Cash and Cash Equivalent

1335 Words Mar 16th, 2013 6 Pages
Cash and Cash Equivalents

Cash This includes money and other negotiable instrument that is payable in money and acceptable by the bank for deposit and immediate credit. Examples are bills and coins, checks, bank drafts and money orders.

To be included or considered as cash, it must be unrestricted as to use, meaning, it must be readily available for use or payment of current obligations, thus, not subject to contractual or legal restrictions.

The following items are included in “cash”: * Cash on Hand * Cash in Bank * Cash Fund

Cash Equivalents According to PAS 7, cash equivalents are short-term highly liquid investments that are readily convertible into cash so near their maturity that they present
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This method is simple. The amount of cash shortage is drawn from one bank and subsequently deposited to the other bank.

This can be discovered by the simultaneous preparation of bank reconciliation.
Accounting for Cash Shortage * It is initially recorded by debiting “cash short or over” and crediting cash * The cash shortage is closed to “due from cashier” account if the shortage is the responsibility of the cashier * The cash shortage is closed to “loss from cash shortage” account if reasonable efforts fail to disclose the cause of the shortage

Accounting for Cash Overage * It is initially recorded by debiting cash and crediting “cash short of over” * The cash overage is closed to “miscellaneous income” account if there is no claim to such * The cash overage is closed to “payable to cashier” account if the overage was the money of the cashier

The Imprest System This is a system of controlling cash which requires all cash receipts to be deposited intact and all cash disbursements made through checks.

This system suggests the use of petty cash fund since it is impractical to always use check in paying expenditures especially for small expenses.

Petty Cash Fund This cash fund is managed using two methods namely: * Imprest Fund System * Fluctuating Fund System

The main difference between the two systems is the timing of the recognition of the expenses and the cash account that is credited when the petty cash

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