Under PAS 7, treasury bills,

money market placement and

time deposit normally qualify as
cash
equivalents only when they
have a short maturity of three
months or less from the date of
acquisition.
In the absence of specific term,
money market account is short-
term investment of three months
or less.
The treasury bill is classified as
cash equivalent because the
term is three months.
The time deposit is not a cash
equivalent because the term is
four months.
Under PAS 7, treasury bills,
money market placement and
time deposit normally qualify as
cash
equivalents only when they
have a short maturity of three
months or less from the date of
acquisition.
In the absence of specific term,
money market account is short-
term investment of three months
or less.
 The treasury bill is classified as
cash equivalent because the
term is three months.
The time deposit is not a cash
equivalent because the term is
four months.
Problem 1-18 Problem 1-20
The customer check of P2,000,000 payable to Ral is properly not included in
cash because it is The NSF customer check of P500, 000 should be reverted The sinking fund is included in cash and cash equivalents because the
to accounts receivable on December 31, 2012 postdated January 2, 2013.
bond payable is already due within one year from the end of the
because it was redeposited after December 31, 2012. The check of P300,000
drawn by Ral is undelivered on December 31,2012. Thus, the undelivered reporting period. The classification of a cash fund should parallel the
check is restored to cash by debiting cash and crediting accounts payable.
classification of the related liability.

Problem 1-14 Problem 1-10

Under PAS 7,
Since the compensating balance is legally restricted, it is excluded from the
amount shown as cash. In this case, the compensating balance is shown as
"cash held as compensating balance" as a current asset because the related
loan is short-term. The term of the time deposit is not given. It is assumed
that it is three months or less, this being the normal banking practice.
Accordingly, the time deposit is a cash equivalent. . In this case, the
compensating balance is shown as "cash held as compensating
balance" as a current asset because the related loan is short-
treasury bills,

(Sum of all deposit – sum of all checks)

(Checks that are not included in the book)

 Zodiac company

Bank reconciliation
(collection of note + interest on note)
March 31

balance per book april 30 ₱ 1,100,000.00

CM for note collected ₱ 60,000.00
Outstanding checks:
no: 1331 ₱ 40,000.00
no: 1332 30000
no: 1334 ₱ 60,000.00
no: 1335 ₱ 10,000.00 ₱ 140,000.00
total ₱ 1,300,000.00
less: bank service charge -₱ 5,000.00
NSF Check -₱ 25,000.00
Undeposited Collection -₱ 270,000.00 -₱ 300,000.00
balance per bank april 30 ₱ 1,000,000.00

adjusting entry DR CR
cash in bank ₱ 60,000.00
note receivable ₱ 60,000.00
bank service charge ₱ 5,000.00
accounts receivable ₱ 25,000.00
Cash in bank ₱ 30,000.00

balance per book april 30 ₱ 1,100,000.00

CM for note collected ₱ 60,000.00
less; Bank Service charge -₱ 5,000.00

less: Nsf check -₱ 25,000.00

adjusted Cash in bank ₱ 1,130,000.00