrs 1,500,000
Postage stamps unused           5,000
Money order         50,000
Manager check         100,000
Traveler check   1,000,000
Bank Draft 60,000
Postdated customer check        500,000
Change Fund 22,000
Petty Cash Fund 50,000
Emergency Fund         175,000

Compute for the total amount of cash at year end.

Bills and coins       400,000
Cash in bank – demand deposit 5,000,000
Cash in bank – savings deposit 1,000,000
Money order         50,000
Manager check         100,000
Traveler check   1,000,000
Bank Draft 60,000
 Change Fund 22,000
Petty Cash Fund 50,000

Cash: 7,682,000

Lecture 01: Cash-Case 2

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Clay Solace Company had the following account balances on December 31, 2021:

Cash in bank 2,500,000

Cash on hand          125,000
Cash restricted for addition to plant in 2022 1,600,000

Cash in bank included P600,000 of compensating balance against short-term borrowing

arrangement.

The compensating balance is not legally restricted as to withdrawal.

Compute for the total amount of cash at year end.

Cash in bank 2,500,000
Cash on hand          125,000
Total cash at year end 2,625,000

Lecture 01: Cash-Case 3

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Dudas Company reported the following on its cash and cash equivalents accounts on December
31, 2021:

Cash on hand 200,000

Petty cash fund       20,000
Good Bank current account                           5,000,000
Morning Bank current account No.1        4,000,000
Morning Bank current account No. 2 (overdraft)   ( 100,000 )
Afternoon Bank saving account 250,000
Afternoon Bank time deposit, 90 days        2,000,000

*  Cash on hand included the following items:

 
1. Customer check for 35,000 returned by bank December 21, 2021 due to insufficient fund
but subsequently redeposited and cleared by the bank on January 10, 2022.
 2. Customer check for P15,000 dated January 10,2022, received December 23, 2021.

* The petty cash fund consisted of the following items:

    Currency and coins  5,000

    IOUs from officers 2,000 (receivable) utang sayo
    Unreplenished petty cash vouchers       12,000

* Included among the checks drawn by Dudas Company

   against the Good Bank current account and recorded in
   December 2021 were the following:

1. Check written and dated December 23, 2021 and delivered to payee on January 31, 2022,
P25,000.
2. Check written December 26, 2021, dated January 30, 2022, delivered to payee on
December 28, 2021, P45,000.

Compute the total cash and cash equivalents at year end

Cash on hand 200,000
No sufficient check (35,000)
Post-dated check (15,000) 150,000
Petty cash fund     20,000
Shortage (1,000)
IOUs from officers (2,000)
Unreplenished petty cash vouchers     (12,000) 5,000
Good Bank current account              5,000,000
Undelivered checks 25,000
Company Post-dated checks 45,000 5,070,000
Morning Bank current account No.1        4,000,000
Morning Bank current account No. 2 (overdraft)   ( 100,000 ) 3,900,000
Afternoon Bank saving account 250,000
Afternoon Bank time deposit, 90 days        2,000,000
Cash and Cash equivalent 11,375,000

Cash Equivalents
Cash equivalent- short-term and highly liquid investments that are readily convertible into cash
and so near their maturity that they present insignificant risk of changes in value because of
changes in interest rates.
Key terms:
1. Short term- should be 3 MONTHS ONLY
2. Highly-liquid- talks about companies like san mo iinvest
3. Readily convertible into cash
4. So near that it presents insignificant risks (cos of change in interest rates).

Example:
a. Three-month BSP treasury bills (BSP collects money then parang nangungutang sayo
then u earn interest)
b. Three-month time deposit
c. Three month money market instrument or commercial paper

Commercial paper- same with T-bills except that the BSP was not the one to print the T-
bills, rather it is printed by companies, hence, calling it commercial paper) – if kunware
local business lng d sanlaki ng san Miguel and the like and 3 mos din, it is not considered
as highly liguid, so, di sya cash equivalent.

