CHAPTER 1 FUNDS FOR NONCURRENT OPERATIONS

CASH AND CASH EQUIVALENTS NONCURRENT

INVESTMENT
PENSION FUND
*But if related Liability
CASH is CURRENT the fund is
=includes money and other negotiable included as CASH.
instrument that is payable in money and NONCURRENT
INVESTMENT
acceptable by the bank for deposit and
PREFERRED Unless the preferred
immediate credit. share has a mandatory
REDEMPTION FUND
=it includes Cash on hand, Cash in Bank, redemption and if
Cash fund for current operations and redeemable:
*W/in 1 year
other items that are unrestricted for use
= CURRENT INV
in the current operations. Always NONCURRENT
ACQUISITION OF
even if expected to be
PPE
1. CASH ON HAND (CUTCOTMaPoBa) disbursed next year
*Customer’s Check awaiting Deposit CONTINGENT NONCURRENT
INVESTMENT
*Undeposited Cash Collections FUND
(Currencies such as BILLS and COINS) INSURANCE FUND NONCURRENT
*Traveler’s Check INVESTMENT
*Cashier’s Check SINKING FUND NONCURRENT
*Official’s Check INVESTMENT
If the related liability is
*Treasurer’s Check
CURRENT, it is included
*Manager’s Check
as CASH.
*Postal Money Orders (demand credit *Classification of cash funds as Current/Noncurrent
instrument issued and payable by a post should be parallel to the classification of the related
office) liability. Thus, an entity should reclassify such Non
*Bank Drafts (written order addressed current Asset is the related liability become Current
to bank to pay money to the order of the
maker)

