Professional Documents
Culture Documents
Additional Notes On Cash and Cash Equivalents
Additional Notes On Cash and Cash Equivalents
2. CASH FUND SET ASIDE FOR the ACQUISITION of a NON CURRENT ASSET, should be classified as
NONCURRENT ASSET regardless of the year of disbursement.
5. Customer’s postdated checks, NSF (No sufficient fund, IOU’s (“I owe you” note), they should be
reported as receivables rather than cash. NSF Checks in the Philippines are often described as
DAIF (Drawn against insufficient funds) and DAUD (Drawn against Unclear Deposits) checks.
6. Postage stamps and expense advances – they are not cash , but they are reported as prepaid
expenses and once used/incurred they are classified as expenses.
7. Company’s postdated check – are company’s check which has been recorded as issued and
delivered to payee before or at the end of the reporting period should be reverted to cash and
the corresponding liability shall continue to be recognized, because there is no actual payment
yet, as of that date.
8. Effective cash management requires controls to protect cash from loss through theft or fraud.
The following are some characteristics of a system of cash control:
a.) Segregation of duties for handling cash and recording cash transactions.
b.) Imprest System
c.) Voucher System – all disbursements must be supported by properly approved vouchers ,
which must be recorded in the voucher register.
d.) Internal audits at irregular intervals.
e.) Periodic bank reconciliation
9. Window dressing – is a practice of opening the books of account beyond the close of the reporting
period for the purpose of showing a better financial position and performance. It is accomplished
as follows:
a.) By recording as of the last day of the reporting period collections made subsequent to the
close of the period.
b.) By recording as of the last day of the reporting period payments of accounts made
subsequent to the close period.
10. Lapping – a practice used for concealing cash shortage. It consists of misappropriating a collection
from one customer and concealing this defalcation by applying a subsequent collection made
from another customer. It involves a series of postponements of the entries for the collection of
receivables.
11. Kiting – it is another device used to conceal a cash shortage. This is possible when an entity
maintains current accounts in different banks. Kiting is usually employed at the end of the month.
It occurs 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.
12. Cash short or over account is only a temporary or suspense account. It means that when
financial statements are prepared the same should be adjusted.
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