Accounting for Cash

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I. Accounting DefnitionA. Cash

1. Medium of exchange acceptable by banks for deposit at face value2. Usual composition of cash in F/S

a. Cash on Hand(BBMMCT) !ank drafts" bills # coins" money orders"

managers check" customer$s check" travelers checkb. Cash in Bank(Savings # %hecking account)c. Working Funds separated for current use (DIPPCT) dividend fund"

interest fund" payroll fund" petty cash fund" change fund" tax fund.B. Cash Equivaents

1.Short term # highly li&uid investment sub'ect to an insignicant risk of

change and value2.%riterion for determining %ash &uivalent matures *ithin short period of

time from date of ac&uisition" not balance sheet date" not date of

instrument (+ months/,- days or less)!.&uity shares are not %ash &uivalent (they don$t have maturity)".edeemable reference Share re&uired to redeem by issuing corporation

0can1 be % if ac&uired + months before redemption/maturity date

(liability in substance)

#.xamples of %ash &uivalent treasury bills" commercial paper" moneymarket instrument *ith maturity of + months or less *ith date of

ac&uisition. (2f silent %)

II. Criteria $or Cash %resentationA.%ash item &ualies to be presented as cash if unrestricted and immediately

available for current operations (purchase of current assets" payment of

current liability" payment of operating expenses.B.resentation of cash as to *hether current or non3current parallel the intentions

of the management1. &inking Fund fund segregated for the bonds (4%5)

2. %ant e'(ansion for expansion x. to be disbursed in

+ monthsto be disbursed in 6 yearto be disbursed in 7 years

8regardless the time of disbursement" other non3current nancial asset

III. &(ecia Consideration on %resentation ) *easure+ent o$ Cash in F,& -Incusion

) E'cusion to Cash

A. Foreign currenc/ deno+inated cash8unrestricted cash (9) (%onvert using exchange rate at !alance Sheet

date)

8restricted excludeB. Cash in Cosed Bank classied to receivable# *rite do*n to its

recoverable amountx. +:; %orp. has a deposit to :!% bank amounting to n ?uly 6"

7-67" the bank is held under bankruptcy.?ournal ntry@ eceivable =-----

5oss 7=----%ash


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8if silent unrestricted cash

8if legally restricted exclude as cash3 long term 4%:3 short term %: but not cash

D. Bank 0verdra$t reported as current liabilityexcept6. Bhere is another account *ith the same bank.7. ight of oCset exists.

E. E'(ense Advances reported as Prepaid Expense.F. Custo+ers %ostdated Check excludes to cash # reported to cashand

recogniDe as liability.?ournal ntry@ %ash xx :?@ :/ xx

:/ xx %ash xx. 3o &u4cient Fund or I 05e 6ou reported as receivable(the same as

%ust. E%)H. Co+(an/s 7ndeivered,7nreeased Check must be reverted to cash#

recogniDe as liability.?ournal ntry@ xpense/ayable xx :?@ %ash xx

%ash xx ayable xxI. Co+(an/s %ostdated Check same as letter (even if delivered)

8ule for and 2 deducted to cash only if check is already dated and checkis released.

I8. Accounting $or %ett/ Cash Fund -I+(rest &/ste+A. %ur(ose for 0payment1 of small amount expensesB. Accounting Entries -E9AI

1. Estabish+ent3 %F xx %2! xx

2. 9e(enish+ent3 xpense/:/re.

xp. xx%2!

xx!. Ad:ust+ent at period end (remove cash items)

xpense/:/re. xp. xx%F

xx". Increase,Decrease in %CF Baance

%F xx %2! xx%2! xx %F xx

84o entry is being made upon actual disbursement under imprest systemC. Cash &hortage,0verage ; %roft and


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gift for another employee. (nvelope sealed or close) I=--

a. stablishment@ %F IJ---%2! IJ---

b. Eisbursement of 7=--- 4o entry

c. :d'[email protected]. %ompute Shortage/>verage@

:ccountability @ IJk9I.=k G

=7=--:ccounted@ 7=k96=k9=k9+k96k9I.=K G

3=+=-- 36---

overc.7. :?@ ntry for overage@ xpense 7=--- %ash in !ank 6---

ec from mployee +--- %ash >verage6--- repaid xpense 6---

%F 7,---

c.+. o* much is the %FLc.+.6Formula@

!ills and %oins (deduct cash that does not belong to the group)

6=---9 eplenishment %heck

3

9 %ertied %heck 39 Eated mployee %heck 39 %ustodian Salary %heck =---3 %ash >verage

(6---)6,---

c.+.7 B3:ccount

8hat if envelope is found to be openL %ompute Shortage/>verage@ :ccountability@ IJk9I.=k

G =7=-- :ccounted@ 7=k96=k9=k9+k96k

G 3I,--- +=--

short:?@ o* much is

the %FLxpense 7=--- Formula@ec from mployee+---repaid xpense 6---

:ccounting for %ash and %ash &uivalentsage +


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%ash Shortage +=-- B3

:ccount%F +7=--

8. Bank 9econciiationA. %ur(ose3 to agree bank statement and cash balance for records of company to

make sure all cash is accountedB. Entries

C. =/(es o$ Bank

9econ1. 2 Cou+n , &inge date reconciiation reconciles ending cash balance

a. 7nad:usted to Ad:usted +ethodper bank per book

Unad'usted !alance xxx xxx9 econ 2tems xxx xxx:d'usted !alance xxx xxx

b. Bank to BooksUnad'usted !alance per bank xxx9 econ 2tems xxxUnad'usted !alance per book xxx

c. Book to BankUnad'usted !alance per book xxx9 econ 2tems xxxUnad'usted !alance per bank xxx

2. " Cou+n , %roo$ o$ Cash

reconciliation of beginning cash balance" receipts" disbursements and

ending cash balance

8I. 2 Cou+n Bank 9econciiation , =reat+ent in 9econciing Ite+sA. Bank 9econciing Ite+s it is reconciling items to be eCected in bank

balance for purpose of bank recon.1. De(osit in =ransit , 7nde(osited Coection receipts already added

to the company$s books but not yet reNected in the bank statement

:ccounting for %ash and %ash &uivalentsage I

DIT addition to

cash balance

Co+(an/>s Bank

Eeposist %ash in !ank %2!

