Chapter 1: Cash and Cash Equivalents Expected Question(s) :: Cash On Hand Cash Fund Cash in Bank
Chapter 1: Cash and Cash Equivalents Expected Question(s) :: Cash On Hand Cash Fund Cash in Bank
Chapter 1: Cash and Cash Equivalents Expected Question(s) :: Cash On Hand Cash Fund Cash in Bank
Expected question(s):
1. What is the amount of cash and cash equivalents to be presented in the financial statements?
Cash Cash
Cash
in Fund
on
Bank
Hand
CASH
Cash on Hand:
1. Currencies and coins
2. Postal money order
3. Bank drafts
4. Undeposited Checks (not all checks are included)
a. Cashier’s check Included as CASH
b. Manager’s check Certified checks
c. Traveler’s check
d. Customer’s check
e. Personal check
f. Antedated check
Checks must be encashed or deposited in the bank six (6) months following the date of the check.
Checks drawn by the company:
1. Company’s unreleased or undelivered check
2. Company’s postdated check Add back to CASH
3. Company’s stale check
4. Supplier’s postdated check
It is assumed that the journal entry for payment is already made when the check was drawn. But because
check (cash) is still in your control as of reporting date, the entry for payment should be reversed.
Entry made when check was drawn: Entry to reverse since the check is still in your control:
Accounts payable xx Cash xx
Cash xx Accounts payable xx
Cash in Bank:
2. Saving’s
Account
Included as
3. Time
CASH
Deposit
Exclude
Include
Legally restricted – excluded from CASH
(classified as “cash held as compensating balance”, treated as other
current asset if related loan is short term)
divided into two (2) categories: (1) cash fund for operations and (2) cash fund NOT for operations.
1. Cash fund for operation:
a. Petty cash fund
b. Revolving fund
c. Change fund
d. Payroll fund
e. Tax fund Included as CASH
f. Interest fund
g. Dividend fund
h. Travel fund
If beyond 3 months but within 12 months, classified as short-term investment, reported as (other)
current asset
If beyond 12 months, classified as long-term investment, reported as (other) noncurrent asset
Three-month rule test:
The counting of three months is from the date of acquisition of CE to the date of maturity of CE.
PAS 1 (Presentation of Financial Statements) provides that “an entity shall classify an asset as current when
the asset is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for
at least twelve months after the end of the reporting period.”
Measurement
1. What is the correct journal entries affecting the petty cash fund?
Answer:
OR
PCF balance xx
Less: Coins and currencies xx
Add: Replenishment checks xx (xx)
Overage / (Shortage) xx
Accountability
Imprest balance of petty cash fund xx
Undeposited collection currencies from customer xx
Undeposited collection checks from customer xx
Unclaimed salaries xx
Excess of advance of travel xx
Employee contributions (always) xx
xx
Accountable
Currencies and coins xx
Undeposited collection, check from customers xx
Paid vouchers (regardless of date) xx
Replenishment checks xx
IOUs xx
Accommodation check (all) xx
Employee contribution (only if closed) xx
xx
Answer:
PCF balance xx
Less: Coins and currencies xx
Add: Replenishment checks xx (xx) (squeeze)
Overage / (Shortage) xx
Answer:
Currencies and coins at the date of count XX
Add: Disbursements after December 31 XX
Less: Receipts after December 31 XX
Currencies and coins at December 31 XX
Less: Cash included in currencies but do not belong to PCF:
1. Undeposited currencies collection XX
2. Unclaimed salaries XX
3. Excess of advance travel XX
4. Employee contributions (only if open) XX XX
Currencies and coins belonging to PCF at December 31 XX
Add: Replenishment checks XX
Accommodation checks (valid checks at December 31 only) XX
Adjusted balance of PCF at December 31 XX
5. What are the correct journal entries affecting cash shortage or overage?
Answer:
Accounting for cash shortage/overage