Cash

• Cash


  Comprises cash on hand and demand deposits
• Cash equivalents


  Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value
• General rule for recognition, measurement, and disclosure

  • The item should be unrestricted for use
  • Items of cash and cash equivalents are measured at their face values
  • Cash and Cash equivalents are disclosed as one- and first-line item in the current asset section on the face of the balance sheet
• Items included in "Cash"

  • Cash on hand
  • Cash in bank
  • Cash in fund
  • Undeposited Collections
  • Company's own
  • For Current Purpose (Bills and Coins, Savings Account, Petty Cash Fund, Customers' Personal Checks, Checking/ Current/ Demand-deposit Account, Revolving Fund, Cashier's Checks, Foreign Currency Deposit, Payroll Fund, Manager's Checks, Compensating Balance, Change Fund, Traveler's Checks, Undelivered Checks, Dividend Fund, Bank Drafts, Delivered but Post-dated or Stale Checks, Interest Fund, Tax Fund, Travel Fund, Money Orders)
• Items to be treated as "Cash Equivalents"

  • Three-month Treasury Bill
  • 90-day Money Market Instrument
  • 90-day Commercial Paper
  • Three-month Time Deposit
  • One-year Treasury Bill acquired three months (or less) before maturity
  • Redeemable preference shares that are acquired three months or less before their specified redemption date
• Rule to offset


  If a cash-in-bank (deposit) account obtained a credit balance ("Overdraft" or "Overdrawn"), generally, this shall be presented in the current liabilities section of the balance sheet as "Bank overdraft". This overdraft can be offset to other account with debit balance only if both accounts are maintained in one bank and be labeled as "Cash, net of overdrafts".
• Accounting for Petty Cash Fund

  1. Imprest Fund System (Fund level is maintained, Periodic)

  2. Fluctuating Fund System (Fund level is fluctuating, Perpetual)
• Reconciling items


  • Book reconciling items (Credit memos, Receivable collected by the bank, Proceeds of loan directly credited by the bank, Matured time deposit transferred to current account, Debit memos, NSF / DAIF Checks, Technically defective checks, Bank service charges, Automatic debit of loan payment, Book errors)
  • Bank reconciling items (Deposit in transit, Outstanding checks, Bank errors)
• Reconciliation methods


  • Adjusted Balance Method
  • Book-to-Bank Method
  • Bank-to-Book Method
• A Proof of cash statement is a four-column expanded, two-period bank reconciliation. Its purpose is to discover possible discrepancies in cash.