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Cash and cash equivalents

Cash not just include currency and coins but also those that are acceptable by bank for deposit or
immediate encashment such as checks, bank drafts and money orders.

Cash is measured at face value. Cash in foreign currency is measured at current exchange rate

If the financial institution holding the funds of an entity is in bankruptcy or financial difficulty, cash
should be written down to estimated realizable value if the amount recoverable is estimated to be lower
than face value

excess cash should be invested in revenue-earning investment

deposits in foreign investment which are subject to foreign exchange restriction, if material, should be
classified separately among noncurrent assets and the restriction clearly indicated.

Details comprising cash and cash equivalents should be disclosed in the notes to financial statements

the credit balance in the cash in bank account results from the issuance of checks in excess of the
depositsoverdraft

Overdraft is not permitted in the Philippines

if entity maintains two or more accounts in one bank and one account results in an overdraft, such
overdraft can be offset against the other bank account with debit balance in order to show, cash, net of
bank overdraft

An overdraft can also be offset against the other bank account if the amount is immaterial

if the deposit is legally restricted because of a formal compensating balance agreement, the
compensating balance is classified separately as cash held as compensating balance under current assets
if the related loan is short term, otherwise, it is classified as noncurrent investment

In banking practice, checks become stale if not encashed within 6months from the time of issuance

if stale check is immaterial, it is simply accounted for as a miscellaneous income.

Cash

Miscellaneous Income

If material and liability is expected to continue, cash is restored and liability is again set up

Cash short/over Due from cashier Loss from cash shortage

Cash Cash short/over Cash short/over


cash short/over account is a temporary account. When we already know the cause of such shortage or
overage, we then cancel d cash short/over account and replace it with the real cause.

Imprest system- system of control of cash which requires that all cash receipts should be deposited intact
and all cash disbursement should be made by means of check.

In imprest system, payment of expenses requires no formal entries. Petty cashier generally requires a
signed petty cash voucher for such payments and prepares memo entry in the petty cash journal.

Petty cash disbursement should be replenished only by means of check and not from undeposited
collection

If not replenished, the entry is to state the correct cash fund is:

expenses

petty cash fund

Under fluctuating fund system, checks drawn to replenish the fund do not necessarily equal the petty
cash disbursement. Expenses are immediately recorded and PCF fluctuates from to time.

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