Financial accounting - cash and cash equivalents

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Slide 1:

Cash and Cash Equivalents

What is Cash:

What is Cash Is any item that can be used as a medium of exchange and which is acceptable by bank at face value upon deposit.

What is Cash:

What is Cash Cash or cash on hand and cash in banks include – Cash items on hand – undeposited cash collections and cash items awaiting deposit such as bills and coins, bank drafts, customers’ checks, manager’s checks, postal money orders

What is Cash:

What is Cash Peso or foreign currency deposits in bank – savings, checking, or money market accounts Working funds – petty cash fund, change fund, payroll fund, dividend fund These items should be unrestricted and immediately available for use in the current operations.

What is Cash equivalents:

What is Cash equivalents are short-term and highly liquid investments that are both readily marketable to known amounts of cash and are subject to insignificant risk of change in value Examples are BSP treasury bills, commercial papers, money market instruments with original maturities of three months or less.

Valuation:

Valuation General Rule At its face value Cash in foreign currency At current exchange rate at balance sheet date

Balance Sheet Presentation:

Balance Sheet Presentation Cash and cash equivalents are usually presented as the first item among the current assets on the balance sheet.

Basic Characteristics of a Cash Control System:

Basic Characteristics of a Cash Control System Specifically assigned responsibility for handling cash receipts Separation of handling and recording cash receipts Daily deposit of all cash received Voucher system to control cash payments Internal audit at irregular intervals Periodic reconciliation of bank statement balance and cash balance in the company’s accounting records

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