Money market instrument- lagay mo sa bank and then the bank will be the one to invest
then u earn interest.

d. Xxx-year BSP treasury bills/commercial paper/redeemable preference share

purchased three-months before maturity date
Hindi lahat ng t-bills three months lang, madalas mas matagal pa.

For example: person A has a 5-year t-bils, then di sya makawait to withdraw, person b
then has the interest to purchase the remaining 3 months, that could happen and if it does,
person b may consider it as a cash equivalent since it was purchase 3 months before its
maturity date.
Another example if person A has owned the said t-bills and he/she made a report in the
remaining 3-mos, person a would not be able to reclassify it and call it cash equivalent.

Redeemable preference share is the same thing as substance over form. In form share sya
pero in substance di sya share rather liability kasi it has a maturity date.

Excess Cash Investment

If the investment is 3 months, assuming it is highly liquid - cash equivalent
 If the investment is more than 3 months but not more than 12 months – short-term
investment
If the investment is more than 12 months – long-term

Lecture 02: Cash Equivalents

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Chelsea Company reported the following information at the end of the current year.

 Investment securities of P1,000,000. These securities are share investments in entities

that are traded in the Philippine Stock Exchange. 

As a result, the shares are very actively traded in the market. 

 Investment securities of P2,000,000. These securities are government treasury bills. 

The treasury bills have a 10- year term and purchased on November 30 at which time
they had two months to go until they mature. 

 Investment securities of P1,500,000. These securities are commercial papers or money

market placements.

The term of the commercial papers is three months and the instruments were purchased
on December 31 at which time they had one and a half month to go until they mature. 

What total amount should be reported as cash equivalents at the end of current year?
Government T-bills 2,000,000
Commercial paper/Money market placement 1,500,000
Total cash equivalent 3,500,000

PETTY CASH FUND

Petty cash fund- is money set aside to pay small expenses which cannot be paid
conveniently by means of check.

-included in cash account under cash fund (those with restrictions for current operations).

Cash in (receipts) > company x > Cash out (disbursement)

8am-5pm
Bills cash expenses
Coins checks to pay
Check
Bank drafts
Money order

Imprest system- all cash in at the end of the day will be deposited to the bank and the
balance in the said bank will be used to pay the expenses from the disbursement through
checks.

-has 2 systems:
1. Imprest Fund System- expenses are compiled before irecord all the expenses.
Petty cash custodian- holder of petty cash fund
Memorandum book- records all transaction all throughout. Not required in the F.S.
Serves as the ledger of the said custodian.

First step: establishment of fund

Entry:
Petty cash fund xxx
Cash in Bank xxx

No effect in cash equivalent

Second step: Expenses – payment of expense out of the fund

NO ENTRY- bc benefit over cause

Not recorded in the journal but recorded in the petty cash memo book.

Third step: Replenishment

Custodian hingi ulit kay acctg dept to replenish.
Replenishment check is usually equal to petty cash disbursements

Entry:
Expenses xxx
Cash in Bank xxx
Should point out that petty cash disbursements should replenished ONLY by means of
check and NOT from undeposited collection.

Fourth step: Increase or decrease of fund

Increase
Petty cash fund xxx
Cash in bank xxx
Decrease vice versa

Fifth step: End of reporting period

Expenses xxx
Petty cash fund xxx

Sixth step: Cash short/over

Kunware fund is 10k tas nung binilang bills and coins 9k lng.