2. CASH IN BANK
CASH EQUIVALENTS
A. Current Account/ Checking Account/
=short term and highly liquid investments
Demand Deposit/ Commercial Deposit
*Generally, non-interest bearing that are readily convertible into cash and
*Withdrawable by checks against bank so near their maturity that they present
B. Savings Deposit (Savings Account) insignificant risk of changes in value
*Generally, non-interest bearing because of changes in interest rates.
*Depositor is issued an ATM card/passbook
1. TIME DEPOSIT
*Withdrawable in ATM station or within
the bank 2. MONEY MARKET INSTRUMENT/
COMMERCIAL PAPER
3. CASH FUND FOR CURRENT OPERATIONS 3. TREASURY BILLS, TREASURY
NOTES AND TREASURY
(CDPPPRITT)
*Change Fund BONDS*
*Dividend Fund 4. REDEEMBALE PREFERRENCE
*Payroll Fund SHARES WITH MANDATORY
*Purchasing Fund (for Purchasing REDEMPTION PERIOD
Inventories)
*Petty Cash Fund
*Revolving Fund (fund used for specified
purpose set by management)
*Interest Fund
*Travel fund
*Tax Fund
If the above items are: TREATMENT SOME MEASUREMENT ISUES
CASH Measured at Face Value
1. Originally Invested/ acquired for more than
Cash in Translate/ Convert first to Philippine Peso
THREE MONTHS before maturity date:
FOREIGN using the current exchange rate.
A. Remaining term is THREE MONTHS or CURRENCY A. Unrestricted = CASH
SHORT TERM
LESS from the reporting date INVESTMENT B. Restricted = if Material, classified
Ex. separately as NCA & restriction indicated
D J F M A M J J A S O N D A. Unrestricted = CASH
DEPOSIT in B. Restricted = if Material
R 1 2 M - - - - - - - - - classified separately among non-current
FOREIGN BANK
D D assets as RECEIVABLES.
RD=reporting date Cash in CLOSED Measured at Est REALIZABLE VALUE and
MD=Maturity Date be included among non-current assets if
BANK/ Banks in
*The Investment may be acquired last year for more the amount recoverable is lower than Face
BANKRUPTCY
than three months but since the maturity date or Value.
the remaining term is 3 mos or less from the Negative Balance in the Cash In Bank Acc.
reporting date then it is STI. A. SAME BANK = OFFSET, except for
B. Remaining term is MORE THAN BANK amount restricted
SHORT TERM
THREE MONTHS but within one YEAR. INVESTMENT OVERDRAFT B. DIFFERENT BANK = CURRENT
Ex. LIABILITY
D J F M A M J J A S O N D But if material or if part of cash
management, may be offset against
R - - - - - 1 2 3 4 5 6 M other bank account.
D D A minimum checking account balance that
*So, if inv is acquired on June and the maturity date must be maintained in connection with a
is on Dec, it is still STI because remaining term is borrowing agreement with a bank.
more than 3 mos but less than one year. A. NOT LEGALLY RESTRICTED = CASH
C. Remaining Term is MORE THAN 1 YEAR LONG TERM COMPENSATING B. LEGALLY RESTRICTED = if related
INVESTMENT BALANCE loan is : 1.) SHORT-TERM
2. Originally Invested/ acquired for THREE -presented as “CASH HELD
CASH
MONTHS or LESS before maturity date: FOR COMPENSATING BALANCE”
EQUIVALENT
*In case A if Inv was bought on Jan = CE under Current Receivable.
*In Case B if Inv was bought on Oct = CE 2.) LONG-TERM
*If an item cannot be included as CASH EQUIV -same account title but under
because it did not qualify the cut-off time period Non-current Receivable
If SILENT: assumed Not Restricted=Cash
(THREE MOS), it will always be classified as
UNDELIVERED/ Reverted back to cash
INVESTMENTS (ST/LT) depending on the period up
UNRELEASED CASH xx
to maturity.
CHECK Acc Pay xx
*For other securities, CE basis should be Checks not encashed for a long period of time.
THREE MONTHS from acquisition date until Current practice: considered Stale if not
MATURITY DATE. STALE CHECKS/ encashed within 6 Months from its date.
*If the problem is SILENT: CHECKS LONG Revert back to Cash - OWN stale check
1. Treasury Note and Bonds OUTSTANDING (Entity’s Check not encashed by Vendor)
= assumed Non-current Investment CASH xx
2. Cash in Money Market Account Acc Pay xx (if Material)
= assumed Cash Equivalent Misc Income xx (if not material)
3. Time Deposit Revert back to AR -Customer’s stale check
(Customer’s Check not encashed by Entity)
= Assumed Cash Equivalent
AR xx
Cash xx
Checks dated after Reporting Date:
POSTDATED Entity’s OWN PDC - Revert back to Cash
CASH xx
CHECKS
Acc Pay xx
Customer’s PDC - Receivable
RECEIVABLE
IOUs (I Owe U) Adv to employees xx
Cash/PCF xx
EQUITY Do not have Maturity Dates so cannot be
SECURITIES classified as Cash Equiv.
(except Redeemable Pref Shares)
Pref Share w/ Specified Redemption date:
REDEEMABLE A. Acquired 3 months before redemption =
CASH EQUIVALENT
PREF SHARES
B. Acquired for more than 3 months before
red = Current Investment
 ACCOUNTING FOR CASH OVERAGE
CALLABLE PREFERENCE Not CE - Part of SHE of Issuer and LT Cash xx Cash Count < Book Bal
SHARES Investment of Shareholder. Cash Short
CSO = Temporary account;
NSF - No Sufficient Funds or Over xx
should be closed when FS
DAUD - Drawn Against Uncleared Deposits are prepared:
NSF/DAUD/DAIF DAIF - Drawn Against Insufficient Funds
Cash Short or Over xx If: Properly found to be
Reverted Back As Part of RECEIVABLE
Payable to Cashier xx money of the cashier
AR xx
CASH xx
CSO xx If: No one claims for the
Misc Income xx overage
EXPENSE ADVANCES Receivable or Prepaid Expense
TEMPORARY Either FVTPL/ FVTOCI but never as
INVESTMENT IN Cash/ Cash Equivalent
SHARES OF STOCKS IMPREST SYSTEM
Amount of credit Applied xx = a system of control cash where: ALL
UNUSED CREDIT LINE Amount approved by Bank (xx)
Unused Credit Line xx Cash RECEIPTS should be deposited
*Disclosed in NOTES intact and ALL Cash DISBURSEMENTS
A warrant for the payment of Money should be made by means of check.
TREASURY WARRANTS into or from a Public Treasury
*However, it is impractical for the company to make
Part of CASH
all payments thru check.
Restricted Amount held in trust for
*Therefore, a PETTY CASH FUND is established to
ESCROW DEPOSIT another party (e.g. Deposit required by
cover Small and Miscellaneous Expenditures.
a court of Law for a Pending Case)
Part of Other Current/NonCurrent
Assets and reported as Liability PETTY CASH FUND
UNRECORDED CASH To be recorded: (-) Cash 2 Methods 1. IMPREST FUND SYSTEM
2 FLUCTUATING FUND SYSTEM
DISBURSEMENTS Acc Pay/ other
IMPREST FUND FLUCTUATING FUND
Approp Account xx
CASH xx SYSTEM SYSTEM
UNRECORDED CASH To be recorded: (+) Cash Check drawn to Establish PCF
COLLECTIONS CASH xx PCF xx PCF xx
AR or other CIB xx CIB xx
Approp account xx Payment of Expenses using PCF
Savings Cert entitling the Bearer to -Memo Entry in PCF Journal- Expenses xx
CERTIFICATE OF Receive Interest. -No Entry- PCF xx
DEPOSIT FOR TIME A. Invested 3 Months Before maturity Replenishment of Petty Cash Payments
DEPOSITS date = CASH EQUIVALENT
Expenses xx PCF xx
B. Invested for more than 3 months
CIB xx CIB xx
= Investment (ST/LT)
Unreplenished Exp at year-end (Adj Entry)
POSTAGE STAMPS ON “Office Supplies” or as
Expenses xx -NO ADJUSTING
HAND “Prepaid Expense”
PCF xx ENTRY-
Reversal at beginning of Next Year
PCF xx -NO REVERSAL ENTRY-
ACCOUNTING FOR CASH SHORTAGE Expenses xx
INCREASE in the FUND
Cash Count < Book Bal PCF xx PCF xx
Cash Short or Over xx
CSO = Temporary account;
Cash xx CIB xx CIB xx
should be closed when FS
DECREASE in the FUND
are prepared:
CIB xx CIB xx
Due from Cashier xx If: Fault of Cashier/
Cash Short or Over xx PCF xx PCF xx
Custodian
*PCF - Petty Cash Fund
Loss from cash
*CIB - Cash In Bank
Shortage xx If: Cause not identified
CSO xx