Cash and Cash

Equivalents
Hiezelyn Delos Santos
CASH

Any item that is acceptable by bank or other financial institution for

deposit at face value

Must be unrestricted and immediately available for use in current

operations
 CASH

Cash Items includes:

Cash on Hand Cash in Bank

Cash Fund
• Undeposited Includes demand
collections deposit or checking
• Customer’s checks account and savings • Petty Cash Fund
• Manager’s checks account which are
• Bank drafts unrestricted as to • Change Fund
• Money orders withdrawal
• Payroll Fund
 CASH
Cash Items

Unrestricted and immediately

For use other than for
available for use in current
operations current operations

For payment of operating expenses

For payment of current liabilities

For acquisition of current asset

Reported as “CASH” in the Reported under non-

current asset section current financial assets
CASH EQUIVALENTS

Short-term highly liquid investments that are acquired three

months before maturity

There should be insignificant risk of change in value due to

fluctuation of interest rates
INVESTMENT OF EXCESS CASH

Excess Cash

Short-term Noncurrent/Long-
Cash Equivalent
financial asset Term investments

More than 3
Three months or
months but within More than 1 year
less
1 year
MEASUREMENT OF CASH

Face Value

If in foreign currency, convert using current exchange rate

 FS PRESENTATION

The caption “Cash and Cash Equivalents” should be shown as the first item among the current assets

Details of cash items should be disclosed in the Notes to Financial Statements

Considerations in reporting cash balance in the balance sheet:

• Foreign Currency- If it is unrestricted, then it should be translated to Philippine currency using the exchange rate at the end of
the reporting period. However, if it is restricted as to withdrawal, then it should be reported as non-current asset.
• Cash in closed banks or in banks having financial difficulty or in bankruptcy- it should be reclassified as receivable and should
be written down to its recoverable amount.
CASH FUND

Cash and cash equivalents – for current operations or payment of current

obligations

Long-term investment – for noncurrent operations or payment of noncurrent

obligations
BANK OVERDRAFT

A credit balance in the cash in bank account

Classified as current liability and should not be offset against other

bank accounts with debit balances

Exception: When two or more accounts are maintained with the

same bank
BANK OVERDRAFT
Example:
WASHURPROBLEM Co. had the following cash balance items listed in its trial balance at
12/31/19:
BDO savings and loan P 50,000
RCBC Bank (5,000)
Metrobank 10,000

WASHURPROBLEM Co. 12/13/19 balance sheet would show that cash balance?
a. (P5,000) c. P55,000
b. P60,000 d. None of the Above

: The credit balance of (P5000) should be recorded under liabilities.

COMPENSATING BALANCE

A minimum bank account balance maintained in connection with a borrowing

arrangement

Not legally restricted – part of Cash

Legally restricted – “Cash held as compensating balance”
RULES
• Current asset – related loan is short term
• Noncurrent investment – related loan is long-term
UNDELIVERED/UNRELEASED CHECKS

Checks drawn and recorded but not given to the payee before the end of the reporting
period

CASH XXX
ADJUSTING ENTRY Accounts Payable XXX
(Appropriate Account)
POSTDATED CHECKS

Checks drawn, recorded and delivered but dated subsequent to the end of the reporting
period

CASH XXX
ADJUSTING ENTRY Accounts Payable XXX
(Appropriate Account)
STALE CHECKS

Checks not encashed by the payee for a relatively long period of

time

CASH XXX
Miscellaneous Income XXX
ADJUSTING ENTRY or, if material,
Accounts Payable/(Appropriate Account) XXX
Thank you