Cash Equivalents

False - Fluctuating Fund System

[T/F] In an Imprest Fund System, no adjustment is necessary at the end of the accounting period because the petty cash expenses are recorded outright.

Cash Management

the monitoring and maintaining of cash flow to ensure that a business has enough funds to function

1. Easily converted to cash

2. Highly liquid financial instrument

3. With maturity date

Nature of Cash Equivalents

PAS 7, Paragraph 6

[PAS] short-term and highly liquid investments that are readily convertible into cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rate.

short-term and highly liquid investments; insignificant risk of changes in value

cash equivalents are _________________ that are readily convertible into cash and so near their maturity that they present __________________ because of changes in interest rate.

True

[T/F] only highly liquid investments acquired three months before maturity can qualify

False - not qualified

[T/F] equity securities or equity investments are qualified since shares do not have a maturity date.

True

[T/F] preference shares with specified redemption date and acquired three months before redemption date are qualified

False - does not qualify

[T/F] a BSP treasury bill that was purchased one year ago qualifies as cash equivalent as long as the remaining maturity is three months or less from the end of reporting period

True

[T/F] Control and Proper Use of Cash is an important aspect of cash management; entity must maintain sufficient cash for use in current operations.

1. cash equivalents:  3 months or less

2. short-term investment or temporary [current financial assets]: more than three months but within one year

3. noncurrent financial asset or long-term investments: more than one year

Classifications of Investments

True

[T/F] long-term investments that become due within one year from the end of the reporting period are reclassified as current.

Cash Shortage

cash count shows cash which is less than the balance per book

Cash short or over

a temporary or suspense account

Dr. Cash short or over

Cr. Cash

Cash shortage [entry]

Dr. Due from Cashier

Cr. Cash short or over

if the cashier or cash custodian is held responsible for the cash shortage, the adjustment should be

Dr. Loss from cash shortage

Cr. Cash short or over

if reasonable efforts fail to disclose the cause of the shortage, the adjustment is [material]

Dr. Miscellaneous Expense

Cr. Cash short or over

if reasonable efforts fail to disclose the cause of the shortage, the adjustment is [immaterial]

Cash Overage

cash count shows cash which is more than the balance per book

Dr. Cash

Cr. Cash short or over

Cash overage [entry[

Dr. Cash short or over

Dr. Miscellaneous Income

cash overage is treated as miscellaneous income if there is no claim on the same. [entry]

Dr. Cash short or over

Cr. Payable to cashier

cash overage is properly found to be the money of the cashier, a liability should be established [entry]

Imprest System

-      a system of control of cash which requires that all cash receipts should be deposited intact and all cash disbursements should be made by means of check; internal control feature

False - internal

[T/F] external control ideally requires that all payments should be made by means of check, this is sometimes impossible.

Petty Cash Fund

money set aside to pay small expenses which cannot be paid conveniently by means of check

1. Imprest System

2. Fluctuating System

types of petty cash fund systems

Imprest Fund System

the system usually followed in handling petty cash transactions

Fluctuating Fund System

checks drawn to replenish the fund do not necessarily equal the petty cash disbursements; replenishment checks are simply drawn upon the request of the petty cashier; petty cash disbursements are immediately recorded

Dr. Petty cash fund

Cr. Cash in bank

check is drawn to establish the fund [entry]

No Entry

payment of expenses out of the fund [entry - imprest]

Dr. Expenses

Cr. Petty cash funds

payment of expenses out of the fund [entry - fluctuating]

True

[T/F] petty cashier generally requires a signed petty cash voucher for such payments and simply prepares memorandum entries in the petty cash journal

Dr. Expenses

Cr. Cash in bank

replenishment of petty cash payments [entry - imprest]

Dr. Petty cash fund

Cr. Cash in bank

replenishment of petty cash payments / increase of fund [entry - fluctuating]

Dr. Expenses

Cr. Petty cash fund

end of accounting period, adjust unreplenished expenses [entry - imprest]

No Entry

end of accounting period, adjust unreplenished expenses [entry - fluctuating]

Dr. Petty cash fund

Cr. Cash in bank

increase in the fund is recorded normally [entry - imprest]

Dr. Cash in bank

Cr. Petty cash fund

decrease in the fund is recorded normally [entry - imprest]

Dr. Cash in bank

Cr. Petty cash fund

decrease in the fund is reverted to the general cash [entry - fluctuating]

False - fluctuating system

[T/F] In the imprest system, disbursements from the petty cash fund are immediately recorded.

True

[T/F] In the imprest system, replenishment check may or may not be the same as the petty cash disbursements.