This document discusses various topics related to cash handling and accounting. It defines different forms of business organization, types of businesses, and types of cash. It also describes cash accounts, bank products, government securities, and ratios used for cash flow analysis. The document outlines functions and positions involved in cash handling, including collectors, cashiers, accountants, and internal auditors. It provides policies and procedures for cash management.

2. Forms of Business Organization
• Sole Proprietorship – owned by one person and
whose owner is called proprietor (for male owner) or
proprietress (in case of a female owner).
• Partnership – owned by two or more persons and
whose owners are called partners.
• Corporation – owned by five or more persons and
whose owners are called corporators. Corporator is
a generic name of the owner of the corporate form
of business organization.

3. Types of Business Organizations
• Service Concern – these are the businesses that
render services to earn income. For example shop,
beauty parlor, schools, hospitals, repair shop, etc.
• Trading Concern – these are the businesses that
sell to earn income. For example are drug store,
hardware, sari-sari store, boutique, etc.
• Manufacturing Concern – these are businesses
that convert raw materials into finished products.
Like furniture shop, shoe factory, etc.

4. Types of Cash
1) Cash on hand – this represents the cash collection waiting to
be deposited the following banking day.
2) Cash in bank – this represents the cash already deposited in
the bank.
3) Cash fund – ideally, company cash has to be maintained
under the imprest system of cash handling. For this matter,
the company has to maintain a certain fund to comply with the
other fund requirements of the company.
4) Cash equivalent – the PAS (Philippine Accounting
Standards) define cash equivalents as short term and highly
liquid investments are readily convertible to cash and so near
their maturity that they present insignificant risk of changes in
value.

5. Cash in bank could either be:
1) Saving Account – this is an account were the
money deposited will earn interest income for
the meantime while it is not yet used.
2) Demand Deposit – sometimes called checking
account or current account. Normally, demand
deposit account does not earn interest. This is
evidenced by a checkbook.
3) Combo Account – these are some banking
companies that tried to combine savings
account and demand deposit into one account.

6. The following funds are classified as cash:
a) Petty Cash Fund – this is the fund that will cater
the small expenditures of the company.
b) Change Fund – this fund is used to maintain
loose change to address the concern for small
bills and coins.
c) Dividend Fund – this is the fund used to pay for
the dividends which the board of directors have
declared and payable a time certain in the
future.

7. Bank Products
(interest are paid at maturity dates)
Overnight placements
Weekly time deposits
Monthly time deposits or 30-day time deposits
60 days, 90 days, 180 days, one year, 2 years,
3 years, etc.
Trusts

8. Government Securities
1) Treasury Bills
2) Treasury Notes
3) Treasury Warrant
4) Treasury Bond

9. 1. Private company’s bonds issuances
2. Private company’s commercial papers

10. Various Ratios
1) Cash flow liquidity
Ratio
Cash and cash
equivalents + Trading
Securities + Cash flow
from Operating
Activities/Current
liabilities
Gauges the firm’s
ability to pay current
financial obligations
by considering cash
and other cash
equivalents.
2) Days Cash Average Cash
Balance/Cash
Operating Costs/365
days or 360 days
Indicates the ability of
the firm to pay the
average daily cash
obligations.

11. The breakdown of the cash and cash equivalents
must have been:
1. Cash on hand
2. Cash fund
3. Cash in banks
4. Investments with less than one year
maturity

12. How to determine excess cash:
Book balance P500,000
Less: deposit for clearing 20,000
Balance P480,000
Add: checks issued but
unreleased
50,000
Actual cash balance P530,000
 So, if the maintaining balance is P500,000 then we have an excess cash
of P30,000.

13. How do we value cash?
• Cash is valued at face value. For cash denominated
in foreign currency, like the US dollar, Japanese
yen, etc. this should be converted to current rate
(current rate would mean the rate on the last
banking day at the end of the accounting period). If
the deposit is placed in a bank having financial
difficulty, the face value should be written down to
estimated realizable value.

14. Functions with cash handling
Position : Collector
Directly reporting to :
Daily Duties:
1. Reviews the accounts receivable that are due for collection on that day.
2. Follow ups thru phone calls/email.
3. Issues provisional receipts to customers who paid their respective accounts.
4. Remits collections to the office cashier together with the daily remittance form
fully paid out.
Responsibilities:
1. Early or on time collection of the various accounts entrusted to him for
collection.
2. Report to the supervisor about the customers who are difficult to collect from.
3. Report any feedback from the customer so management can address the
concern as early as possible.

15. Position : Accounting Supervisor
Directly reporting to :
Daily Duties:
1. Supervises accounting department personnel.
2. Approves all vouchers prior to entry in the books of accounts.
3. Analyzes the various reports coming from various departments to countercheck the
reports generated by the accounting department.
Periodic Duties:
1. Checks accounting reports.
2. Reports the result of operation to the Board of Directors.
Responsibilities:
1. Financial Reporting
2. Tax Reporting
Files to maintain:
1. Accounting Reports
2. Income Tax Payments

16. Collectors collect
the receivable of the
company
Customers, as an
alternative, may pay
directly to the office
The Cahier receives the money from
collectors and customers
The Junior Accountant
will journalize the
receipt transactions
Depository Bank
The accounting supervisor will
check the entry and later on
check the bank reconciliation
statement
The General Accountant will record
the transaction. He will receive the
bank statement and prepare the
bank reconciliation
Flow of Cash Transaction

17. Position : Internal Auditor
Directly reporting to :
Daily Duties:
Checks the documents coming from the cashier and from the Junior
Accountant.
Periodic Duties:
1. Conducts post audit of the documents and reports.
2. Conducts compliance audit. This is an audit check on the compliance of
the existing system of internal control installed by the company.
3. Evaluates of certain internal control mechanisms for enhancing its
operation and asset safely.
Responsibilities:
1. See adherence of all policies and procedures by various personnel of the
company.
2. Asset protection.

18. Policy on Cash Handling:
1. The company should adopt the imprest system of handling cash.
2. The company should maintain the combo account for easier tracking
of banking transaction.
3. The company should place its money in various banking companies
so as distribute the risk involve in banking.
4. The following bank signatories will be observed.
5. The official receipt can only be issued when cash is received. Check
payments received from customers or other person or company will
be covered by provisional receipts.
6. All funds should be kept and maintained by the office fund custodian.
For the petty cash fund, the custodian should request replenishment
once the fund is at lest 40% used to avoid disruption of operations
due to insufficiency of the fund.

19. Procedure in Cash Handling:
1. The cashier upon receiving cash from the customer or the company
collector will issue an official receipt.
2. The cahier will also issue an official receipt for check deposits that are
already cleared in banking system.
3. The cashier will deposit the cash collection up to 12noon of the current
day intact within the day and money collections after 12noon will be
deposited intact the following banking day.
4. The cashier will then prepare the daily cash position report.
5. The official receipt issued together with the validated deposit slip and
the original copy of the daily cash position report will then be
forwarded to the accounting department for file and the preparation of
the appropriate accounting entries and for eventual entry in the books
of accounts.

20. What is Earmarking?
• Earmarking is an old terminology used many years
back. Now, the new term used n the banking system
is confirmation of deposit. When you have doubts on
the dated check you are holding on whether it is
funded or not you may call your bank and ask it to
confirm the check.
• Bouncing Check means that the check you
received was not funded and therefore will not be
cleared in the banking system.

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