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CASH AND CASH EQUIVALENTS
IMPREST SYSTEM System of control of cash which requires that all  cash receipts should be deposited intact and all  cash ...
PRESENTATION AND MEASUREMENT OF          CASH IN THE BALANCE SHEETA.   CASH ITEMS1.   PETTY CASH FUND2.   CASH IN BANK3.  ...
   CASH IN CLOSED BANKS/BANKS HAVING A    FINANCIAL DIFFICULTY    - classified as receivable and write down to its recove...
PETTY CASH FUND Small amount of cash in a fund topay MINOR EXPENSES
ESTABLISHMENT OF FUNDJournal Entry:PETTY CASH FUND           XX   CASH IN BANK                XX
PAYMENT OF EXPENSES    NO ENTRY
REPLENISHMENT OF FUNDJournal entry:EXPENSES ( VARIOUS ) XX    CASH IN BANK                XXNOTE:   Reimbursement should ...
YEAR-END ADJUSTMENTJournal entry:EXPENSES    XX    PETTY CASH FUND                    XXNOTE:1.   To avoid understatement ...
TO INCREASE OR DECREASE PETTY CASH                 FUNDJournal entry:PETTY CASH FUND           XX    CASH IN BANK         ...
CASH SHORT/OVER ( CSO )-   Nominal account that is debited for shortages and    credited for overages in the Petty Cash Fu...
BANK RECONCILIATION
Bank Reconciliation- report that explains the  difference between the book ( company )  balance of cash and the cash balan...
BANK RECONCILING ITEMS DEPOSITS IN TRANSIT/ UNDEPOSITED  COLLECTIONS OUTSTANDING CHECKS ERRORS
BOOK RECONCILING ITEMS DEBIT MEMOS CREDIT MEMOS ERRORS
DEPOSITS IN         TRANSIT/UNDEPOSITED             COLLECTIONS   Deposit made near the end of the month and recorded    ...
OUTSTANDING CHECKS   Checks written by the company and issued to payees    but have not been cleared or presented to the ...
DEBIT MEMOS   Charges to the company’s or depositor’s account made    directly by the bank such as returned checks ( NSF ...
CREDIT MEMOS   Deposits or credits made directly by the bank to the    depositor’s account such as notes collected by ban...
FORMS OF BANK       RECONCILIATION ADJUSTED BALANCE METHOD BOOK TO BANK BALANCE METHOD BANK TO BOOK BALANCE METHOD
ADJUSTED BALANCE METHOD   Under this method, the book balance and the bank balance are    brought to a correct cash balan...
BOOK TO BANK METHOD   Under this method, the book balance is reconciled with the bank    balance or the book balance is a...
BANK TO BOOK METHOD   Under this method, the bank balance is reconciled with the book    balance or the bank balance is a...
DEPOSITS IN TRANSITDeposit in transit, beginning of the month                          XXAdd: Cash receipts reflected in t...
OUTSTANDING CHECKSTo compute the outstanding checks:Outstanding checks, beginning of the month                            ...
PROOF OF CASH Reconciles the beginning and ending balances of cash for the month, as well as the recorded receipts and di...
CASH IN BANKJan 31 beginning balance    50,000           Feb 28 Book credits                                         ( inc...
Cash and cash equivalents
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Cash and cash equivalents

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Transcript of "Cash and cash equivalents"

  1. 1. CASH AND CASH EQUIVALENTS
  2. 2. IMPREST SYSTEM System of control of cash which requires that all cash receipts should be deposited intact and all cash disbursements should be made by means of check
  3. 3. PRESENTATION AND MEASUREMENT OF CASH IN THE BALANCE SHEETA. CASH ITEMS1. PETTY CASH FUND2. CASH IN BANK3. POSTAL MONEY ORDER4. MANAGER’S CHECK AND TRAVELLER’S CHECK5. UNDELIVERED OR UNRELEASED CHECKS6. COMPANY’S POSTDATED CHECK AND STALE CHECK7. COMPENSATING BALANCES ( UNRESTRICTED )8. CASH SET ASIDE FOR CURRENT OPERATIONS9. FOREIGN CURRENCY- cash in foreign currency should be translated to Philippine currency using the exchange rate at the balance sheet date ( closing rate )B. CASH EQUIVALENT- short term investment purchased 3 MONTHS OR LESS BEFORE MATURITY
  4. 4.  CASH IN CLOSED BANKS/BANKS HAVING A FINANCIAL DIFFICULTY - classified as receivable and write down to its recoverable value CUSTOMERS POSTDATED CHECKS AND NSF CHECK - classified as receivables including the IOUs - it is described also as DAUD AND DAIF EXPENSE ADVANCES- classified as prepaid expense such as travel expenses and postage stamps BANK OVERDRAFT- occurs when a depositor has written checks for a sum greater than that in the depositor’s bank account -classified as current liability -right of offset exists- cash in bank net of bank overdraft
  5. 5. PETTY CASH FUND Small amount of cash in a fund topay MINOR EXPENSES
  6. 6. ESTABLISHMENT OF FUNDJournal Entry:PETTY CASH FUND XX CASH IN BANK XX
  7. 7. PAYMENT OF EXPENSES NO ENTRY
  8. 8. REPLENISHMENT OF FUNDJournal entry:EXPENSES ( VARIOUS ) XX CASH IN BANK XXNOTE: Reimbursement should equal to the amount/ sum of petty cash vouchers submitted
  9. 9. YEAR-END ADJUSTMENTJournal entry:EXPENSES XX PETTY CASH FUND XXNOTE:1. To avoid understatement of expenses2. To avoid overstatement of assets
  10. 10. TO INCREASE OR DECREASE PETTY CASH FUNDJournal entry:PETTY CASH FUND XX CASH IN BANK XX ( To increase PCF )CASH IN BANK XX PETTY CASH FUND XX ( To decrease PCF )
  11. 11. CASH SHORT/OVER ( CSO )- Nominal account that is debited for shortages and credited for overages in the Petty Cash Fund- Error in making change fund or failure to obtain receipts for very small amounts- Incorrect recording of amounts and theft/loss- Cash shortage is debited to miscellaneous expense at the end of the period- Cash overage is credited to miscellaneous income and deposited to general cash account at the of the period and the journal entry is Cash in Bank xx Miscellaneous Income xx