Entry for shortage:

Cash shortage xxx
Cash in bank xxx

Entry for over:

Cash in bank xxx
Cash overage xxx

Cash shortage and overage is a SUSPENSE ACCCOUNT OR TEMPORARY

ACCOUNT
If shortage bc of the fault of custodian, bawas sa kanya yon.
Receivable from custodian
Cash shortage
Pwede rin na misc fees or loss account

If over
Cash overage
Payable to custodian

2. Fluctuating Fund System- every time there is a movement in the fund, record agad.

First step: establishment of fund

Entry:
Petty cash fund xxx
Cash in Bank xxx
Second step: Expenses
Entry:
Expenses xxx
Petty cash fund xxx

There is an entry kasi pinapagalaw ing flow of petty cash fund

Third step: Replenishment

Custodian hingi ulit kay acctg dept to replenish.

Not recorded as expenses.

Entry:
Petty cash fund xxx
Cash in bank xxx

Fourth step: Increase or decrease of fund (adjust the replenished expenses in order to
state the correct petty cash balance)

Increase
Petty cash fund xxx
Cash in bank xxx

Decrease vice versa

Cash in bank xx
Petty cash fund xx

Fifth step: End of reporting period (adjust the replenished expenses in order to state the
correct petty cash balance)
Expenses xx
Petty cash fund xx
Adjustments is to be reversed at the beginning of the next acctg. Period
Reversal is made so that the normal replenishment procedure may be followed w/o
distinguishing whrher the expenses pertain to a current or prior period.

Sixth step: Cash short/over

Kunware fund is 10k tas nung binilang bills and coins 9k lng.

Entry for shortage:

Cash shortage xxx
Petty cash fund xxx
 Entry for over:
Petty cash fund
Cash overage

Cash shortage and overage is a SUSPENSE ACCCOUNT OR TEMPORARY

ACCOUNT
If shortage bc of the fault of custodian, bawas sa kanya yon.
Receivable from custodian
Cash shortage
Pwede rin na misc fees or loss account

If over
Cash overage
Payable to custodian

Lecture 03: Petty Cash Fund

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Gupit Company closed the accounts on June 30. The entity provided the following transactions:

May 1 The entity established an imprest fund of P10,000.

   
        30 The fund is replenished. The petty cash items include:

Currency and coin 2,000

Postage 1,000
Supplies 3,000
Transportation 2,500
Miscellaneous expense 1,500

June 30 The fund was not replenished. The fund is composed

of the following:

Currency and coin 6,000

Supplies 2,000
Postage 1,000
      Transportation 1,000

July 15   The fund is replenished and increased to P15,000.

Currency and coin 3,000

Supplies 3,500
Postage 1,500
 Transportation 1,500
Miscellaneous expense       500

Prepare journal entries to record the transactions under:

1.  Imprest fund system
2.  Fluctuating fund system.

Imprest fund system

May 1 Petty cash fund 10,000
Cash in bank 10,000

May 30 Miscellaneous expenses 1,500

Postage Expense 1,000
Supplies 3,000
Transpo expense 2,500
Cash in bank 8,000

June 30 Supplies expense 2,000

Postage expense 1,000
      Transportation expense 1,000
Petty cash fund 4,000

July 1 Petty cash fund 4,000

Supplies expense 2,000
Postage expense 1,000
      Transportation expense 1,000

July 15 Petty cash fund 5,000

Cash in bank 5,000
Originally 10k and increased by 5k so 10-5

Supplies expense 3,500

Postage expense 1,500
Transportation expense 1,500
Miscellaneous expense       500
Cash in bank 7,000
Fluctuating fund system
May 1 Petty cash fund 10,000
Cash in bank 10,000

May 30 Miscellaneous expenses 1,500

Postage Expense 1,000
Supplies 3,000
Transpo expense 2,500
Petty cash fund 8,000
#
Petty cash fund 8,000
Cash in bank 8,000

June 30 Supplies expense 2,000

Postage expense 1,000
      Transportation expense 1,000
Petty cash fund 4,000

July 15 Supplies expense 1,500

Postage expense 500
      Transportation expense 500
Misc expense 500
Petty cash fund 3,000

July 15 Petty cash fund 12,000

Cash in bank 12,000
15k from increase + pcf of 3k in jjul 15 trans