CASH AND CASH EQUIVALENTS
CASH
1. Cash on hand
a. Customer’s checks awaiting deposits
b. Undeposited cash collections (Bills and coins)
c. Traveler’s check
d. Cashier’s/Official/Treasurer’s/Manager’s checks
e. Postal money orders
f. Bank drafts
2. Cash in bank
a. Demand deposit
b. Savings deposit
3. Cash fund for current operations
a. Change fund
b. Payroll fund
c. Purchasing fund (Purchase of inventories)
d. Revolving fund (Used for limited or special purpose)
e. Interest fund
f. Petty cash fund
g. Dividend fund
h. Travel fund
i. Tax fund
Fund for Noncurrent operations
Pension fund
Preferred redemption fund
Acquisition of Property, plant and
equipment
Contingent fund
Insurance fund
Sinking fund
GENERALLY NONCURRENT INVESTMENT, BUT
If related liability is current, then pension fund is current, thus part of
CASH.
If the preferred share capital has a mandatory redemption date and is
already within one year from the reporting period, the fund is part of
CASH EQUIVALENTS.
ALWAYS NONCURRENT even if expected to be disbursed next year.
Noncurrent investment
Noncurrent investment
If bond is current, the fund is part of CASH.
CASH EQUIVALENTS
Generally: Investments acquired three months before maturity.
Examples:
1.
2.
3.
4.
Time deposit
Money market instrument or commercial paper
Treasury bills
Redeemable preference shares (w/ mandatory redemption, acquired 3 moths before maturity)
If problem is SILENT:
1. Treasury Note – assumed investment
(Maturity: 1 year to less than 10 years)
2. Cash in money market accounts – cash and cash equivalents
3. Time deposit – cash and cash equivalents
Note: If an item cannot be included as cash equivalent because of time cut-off (i.e., three months), it will always
be classified as investments (short-term or long term) even if it matures within three months from the end of the
reporting period.
ITEMS THAT COULD AFFECT CASH AND CASH EQUIVALENTS
Items
Remarks
Cash
Cash in foreign currency
Measured at face value
Translate to Philippine Peso using the closing rate or spot rate at the reporting
date.
Deposit in foreign bank
a. Unrestricted – cash
b. Restricted – noncurrent asset
Cash in closed bank or banks in Noncurrent asset
bankruptcy
Bank overdraft
If the entity is maintaining two or more accounts in:
-Different banks – current liabilities or may be offset if immaterial
-Same bank – maybe offset against the account with positive amount but
cannot be offset against restricted account.
Compensating balance
a. Not legally restricted – cash
b. Legally restricted: Not cash
Loan is short term – current asset
Loan is long term – noncurrent asset
Undelivered/unreleased check
Revert back to cash
Stale check
Revert back to cash
Postdated check
a. Entity is issuer – revert back to cash
b. Customer’s check – not part of cash
IOUs
Receivables
Equity securities (Ordinary shares, No maturity date, therefore, not classified as cash equivalents.
etc.)
Except: Redeemable preference share
Redeemable preference shares
Preferred shares with specified redemption date and acquired three months
before redemption date are classified as cash equivalents.
Callable preference shares
Part of shareholder’s equity
NSF/DAIF/DAUD checks
Receivables
Expense advances
Receivables or prepaid expenses
Unused credit line
This is the difference between the amount of line of credit applied for and
approved by a bank and the amount actually borrowed.
Treasury warrants
Disclose only in the notes.
A warrant for the payment of money into or from public treasury.
Escrow deposit
Certificate of deposit
Postage stamps on hand
Include as part of cash.
Excluded from cash.
Use three-month rule.
Supplies or prepaid expenses.