Cash and Cash Equivalents

What accounting standard governs the definition of cash?

PAS 7 because cash is not directly defined in PAS 1

What comprises cash?

* Cash on hand
* Demand deposits

What are the types of cash?

* Cash on hand - bills, coins
* Demand deposit - checking accounts
* Cash fund - petty cash, sinking fund

What are the characteristics of cash?

* Current asset
* **Unrestricted**
* Available for immediate use

What is the characteristic of a cash equivalent?

* Short-term
* Highly liquid **investments**
* Readily convertible to known amount of cash
* Subject to an insignificant risk of changes
* Must be **ACQUIRED** three months before maturity

What kind of equity investment is classified as cash equivalent? And, why?

Mandatory redeemable preference share because it has a maturity date and it has a known amount

How do you classify this: Term is 3 months or less?

Cash equivalent

How do you classify this: Term is more than 3 months but not more than 1 year?

Current asset

How do you classify this: More than 1 year?

Noncurrent asset

How is cash measured?

At face value

How are foreign currencies measured?

Using closing rate (end of the balance sheet currency rate) as provided by PAS 21

How are cash and cash equivalent normally presented?

As first-line item in the financial statements

If set aside for a certain purpose--cash fund, how is it measured?

At face value, however, their presentation depends upon their purpose

Another term for checking accounts and does not bear interest

Demand deposit

What occurs when the entity issue checks for an amount more than the balance in its account?

Bank overdraft

How is a bank overdraft presented as? What is the general rule and exception?

General rule: Current liability and is not to be offset with other current accounts

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Exception: When the overdraft belongs to the same bank