  12. 12. BANK RECONCILIATION
  13. 13. Bank Reconciliation- report that explains the difference between the book ( company ) balance of cash and the cash balance reported in the bank statementBank Statement- monthly report provided by the bank to the depositor which shows the following Beginning-of-month cash balance Total deposits made by the depositor and other bank credits Checks paid by the bank and other charges End-of-month cash balance
  14. 14. BANK RECONCILING ITEMS DEPOSITS IN TRANSIT/ UNDEPOSITED COLLECTIONS OUTSTANDING CHECKS ERRORS
  15. 15. BOOK RECONCILING ITEMS DEBIT MEMOS CREDIT MEMOS ERRORS
  16. 16. DEPOSITS IN TRANSIT/UNDEPOSITED COLLECTIONS Deposit made near the end of the month and recorded on the depositor’s books but is not received by the bank in time to be reflected on the bank statement ( DIT ) Collections still in the hands of the depositor awaiting delivery to the bank for deposit ( UC ) Comparing the receipts in the accounting records and deposits in the bank statement Understate the bank balance Added to the bank balance
  17. 17. OUTSTANDING CHECKS Checks written by the company and issued to payees but have not been cleared or presented to the bank for payment Comparing written checks during the month as reflected in the company’s check voucher or cash disbursements book with the canceled checks included in the bank statement Overstate the bank balance Deducted from the bank balanceCanceled checks- checks that the bank has paid and deducted from the depositor’s account
  18. 18. DEBIT MEMOS Charges to the company’s or depositor’s account made directly by the bank such as returned checks ( NSF and technically defective checks ), bank service charge, charge for the cost of check booklets and payment of bank loans Overstate the book balance Deducted from the cash balance per book
  19. 19. CREDIT MEMOS Deposits or credits made directly by the bank to the depositor’s account such as notes collected by bank in favor of the depositor, proceeds of bank loan and interest earned on the depositor’s account and matured time deposits transferred to current account Understate the book balance Added to the cash balance per book
  20. 20. FORMS OF BANK RECONCILIATION ADJUSTED BALANCE METHOD BOOK TO BANK BALANCE METHOD BANK TO BOOK BALANCE METHOD
  21. 21. ADJUSTED BALANCE METHOD Under this method, the book balance and the bank balance are brought to a correct cash balance that must appear on the balance sheet PROFORMA RECONCILIATIONBook balance xx Bank balance xxAdd: Credit memos xx Add: Deposits in transit xxTotal xx Total xxLess: Debit memos xx Less: Outstanding checks xxAdjusted book balance xx Adjusted bank balance xx
  22. 22. BOOK TO BANK METHOD Under this method, the book balance is reconciled with the bank balance or the book balance is adjusted to equal the bank balancePROFORMA RECONCILIATIONBook balance xxAdd: Credit memos xx Outstanding checks xx xxTotal xxLess: Debit memos xx Deposits in transit xx xxBank balance xx
  23. 23. BANK TO BOOK METHOD Under this method, the bank balance is reconciled with the book balance or the bank balance is adjusted to equal the book balancePROFORMA RECONCILIATIONBank balance xxAdd: Deposits in transit xx Debit memos xx xxTotal xxLess: Outstanding checks xx Credit memos xx xxBook balance xx
  24. 24. DEPOSITS IN TRANSITDeposit in transit, beginning of the month XXAdd: Cash receipts reflected in the company’s record during the month* XXTotal XXLess: Deposits during the month as reflected in the bank statement ** XXDeposit in transit, end of the month XX*The amount does not necessarily represent debits ( charges ) in the company’s records. If the total of charges to the cash account is given, any credit memo in PREVIOUS month should be excluded**The amount does not necessarily represent credits in the bank statement. If the total of the credits in the bank statement is given, any credit memo for the CURRENT month should be excluded
  25. 25. OUTSTANDING CHECKSTo compute the outstanding checks:Outstanding checks, beginning of the month XXAdd: Checks drawn by the company during the month* XXTotal XXLess: Checks paid by the bank during the month** XXOutstanding checks, end of the month XX*The amount does not necessarily represent credits in the company’s records. If the total of the credits to the cash account is given, any debit memo in PREVIOUS month should bee excluded**The amount does not necessarily represent debits ( charges ) in the bank statement. If the total of charges in the bank statement is given, any debit memo for the CURRENT month should be excluded
  26. 26. PROOF OF CASH Reconciles the beginning and ending balances of cash for the month, as well as the recorded receipts and disbursements made by the bank and by the depositor company
  27. 27. CASH IN BANKJan 31 beginning balance 50,000 Feb 28 Book credits ( including NSF of P 5,000Feb 28 Book debits and SC of P 1,000 for Jan) 180,000( including Jan CM of 15,000 ) 200,000 COMPANY XFeb 28 Bank debits Jan 31 Beg bal 84,000( including NSF check ofP10,000) 130,000 Feb 28 Bank credits ( including CM for note collected of P 20,000) 170,000
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