[ACYFAR1] Unit 2: Cash and Cash Equivalents

Cash

Cash

financial asset used as a medium of exchange and provide a basis for accounting measurement

Cash

must be readily available and not restricted for use in the payment of current obligations

Cash

must be acceptable for deposit at face value by a bank or other financial institutions

Cash on hand

includes cash collections and other cash items awaiting deposit.

Cash in bank

include deposits in a bank which are unrestricted as to withdrawal

Cash fund

cash set aside for current use

Cash on hand

Customers’ check

Cash on hand

Personal check

Cash on hand

Cashier’s check

Cash on hand

Manager’s check

Cash on hand

Traveler’s check

Cash on hand

Bank drafts

Cash on hand

Money order

Cash in bank

Demand deposit

Cash in bank

Checking account

Cash in bank

Savings deposit

Cash fund

Petty cash fund

Cash fund

Payroll fund

Cash fund

Travel fund

Cash fund

Interest fund

Cash fund

Dividend fund

Cash fund

Tax fund

Cash overdrafts

credit balances in bank accounts resulting from issuance of checks in excess of the amount on deposit

Current liability

Cash overdrafts are _____ if material and cannot be offset with other accounts in the same bank

Compensating balance

cash that is required to be maintained with a bank as a support for existing borrowing arrangements

Current asset

If there is legal restriction and the compensating balance is a result of a short term financing arrangement, it is reported separately as _______

Noncurrent asset

If the compensating balance is in connection with a long-term financing

agreement, it should be classified as ______

Cash equivalents

Term is 3 months or less (acquired 3 months or less before maturity)

Short-term investments

Term is more than 3 months up to 12 months

Long-term investments

Term is more than one year

Unreleased checks

checks drawn before the balance sheet but held for later delivery to creditors

Cash

Unreleased checks

Postdated checks received

These are checks drawn, recorded and already given to the payees but they bear a date subsequent to the balance sheet date

Receivables

Postdated checks received

Cash

Postdated checks issued and delivered

Stale checks issued

checks that are not encashed by the payees within 6 months from the date of the issuance

Cash

Stale checks issued

Receivables

Advances to employees (IOUs)

Receivables

NSF checks

Receivables

Travel advances

Office Supplies

Postage stamps

Imprest System

all significant disbursements shall be made through the issuance of checks; small payments shall be made through the petty cash fund.

Petty Cash Fund

small amount of currency from which to make small payments

Imprest fund system

petty cash fund is maintained at a fixed amount

Imprest fund system

payments are supported by petty cash vouchers and recorded through memo entries in the petty cash book

Imprest fund system

the fund is replenished when it is exhausted or when the remaining balance is not enough to meet the average requirements for the day

Imprest fund system

at the end of the accounting period, either the fund is replenished or an adjusting entry is prepared to record the unreplenished expenses

Imprest fund system

the amount of petty cash fund may be increased or decreased

Fluctuating fund system

the checks drawn to replenish the fund do not necessarily equal the petty disbursements

Fluctuating fund system

replenishments checks are prepared upon request of the petty cashier.

Fluctuating fund system

petty cash disbursements are immediately recorded

Cash Over and Short

account used when the petty cash fund fails to prove out

Demand deposit

where deposits are covered by deposit slips and withdrawals are done through the issuance of checks; does not earn interest

Savings deposit

deposits and withdrawals in this account require the presentation of a passbook; earns interest

Time deposit

evidenced by a certificate of deposit; may be withdrawn after a certain period of time; earns interest; may be pre-terminated

Bank statement

a report prepared by the bank which shows the deposits made, checks paid and other charges and credits recorded by the bank for the month as well as the cash balance per bank records; prepared only for demand or checking accounts; prepared once a month

Bank reconciliation

a schedule prepared by the business explaining the difference between the bank’s and the company’s record of cash; prepared once a month upon receipt of the bank statement

Deposits in transit

cash receipts recorded by the depositor but which reached the bank too late to be included in the bank statement for the current month

Add to balance per bank

Deposits in transit

Outstanding checks

checks issued by the depositor but are not yet presented to the bank for payment

Subtract from balance per bank

Outstanding checks

Certified Checks

checks where the bank immediately debits the account of the depositor to ensure or certify eventual payment

Subtract from outstanding checks

Certified Checks

Unrecorded bank charges

items which are charged or debited by the bank to the account of the depositor aside from checks paid; evidenced by debit memos

Subtract from balance per book

Unrecorded bank charges

Unrecorded bank credits

items which are credited by the bank to the account of the depositor aside from deposits received; evidenced by credit memos

Add to balance per book

Unrecorded bank credits

Proof of cash

an expanded version of the bank reconciliation.

Segregation of duties

prevents simultaneous misappropriations and manipulations of accounting records to cover up stolen cash.

Imprest system

prevents the presence of significant amount of cash within the business vicinity

Imprest system

a control measure for both cash receipts and cash disbursements

Voucher system

All potential payments are recorded first in the voucher register actual payments are recorded in the check register

Internal audits at irregular intervals

prevents connivance among employees and manipulating of cash records

Periodic reconciliation

uncovers immediately any error or irregularities in recording cash transactions; any error or irregularity is therefore, immediately rectified

Window dressing

by recording as of the last day of the accounting period collections made subsequent to the close of the period.

Window dressing

by recording as of the last day of the accounting period payments of accounts made Lappingsubsequent to the close of the period

Lapping

misappropriating a collection from one customer and concealing this defalcation by applying a subsequent collection made from another customer

Kiting

when a check is drawn against a first bank and depositing the same check in a second bank to cover the shortage in the latter bank; no entry is made for both the drawing and deposit of the check