CASH AND CASH EQUIVALENTS
When accounting for cash and cash equivalents, the following categories are of relevance:
CATEGORIES

Cash on Hand

Cash in Bank

Cash Fund

Cash Equivalents
DESCRIPTION
Includes cash items in the possession of an
entity such as, but not limited to, coins,
currency, customer checks, manager’s
checks, traveller’s checks, and money
orders.
Includes cash held in the possession of a bank
such as, but not limited to, cash in checking
accounts and savings accounts. Legally
restricted compensating balances shall be
excluded
Includes cash funds for operating and/or
short-term purposes such as, but not limited
to, payroll fund, tax fund, dividends fund, and
petty
cash
coins,
currencies
and
accommodation checks. Does not include
funds for long term purposes such as PPE fund,
bond sinking fund, among others
Short-term, highly liquid investments that are
readily convertible to known amounts of cash
and which are subject to an insignificant risk
of changes in value. Includes all investments
acquired within three (3) months before their
maturity date.
The following rules shall be observed regarding post-dated checks, stale checks and unreleased
check:
Check items
Point-of View

Payee (e.g., an entity receiving
post-dated customer’s check)
Post-dated checks
Stale Checks
Unreleased Checks
Payor (e.g., an entity writing a 
post-dated check for supplies)
Payee (e.g., an entity did not
encash a customer check for
more than 6 months after the
date of the check)
Payor (e.g., check written was
not encashed by the supplier for
more than 6 months after the
date of the check
Payee
Payor (e.g., an entity has written
a check but not given to the
payee)
Treatment
Shall be excluded from cash
balance and shall not
decrease the accounts
receivable balance
Shall still form part of cash
balance and shall not
decrease the accounts
payable balance

Shall form part of accounts
receivable and shall not
form part of cash balance

Shall form part of accounts
payable and part of cash
balance


N/A
Shall still form part of cash
balance and accounts
payable
BANK RECONCILIATION
 Accounting for the sources or reasons for the difference between the cash in bank per books
and cash in bank per bank. In practice, bank reconciliations are made on a per bank account
basis and normally made at the end of each month
 The aforementioned sources or reasons of the difference are classified into “book-reconciling”
items and “bank-reconciling”
BOOK-RECONCILING ITEMS
 Those which will bring the unadjusted cash in bank per books to the correct (i.e., adjusted)
amount of cash in bank
BANK-RECONCILING ITEMS
 Those which will bring the unadjusted cash in bank per bank to the correct (i.e., adjusted)
amount of cash in bank
Bank reconciliation format to get the adjusted cash in bank balance starting with unadjusted cash in
bank balance per books (or “balance per ledger”, “balance per records”, etc.)
Unadjusted cash in bank balance per books
Additions:
Credit memos:
Net proceeds from account/notes receivable collected by the bank on behalf of the entity
Bank loan proceeds directly credited to the entity’s bank account
Proceeds of matured investments managed by the bank on behalf of the entity that were
directly credited to the entity’s bank account
Direct wires transfers from another bank
Pxx
xx
xx
xx
xx
Errors:
Non-recording of cash receipts
Understatement in the recording of cash receipts
Overstatement in the recording of check made
xx
xx
xx
Deductions:
Debit memos:
No-sufficient fund (NSF) check
Bank service charge
Matured loan payable to the bank from the entity’s account (i.e., auto-debit arrangements)
xx
xx
xx
Errors:
Non-recording of check made
Overstatement in the recording of cash receipts
Understatement in the recording of check made
Adjusted cash in bank balance
xx
xx
xx
xx
Bank reconciliation format to get the adjusted cash in bank balance starting with unadjusted cash in
bank balance per bank (or “balance per bank statement”, “balance per bank records”, etc.)
Unadjusted cash in bank balance per bank
Additions:
Deposits in Transit
Pxx
Errors:
Non-recording of cash deposit of the depositor
Recording of check made by another depositor
Understatement in the recording of cash deposit of the depositor
Overstatement in the recording of check made by the depositor
xx
xx
xx
xx
Deductions:
Outstanding checks
Errors:
Non-recording of check made by the depositor
Recording of cash deposit made by another depositor
Overstatement in the recording of cash deposit of the depositor
Understatement in the recording of check made by the depositor
Adjusted cash in bank balance
xx
xx
xx
xx
xx