Cash - CASHANDCASHEQUIVALENTS I. DEFINITION A. Cash

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CASH AND CASH EQUIVALENTS I. DEFINITION A. Cash  These represent money and negotiable instruments which are accepted by bank  for deposit and immediate encashment.  These represent currency or cash items on hand (such as cash items awaiting  deposit and cash in working funds) as well as peso or foreign currency in banks  which   are   unrestricted   and   immediately   available   for   use   in   the   current  operations. B. Cash Equivalents These are short-term, highly liquid investments that are readily convertible into  cash and so near their maturity that they present insignificant risk of changes in  values because of changes in interest rates. II. COMPOSITION A. Cash Cash On Hand   – undeposited cash collections, cash items awaiting deposit  (customer’s   checks,   cashier’s   or   manager’s   checks,   traveler’s   checks,   bank  drafts, and money orders) Cash In Bank  – demand deposit (or checking account), savings deposit Cash Funds  – (for current purposes) petty cash fund, payroll fund, dividend fund,  travel   fund,   interest   fund,   tax   fund;   (for   non-current   purposes)   sinking   fund,  preferred   stock   redemption   fund,   contingent   fund,   insurance   fund,   fund   for  construction properties B. Cash Equivalents Treasury Bill  – 3 months, 3 yrs but purchased 3 months before date of maturity Time Deposit  – 3 months Money Market Instrument  – 3 months   III. VALUATION
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A.   General   Rule   –   Face   Value;   In   case   of   foreign   currency,   use   the   Current  Exchange Rate at Balance Sheet Date B. Exception   – Estimated Recoverable Amount (if a bank or financial institution  holding the funds of the company is in bankruptcy or financial difficulty) IV.  FINANCIAL STATEMENT PRESENTATION A. Cash and Cash Equivalents  – shown as the first item among the current assets  if unrestricted in use for current operations.   Otherwise, they are presented  separately as non-current items.  As to its details, they are disclosed in the notes  to financial statements. B. Cash in Foreign Currency  – should be translated into Philippine pesos using the  current exchange rate. C. Deposits in Foreign Countries  – shown as part of cash and cash equivalents in  the current assets if not subject to any foreign exchange restriction.  Otherwise, if  subject to restriction and material in amount, they should be classified separately  among non-current assets and the restriction clearly indicated.
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This note was uploaded on 03/26/2012 for the course ECON 1023 taught by Professor Allen during the Spring '12 term at Assoc. of Chartered Certified Accountants.

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Cash - CASHANDCASHEQUIVALENTS I. DEFINITION A. Cash

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