LESSON 8
check paments to creditors. Safer
Cash- an example of financial asset
-usually at the first item in the statement of
financial position
Before item presented as “Cash”
1. The item must be unrestricted as to its
withdrawal.
2. It must be immediately available for use in
the current operation of the company
Receivables- Cash Deposit in Banks
Specific Cash Items: items Classified as part of
Cash in SFP
1. Cash on hand
a) Bills and Coins- issued by BSP
b) Different Checks- received from
other people
Different kinds of checks:
 Customer’s check- received from customers
 Traveler’s check- check with a security
feature
 Manager’s check- issued by bank managers
 Cashier’s check- issued by bank cashiers
 Company’s undelivered check- prepared by
company thet will eventually be delivered
to corporate creditors or suppliers
 Company’s postdated check- company
checks that were already delivered to
payees, but they cannot be encashed ot
dposited until the date on the check
 Company’s stale check- issued by the
company to suppliers and creditors and are
not encashed on time
c) Bank drafts- documents issued by
banks as an evidence of money
deposited to them
d) Postal money orders- cash items
sent through the post office
2. Cash in Bank( unrestricted)
 Savings Account- usual regular
savngs account that earns interest
 Checking account- used to issue
because there is no need to carry
hugw amount of cash anymore. Do
not usually earn interest income.
 Bank accounts in foreign currency-
cash items deposited in foreign
countries and denominated in
different countries
3. Working funds- operation
 Petty cash fund- pay for small
expenses incurred by the company
on the daily basis
 Change fund- used in the store by
the cashier
 Payroll fund- fund to pay the salaries
of the employees
 Dividend fund- pay the dividends
that were declared by corporation to
their stockholders
 Interest fund- set aside to pay
interest that will become due from
short and long term liabilitiesof the
entity
Specific Non-Cash Items: Not Considered as cash
in SFP
1. Receivables
 Cash in closed banks/ banks having
financial difficulty- they no longer
meet one of the twin requirements
needed
 Customer’s post-dated checks-
postdated check that was issued to
the company by a customer
 Cutomer’s NSF( no sufficient fund)-
customers will issed check with
problems
Classification:
i. Drawn Against Insufficient
fund (DAIF) check
ii. Drawn Against unclear
deposits (DAUD) check
 Customer’s stale check- received
from the customer that was not
 encashed by the company on Employed by a company to protect its cash:
time(expired)
1. Segregation of Duties
 IOU( I owe you)- amounts borrowed
3 duties considered to be incompatible:
by employees from the company
 Authorization- incharge of allowing
2. Prepaid Assets
the purchase requisition orders
 Advances for employee travel- used
 Custody- in charge of safekeeping
by employees while they are on a
the assets of the company. In charge
business trip
of releasing the cash to requesting
 Postage stamps- they can no longer
employees
be used for a medium of exchange.
 Recording- in charge of making the
Used for sending mails through the
necessary journal entries in the book
post office
of the company
 Supplies- usual offices supplies being
used by the company Note: there will be a risk if the function is given to
3. Temporary Investments the same person
 Trading securities- shares of the
2. Imprest system
stocks of other companies that were
2 important features
purchased by the company using
 All cash receipts for today must
excess fund.
be deposited intact to their
 Stocks are not considered as a
depository bank - to prevent
form cash because they are not
hugr amount of cash to be left in
the medium of exchange
the premises of the company
4. Non-current assets
 All cash disbursements must be
 Restricted foreign Bank accounts-
made through checks
cannot qualify as a cash item for
3. Voucher system- employees must first get
there is a restriction as to its
the approval of a higher level management
withdrawal
before cash disbursements can be made
 Bond sinking fund- fund reserve for
4. Internal audit at irregular intervals- to
payment of the bonds payable that
prevent familiarization on the part of the
are about to mature
employees(only audit)
 Plant expansion/ Acquisition fund-
5. Periodic bank reconciliation- records of the
reserved for the purchase of
bank company must be reconciled with the
additional non-cash assets like land
bank records
and building
 Retirement fund- reserved for Bank Reconciliation
retirement benefits of employees
 Done to show that there is no discrepancy
 Pension fund- also instituted for the
between the cash balance per book records
benefit of managers and employees
and the cash balance per bank records.
