Cash and Cash Equivalents Cash fund for a certain purpose

Unrestricted Cash Current Asset (Cash and Cash Equivalents) -

For use in current operating operations or for
a. Cash on Hand
payment of current obligations.
 Undeposited Cash Collections
 Customer’s checks Long-term Investment – For noncurrent purpose
 Cashier/Manager’s checks or payment of noncurrent obligations.
 Traveler’s checks  Classification of a cash fund as current or
 Bank Drafts noncurrent should parallel the
 Money Orders classification of the related liability.
b. Cash in Bank
c. Cash Fund Bank Overdraft
 Petty Cash Fund Presented as an Accounting Liability – Current
 Payroll Fund Liability
 Dividend Fund
Should not be offset against other bank accounts
Cash Equivalents with debit balances.
a. Three month BSP Treasury Bill Exception: When an entity maintains 2 or more
b. BSP Treasury Bill (purchased 3 months accounts in 1 bank and 1 account results in an
before date of maturity) overdraft, it can be offset against the other bank
c. Three month Time Deposit account with a debit balance to show the “Cash,
d. Three month Money Market Instrument or Net of Bank Overdraft” or “Bank Overdraft, Net of
Commercial Paper Other Bank Account”.
Measurement of Cash Bank Overdraft can also be offset if the amount is
 Cash is measured at Face Value not material.
 Cash on Foreign Currency is measured at A bank overdraft that is repayable on demand
the Current Exchange Rate that forms part of an entity’s cash
 Bank or Financial Institution is in management should be included as a
Bankruptcy the amount recoverable is component of cash and cash equivalent.
lower than the face value written down to
Estimated Realizable Value Undelivered or Unreleased Check – Current
Liability
Investment in Time Deposit, Money Market
Instruments and Treasury Bills should be Postdated Check – Current Asset (Accounts
classified as follows: Receivable)

Term Classification Petty Cash Fund

3 months or less Cash Equivalents Imprest System
More than 3 months Short-term Financial
but within 1 year Assets (Current a. Establishment
Assets) Petty Cash Fund xx
More than 1 year Long-term Cash in Bank xx
Investments b. Payment of Expenses
No Entry
c. Replenishment
Foreign Currency
Expenses xx
Not subject to any foreign exchange restriction Cash in Bank xx
included in “Cash”. d. Adjustment (unreplenished expenses)
Expenses xx
Subject to foreign exchange restriction if material Petty Cash Fund xx
classified separately among noncurrent assets
and the restriction clearly indicated.
Bank Reconciliation
*Certified Checks are deducted from total
outstanding checks if it is included.
Adjusted Balance Method Deposits in Transit

Book Balance xx Deposits in Transit - Beginning xx

Add: Credit Memos xx Add: Cash Receipts deposited during
Total xx the month xx
Less: Debit Memos xx Less: Credit Memo (included) xx xx
Adjusted Book Balance xx Total xx
Less: Deposits acknowledge by bank
during the month xx
Bank Balance xx Less: Credit Memo (included) xx xx
Add: Deposit in Transit xx Deposits in Transit - Ending xx
Total xx
Less: Outstanding
Checks xx Outstanding Checks
Adjusted Bank Balance xx
Outstanding Checks - Beginning xx
Add: Checks drawn during the
Book to Bank Method month xx
Less: Debit Memo (included) xx xx
Book Balance (Unadjusted) xx
Add: Credit Memos xx Total xx
Less: Checks paid by bank during the
Outstanding Checks xx xx
month xx
Total xx
Less: Debit Memo (included) xx xx
Less: Debit Memos xx
Deposits in Transit xx xx Deposits in Transit - Ending xx
Bank Balance (Unadjusted) xx
Proof of Cash
Bank to Book Method

Bank Balance (Unadjusted) xx

Add: Deposits in Transit xx
Debit Memos xx xx
Total xx
Less: Outstanding Checks xx
Credit Memos xx xx
Book Balance (Unadjusted) xx

Proof of Cash
Computation of Book Balance

Book Balance - Beginning xx

Add: Book Debits during the month xx
Total xx
Less: Book Credits during the month xx
Book Balance - Ending xx
Computation of Bank Balance

Bank Balance - Beginning xx

Add: Bank Credits during the month xx
Total xx
Less: Bank Debits during the month xx
Bank Balance - Ending xx
Accounts Receivable Required Allowance xx
Classification Less: Allow. For D/A - credit bal. xx
Doubtful Account Expense xx
Trade Receivables within 1 year – Current
Assets
Percent of Sales
Nontrade Receivables within 1 year – Current
Assets  The amount computed is the adjustment
(doubtful account expense) not the
More than 1 year – Noncurrent Assets required allowance
Nontrade Receivables *D/A Expense = % x Net Sales
a. Advances to or Receivables from
(shareholders, directors, officers, Impairment of Accounts Receivable
employees) Entry:
Doubtful Accounts
 1 year – Current Assets
Allowance for Doubtful Accounts
 More than 1 year – Noncurrent
Assets Notes Receivable
b. Advances to Affiliates – Long-term
Investments Initially – Present Value
c. Advances to suppliers – Current Assets
d. Subscription Receivable Short-term Notes Receivable – Face Value
 1 year – Current Assets
 More than 1 year – Deduction from Interest Bearing N/R – Face Value
Subscribed Share Capital
Non-interest bearing N/R – Present Value
e. Creditor’s Account (debit balance) –
Current Assets
Subsequently – Amortized Cost
f. Special Deposits – Noncurrent Assets
 Collectible Currently – Current
Face Value (Note Receivable) xx
Assets
g. Accrued Income – Current Assets Less: Present Value (Note Receivable) xx
h. Claims Receivable – Current Assets Unearned Interest Income xx
i. Customer’s Credit Balance – Current
Liability
Measurement of Accounts Receivables
Present Value xx
Initially – Face Value Down Payment (if any) xx
Total (Sales Price) xx
Subsequently – Net Realizable Value
Less: Cost xx
Gain/Loss xx
Aging of Accounts Receivable
 Dishonored notes receivable is transferred
 The amount computed is the required to accounts receivable including any
Allowance for Doubtful Accounts at the accrued interest and other charges
end of the period

Required Allowance xx
Less: Allow. For D/A - credit bal. xx
Doubtful Account Expense xx

Percent of Accounts Receivable

 The amount computed is the required
Allowance for Doubtful Accounts at the
end of the period
Loan Receivable Impairment AR

Initially – Fair Value plus transaction costs Others includes accounts receivable not
considered impaired for collective assessment of
Direct Origination Costs – capitalized; added to impairment
the principal amount
 Decreased Unearned Interest Income Recovery of AR does not affect the balance
because the effect is offsetting
Indirect Origination Costs – expense Write off does not affect the working capital same
with recovery
Origination Fees Received – deduction from the
principal amount Dishonored Note
 Increased Unearned Interest Income
Total Amount Due: Amount the entity paid
Subsequently – Amortized Cost
Example: Maturity value + Protest fee
Principal Amount xx Debited to Accounts Receivable
Origination Fees Received (xx)
Interest Income – based on the total amount due
Direct Origination Costs xx
from date of dishonored.
Initial Carrying Amount xx

PV of Principal xx
PV of Interest xx
Present Value xx

Interest Received = Principal x Nominal Rate

Interest Income = Carrying Amount x Effective Rate
Impairment of Loan

Impairment Loss
 Carrying Amount of Loan minus PV of
future cash flows (original effective rate)
 Carrying amount can be reduced either
directly or through the use of an allowance
account
 Loss recognized in profit or loss
 Interest income is charged against
allowance for loan impairment