[P1-AP] CASH AND CASH EQUIVALENTS - CHAPTER 1 CASH AND CASH...

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CHAPTER 1 CASH AND CASH EQUIVALENTS LINE ITEM C&CE CASH Cash on hand xx Cash in Bank (checking and saving) xx Cash Fund (*unrestricted and current) xx xx CASH EQUIVALENTS Treasury Bills (purchased 3-mo before maturity) xx Money market instruments (purchased 3-mo before maturity) xx Commercial paper (purchased 3-mo before maturity) xx Redeemable preference share (purchased 3-mo before maturity) xx xx TOTAL CASH AND CASH EQUIVALENTS xx NOTE: Bank Overdrafts- credit balance in cash in bank account. General rule: classified as current liability and should not be offset against other bank accounts Exception: when an entity maintains two or more accounts in one bank. Compensating Balance Legally restricted – informal agreement; part of cash Not-legally restricted – “cash held as compensating balance” as part of current assets Certificate of Deposits Part of short term investments, since banks impose substantial interest penalties that discourage holders from making withdrawals before the securities mature.
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