cash and cash equivalents

• not included as cash are postdated checks, IOUs or advances to employees, cash funds not available for use in current operations and postage stamps
• unused credit line is not included in cash
• stale checks are included in cash
• cash equivalents are short term, highly liquid investments and which are subject to an insignificant risk
• only debt instruments acquired within 3 months or less before maturity date are classified as cash equivalents
• treasury bills, notes and bonds, money market and 3 month time deposit are examples of cash equivalents
• checks band bank drafts are cash but not cash equivalents
• redeemable preseference shares that are cquired 3 months or less are cash equivalents
• compensating balances that are not legally restricted are included in cash
• bank overdraft occur only in checking accounts and presented as current liabilities
• cash shortage may be closed to receivable account if it is due to employee's fault or loss if the investigation was without merit
• cash overage may be closed to payable account if cash is belonging to an employee or gain if the investigation was without merit
• lapping occurs when collection of receivable from one customer is misappropriated and then concealed by applying a subsequent collection from another customer
• kiting occurs when cash shortage is concealed by overstating the balance of cash; exploiting the float period
• kiting normally occurs at month-end when a check is written to transfer funds from one bank account to another bank account
• kiting records only the receipt but not the disbursement. Cash is overstated to conceal a shortage
• window dressing is a form of fraudulent financial reporting and not primarily a method of concealing cash shortages
• petty cash fund is money set aside to defray relatively small amounts of cash disbursement