:/5iab todep.

Eisbursem

ent

:/ or xp 5iab. to dep.

%2! %2!EebitMemo

xp or :/ 5iab. to dep. %2! %2!

%reditMemo

%2! %2!

2nc/ec/ay

5iab todep.


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8good check check is not yet deposited" check deposited but didn$t

reconcile in the bank (cutoC)?ournal ntry in book@ %ash xx

:/ xx82f %ustomer E% ad'ust rst the book balance before reconciliationxample@ Eeposit in Bransit of +-" included in the E2B is %ustomer E%

amounting to 6-per bank per book

Unad'usted 6-- 6+- 67-

E2B 7-:d'usted 67- 67-

2. 0utstanding Check company$s check already recorded as

disbursement in the books but not yet reNected in the bank statement

because it is not yet presented to the bank for payment. (delivered and

dated check)?ournal ntry in book@ :/ or xp xx

%ash xx82f %ompany$s E% ad'ust rst the book balance before reconciliation

xample@ >utstanding %heck of +-" included in the >% is %ompany$s E%

amounting to 6-per bank per book

Unad'usted 6-- % (7-):d'usted J- J-

!. Bank Errorsa. Erroneous Bank Credit liability to the depositor (nadagdagdan

ang cash) deduct bank balance

b. Erroneous Bank Debit add to book balance

B. Book 9econciing Ite+s re&uire :? to books1. Debit *e+o charges or deduction to the depositor$s account made by

banka. Bank &ervice Charge cost of check booklet and payment of bank

loanbank 5iab. xx book xpense xx 5oan$s pay

xx%2! xx %2! xx %2!

xxb. 3&F , DAIF , DA7D !ounce check

Co+(an/ Bank

UponEeposit

%2! %2!

:/5iab todep.

Uponeturn

:/ 5iab. to dep. %2! %2!

Uponedeposit

%2! %2!

:/5iab todep.

:ccounting for %ash and %ash &uivalentsage =

OC

deduction to

cash balance

deducted to

cash per


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b.1. 4SF returned and redeposited this month" no entry made on the

return and redepositUnad' bank 7----" Unad' book 6=---" E2B =---" >%

6----" 4SF =---

Co+(an/ Bank

Upon

Eeposit

%2! %2!

:/ 5iab to dep.

Upon eturn 4o ntry5iab. to dep. %2!

Uponedeposit

4o ntry%2! 5iab to dep.

per bank per bookUnad'usted 7---- 6=---E2B =--->% (6----):d'usted 6=--- 6=---

b.2. 4SF returned # redeposited this month" made entry for return butno entry on redepositUnad' bank 7=---" Unad' book 6=---" E2B =---" >%

6----" 4SF =---

per bank per bookUnad'usted 7=--- 6=---E2B =--->% (6----)EM =---:d'usted 7---- 7----

b.!.4SF returned this month and redeposited next month" no entry on

return and redepositUnad' bank 6=---" Unad' book 6=---" E2B =---" >%

6----" 4SF =---

:ccounting for %ash and %ash &uivalentsage ;

DM no

DM add to

book

DM deduct

to book

Co+(an/ Bank

UponEeposit

%2! %2! :/ 5iab to dep.

Upon eturn:/ 5iab. to dep. %2! %2!

Upon

edeposit 4o ntry@ needs :?

%2!

5iab to dep.

Co+(an/ Bank

UponEeposit

%2! %2!

:/ 5iab to dep.

Upon eturn 4o ntry@ needs :?5iab. to dep.

%2!


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per bank per bookUnad'usted 6=--- 6=---E2B =--->% (6----)EM (=---):d'usted 6---- 6----

b.". 4SF returned this month and redeposited next month" entry made

on return # no to redepositUnad' bank 7----" Unad' book 6=---" E2B =---" >%

6----" 4SF =---

per bank

per bookUnad'usted 7---- 6=---E2B =--->% (6----):d'usted 6=--- 6=---

b.#.4SF silent as to return or redeposit (4SF during the month treat as

normal debit memo)

c. Custo+ers Checkc.1. &tae checks *hich *ere not deposited *ithin ; monthsc.2. *utiated crampled

2nitial ntry@ %ash xx :?@ :/ xx:/ xx %ash xx2. Credit +e+o credit made directly by the bank

3 additions / deposits made directly by bank3 if not yet reNected in the books at the date of recon" add to

cash per booksa.

b.

Co+(an/s Checkb.6. Stale checks *hich *ere not deposited *ithin ; monthsb.7. Mutilated crampled

2nitial ntry@ :/ or xp xx :?@ %ash xx%ash xx :/ xx

:ccounting for %ash and %ash &uivalentsage

Documents

Accounting for Cash