REVIEWER IN FINANCIAL

ACCOUNTING AND REPORTING 212 UNRESTRICTED BALANCES

- Cash must be Unrestricted to considered as
Cash in use of withdrawals and readily available
for payment of current obligation and not
Lesson 1: Cash and Cash Equivalent
subject to any restrictions, contractual,
CASH otherwise. Restricted balances are reported as
other Assets.
- Includes money and other negotiable
instrument that is payable in money and CASH FUNDS
acceptable by the bank for deposit and - Intended for payment of non-current obligation
immediate credit. as a long-term investment such as;
- Includes Checks, Bank drafts and Money order.  Sinking fund
 Acquisition of PPE
Cash Equivalent
COMPENSATING BALANCE
- PAS 7 define as short term, highly liquid
- It is the minimum account balance, Checking or
investment that are readily convertible into cash.
Saving, that must be maintained in connection
- An investment qualifies as cash equivalent when it with a borrowing transaction with the bank.
has maturity of 3 months or less from the date of
acquisition. Compensation Balance
Legally Restricted Not Legally restricted
Example: Decrease to the balance of Part of Cash.
Bank.
 3 months Treasury bill. Presented as Cash held as
 3 years treasury bill purchased 3 months before compensating Balance
maturity date.
 3 months Time deposit. BANK OVERDRAFTS (Over withdrawn)
 3 months Money market instrument. - When the amount of check is issued are more
 Preference shares purchased 3 months for than the deposit creating a bank balance. This is
redemption date. classified as current liability.
- Not allowed in the Philippine banking industry.
Measurement of Cash - The amount of Overdraft can be offset with
- Measured at Face value other account and will be presented as net bank
overdraft.
- Foreign currency at its exchange rate.
UNDELIVERED CHECKS
- Closed to bankruptcy at its estimated realizable
- Or unreleased checks, issued but not yet given
value.
to the payee and reported as Cash.
Journal entry:
CASH Cash XXX
CASH ON HAND Related Account XXX
 Undeposited Cash and Checks
 Manager’s Check POSTDATED CHECKS
 Travel’s Check - Also called as Stale checks or Long outstanding
checks are checks not encashed or deposited by
CASH IN BANK
the payee for a relatively long period of time. In
 Demand deposit
the Philippine set up checks become stale if it is
 Checking Account
not encashed within 6 months.
CASH FUND
When the amount is immaterial it is accounted as
Restricted for current purposes:
miscellaneous Income.
 Petty Cash
Entry:
 Payroll
Cash XXX
 Dividend
Miscellaneous Income XXX
However, if the amount is material the related liability is CASH EQUIVALENT
expected to continue.
Entry:
Cash XXXX
Related Liability XXXX

SHORTAGE OF CASH
- Cash shortage is when actual cash count is less
than the cash balance per books. Cash shortage
or over is only a temporary or suspense
account.
Entry:
Cash shortage or over XXX
Cash XXX

- The amount of shortage is charged to the petty

cash custodian is he/she is accountable for the
shortage.
Entry:
Due from Cashier XXXX
Cash shortage or over XXXX

Loss from Cash shortage XXXX

Cash shortage or over XXXX

OVERAGE OF CASH
- Cash overage is when actual cash count is more
than the cash balance per books.
Entry:
Cash XXXX
Cash shortage or over XXXX

If there’s no claim in overage, It is treated as

Miscellaneous Income (first entry). If the overage is
proven to be the money of the cashier, it will be
credited as payable to the cashier (Second entry).

First entry:
Cash shortage or over XXXX
Miscellaneous income XXXX

Second entry:
Cash shortage or over XXXX
Payable to the cashier XXXX