 Contingent Funds- prepare for the
worst case scenarios Credit for company
5. Expenses
Debit for bank
 Expenses vouchers- represent the
expenses that were incurred by the 2 reciprocal accounts will be reconciled
company for the period
 Cash in bank- pov of the company
Cash Management  Deposits from ABC com- pov of the back
LESSON 9 1. Resident Citizen- a filipino that lives or
reside at the Philippines
Taxation- the process by which our government,
2. Non resident citizen- a filipino but does not
through our lawmakers, raises income to pay its
live or reside in the Philippines
necessary expenses.
3. Resident alien- a American but living in the
Purpose: Philippines
4. Non resident alien- American that does not
1. To provide proper funding needed to run
lives or reside in the Philippines
the government
2 classifications
2. a) by imposing high customs duties or taxes
1. Engaged in trade or business (NRA-ETB)-
on imported goods, local products would
stays for more than 180 days
remain
2. Not engaged in trade or business (NRA-
b) by imposing the progressive taxes, it will
NETB)
reduce the inequalities between the wealth
and income of our people Kinds of Income
c) by increasing taxes, the government may
1. Compensation income- received by
mitigate the effect of an impending inflation
employees working for different companies
Basic principles of a sound tax system 2. Business income- generated by the
entrepreneurs.( they do not work as
1. Fiscal Adequacy- government should make
employee)
sure that the amount of revenue collected
3. Passive income- generated by different
is enough to shoulder its different expenses
investments made by the individual
2. Theoretical Justice- burden of taxation
should be proportionate to the ability of the Gross income – Allowable deductions = taxable
taxpayer to pay it income
3. Administrative Feasibility- tax law being
promulgated by the government should be
capable of just and equitable administration
3 inherent powers of the government
1. Eminent domain- power of the government
to take private property, upon payment of
just compensation to be used for a public
purpose
2. Police power- power of government to
make law that will promote public health,
moral, safety and welfare of the people Note: Applicable only for residents, citizens, &
3. Taxation- power of government to collect NRA-ETB. NRA- NETB 25% final withholding. Tax
taxes that will be used to finance the passive income will be computed separately.
different projects needed by the people
Allowable Deductions
Income Taxation
-Deduction for qualified individuals would
- 2 biggest classifications of the income taxpayer depend one the income they earn
are individual and corporation
4 classification of individual
1. Earning purely compensation income
  Basic personal exemptions(50,000)
 Add basic personal Exemp
(maximum 100,000)
 Premium payments on health and
hospitalization insurance
2. Business / prof income
 Regular expenses incurred by the
business
 Interest expense
 Tax expense
 Losses
 Bad dept expenses
 Depreciation and depletion exp
 Charitable contributions
 Research and developmet exp
 Basic personal exemp
 Add personal exemp
 Premium payment on health and
hospitalization insurance(limit 2400
per family or 200 per month)
Note:
Basic Personal Exemption- (50,000 per year) all
kinds of individual except NRA-NETB. Applicable to
single, married, or a widow/widower
NRA-ETB is lower than 50,000.( reciprocity)
Add Personal Exemption- Maximum 100,000,
25000 per dependent child. If married father is the
proper claimant, if legally separated mother is the
claimant.
Allowance deduction for every individual:
LESSON 6
Statement of cash flow
-presents the sources and utilization of an
organization’s cash and cash equivalents.
3 major section
1. Operating Activities- activitiea are related to
normal operating cycle
 Cash receipts from sale of goods and
rendering of services (+)
 Cash receipts from royalties, fees,
commision, and other revenue (+)
 Cash payments to suppliers of goods
and services(-)
 Cash payments to employees(-)
 Cash payments to income taxas(-)
 Interest paid (-)
 Interest received (+)
 Dividends received (+)
2. Investing Activites- activities generally result
from acquisition and disposal of non-
current
 Cash payments to acquire property,
plant, and equipment (-)
 Cash payments to acquire intangible
assets (-)
 Cash receipts from sale of property,
plant, and equipment (+)
 Cash receipts from solo intangible
assets (+)
 Cash receipts from sale of long-term
assels (+)
3. Financing Activities- activities usually arise
from changes in non-current liabilities and
owner’s equity of a business organization
 Cash investments from owners (+)
 Cash proceeds from bank loans (+)
 Cash distributions to owners (-)
 Repayment of bank loans (-)
Operating -Profit or Loss
Investing- Non-current Asset
Financing - Equity and Non-current Liability