Cash – includes money and any other negotiable instrument that is payable in money and acceptable by

the bank for deposit and immediate credit.

 Cash on Hand – undeposited collections and other current funds held as of the reporting date.
 Cash in Bank – deposits in bank that are available for immediate withdrawal and unrestricted
use.
Examples of Cash: Not included as cash:

 Cash  Sinking Fund

 Bank Drafts  Preferred Redemption Fund
 Money Orders  Plant Expansion Fund
 Petty Cash Fund  Insurance Fund
 Payroll Fund  Post-dated checks
 Travel Fund  IOUs or advances to employees
 Interest Fund (receivables)
 Dividend Fund  Depreciation Fund (form of asset
 Tax Fund replacement fund)
 Coins and Currencies  Contingency Fund
 Revolving Fund  Preference share redemption Fund
 Postage Stamps (prepaid supplies)
Valuation: In local currency = Face Value

In foreign currency = Current Exchange Rate

If Recoverable Value less than Face Value = Estimated Realizable Value

Financial Statement Classification

Classified as cash and cash equivalents Classified as a separate line item

1. Unrestricted/Current Use 1. Restricted/Non-current Use
2. Investment in time deposit, Money Market
and Treasury Bills
* If term ≤ 3 months
* There is an assumption of 3 month-term when the problem is silent.
3. General Rule: Bank Overdraft ( credit bal. bank account) – current liabilities
* Exception: it can be an offset against other bank acc. If
(a) immaterial
(b) 2 or more account maintain in 1 bank by an entity
4. Informal Compensating Balance 4. Formal Compensating Balance
→ not legally restricted → legally restricted
* If related loan is short term = cash held as
compensating bal.
* If related loan is long-term = non-current
investment
  Cash includes money or its equivalent that is readily available for unrestricted use.
o Postdated check received from  Exclude from cash
customer
o Undelivered check drawn  Include in cash
o Postdated check drawn  Include in cash
o Stale checks  Include in cash

Cash Equivalents are short term highly liquid investment that are readily convertible to known amount
of cash and which are subject to an insignificant risk of changes in value.

Examples of CE:

a. Treasury Bills, Notes, or Bonds acquired 3

months before maturity date
 Treasury bill – short term
- normally have 90 days to
less than a year
- 90 days to less than a year
 Treasury notes and treasury bonds - log-
term
- have maturity date of 1
year to less than 10 years.
 Treasury bonds – have a maturity of 10
yrs. or more.

b. Money Market instrument (commercial paper

acquired 3 months before maturity date
c. Three-month time deposit

Bank Overdraft – negative (credit) bal.

- may occur only in