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CASH AND CASH EQUIVALENTS Related Standard PAS 7 Statement of Cash Flows Cash and Cash Equivalents - Comprise of cash on hand and demand deposits, together with short-term, short-term, highly liquid investments investments that are readily convertible to a known amount of cash and that are subject to an insignificant risk of changes in value. Include but Include but not limited to; 1-12 Cash, 13-18 Cash Equivalents: 1. Payroll Fund 2. ***Fund for short term term payments / Fund short term term liabilities / Restricted fund as long as for short term use 3. Unrestricted Unrestricted fund 4. Adjusted petty cash fund 5. Maintaining balance in the bank 6. Undelivered Undelivered checks 7. Delivered checks but post dated as of the end of the year 8. Demand Deposit 9. Money Orders 10. Bank Drafts 11. Cash in Bank gross of OVER OVER draft / Checking, Savings, Current account 12. Cash on Hand / Bills & Coins 13. 14. 15. 16. 17. 18.
Commercial Papers Marketable Securities Securities Money Market Funds Funds Short term Government term Government funds Treasury Bills Cash equivalents purchase purchase within 3months / 90days before maturity
Exclude but Exclude but not limited to: 1. Not sufficient Fund *NSF 2. **Bank OVER Draft OVER Draft 3. ***Restricted ***Restricted Fund for long term Use 4. Post Dated Checks 5. Stale Checks, 6months for Private, 3months for Government Agencies See Bureau Bureau of Treasury Circular Circular No. 03-2017 6. Cash equivalents equivalents purchase 4months / 91days 91days and above before maturity. HINT: Ang *NSF ay considered as Accounts Receivable. Receivable . Ex May nagbayad sayo ng cheque worth 5,000.00 tapos nung inencash mo sa bangko 4,000.00 nalang pala laman ng account nung taong nagbayad sayo, kaya may A.R ka pa sa kanya na 1,000.00, **Bank over draft naman yun sa part nya or Accounts Payable. Payable.
HINT: Ingat don sa ***Restricted fund for long term Use, dapat gagamitin mo yung fund after 3months and above kahit pa short term asset yung binili mo considered na sya as HINDI na cash. Pag ginamit mo yung fund within 3months kahit pa restricted yun or kahit pa long term asset yung binili mo considered padin sya as cash. “Period of using” Petty Cash Fund - is a small amount small amount of cash on hand that is used for paying small amounts owed, rather than writing a check. Petty cash is also referred to as a petty cash fund. The person responsible for the petty cash is known as the petty cash custodian. The word petty means small. Include but Include but not limited to 1. Bills & Coins 2. Checks payable to custodian 3. Acceptance Check 4. Certified Checks Exclude but not limited to 1. Petty Cash Voucher / Expense Expense Vouchers Vouchers 2. Post dated checks 3. ****IOUs from employees (vale) 4. ***Birthday/Wedding envelope 5. *Post Dated Check 6. NSF 7. **Postage Stamps
HINT: *Postdated *Postdated Check – Check – yun ung mga cheke na pinapapalitan sa petty cash (tigas ng ulo no, bawal nga to eh) na hindi pa due and demandable so, Receivable parin sya. **Postage Stamps – Stamps – syempre Prepaid expense yan. Hindi yan considered as cash in petty cash na tulad ng bills and coins. Baket, pag bumili ka ba ng kendi kina aling nena, papayag sya na ibayad mo yung Stamp? Diba hindi? So, prepaid expenses siya. expenses siya. ***Birthday/Wedding envelope Empty – – ibawas sa bills and coins kasi malamang napahalo yun dun May laman – laman – ignore ignore mo lang ****IOU – ****IOU – simply stated “I Owe You” or “vale”. Narinig mo na ba yung “babale muna ako”, or “bumale ka muna”. Yun ung VALE (pronounced as va-le not veyl). Simply put, umutang ang Empleyado. So, Receivable sya. Credit to kuyajosephlecture.wordpress.com
Bank Reconciliation Statement - A bank reconciliation statement is a summary of banking and business activity that reconciles an entity’s bank account with its financial records. The statement outlines the deposits, withdrawals, and other activity impacting a bank account for a specific period. A bank reconciliation reconciliation statement is a useful financial internal control tool used to thwart fraud. Book Reconciling Items (Mga transaction sa banko na hindi pa narerecord kay company book) 1. Cash Collection / Credit Credit Memo Memo (Ito yung payment from customer na deniretso nya deposit sa banko ng company kaya hindi pa to naka record sa company book, net of discount dapat ang cash collection) 2. NSF (Accounts Receivable to, alisin sa cash dr. AR cr Cash) 3. Interest Income from from Bank Deposit (Namunga na yung pera mo sa banko syempre considered sya additional cash) 4. Bank Charges / Debit Debit Memo Memo (Payment to sa passbook kadalasan, and other necessary expenses) 5. *Book Errors (Pag debit error deduction to, pag credit error addback) Bank Reconciling Items (Mga transaction sa company book na hindi pa na rerecord banko) 1. Deposit In Transit (Ang kwento nito month end na ngayon pupunta ka ng bangko kasi mag dedeposit ka, i naabutan ka ng cut off kasi traffic di mo tuloy na deposit, kaya recorded na sya as additional cash in bank sa company book sa bank not yet pa) 2. Outstanding Check (Ito naman nag issue ka ng cheque as payment sa isang tao eh month end nadin, tapos yung taong pinagbayaran mo ng cheque next week nya pa daw i encash kaya yun recorded na sya as deduction sa cash in bank sa company book sa bank hindi pa) 3. *Bank Errors (Pag debit error addback to, pag credit error deduction) HINT: *Bakit baliktad ang treatment ng errors ng book at bank? Debit error ng error ng book book - deduct to kasi mali yung pag kaka add nya, ang wrong entry nya nag debit sya ng cash so to correct credit mo yung cash. Credit error ng book book - addback to kasi mali yung pag kaka deduct nya, ang wrong entry nya nag credit sya ng cash so to correct debit mo yung cash.
Proof of Cash / 4 Columns Reconciliation - Is essentially a roll forward of each line item in a bank reconciliation from one accounting period to the next. 1stColumn Beginning balance + 2ndColumn Cash receipts in the period – period – 3rdColumn Cash disbursements in the period = 4thColumn Ending balance *KEY TERMS: BANK A. **DIT Last Month, deduct deduct in the 2ndcolumn then add in the 1 stcolumn B. DIT Current Current Month, Month, add in the 2 ndcolumn then add in the 4 thcolumn C. **OC Last Month, deduct in the 3 rdcolumn then deduct in the 1stcolumn D. OC Current Current Month, add in the 3 rdcolumn then deduct in the 4 thcolumn 1st 2nd 3rd 4th A. xxx (xxx) B. xxx xxx C. (xxx) (xxx) D. xxx (xxx) BOOK A. NSF Last Month, deduct in the 3 rd column then deduct in the 1 st column B. NSF Current Month, add in the 3rd column then deduct in the 4 th column C. Credit Memo Last Month, Month, deduct in the 2 nd column then add in the 1 st column D. Credit Memo Current Month, add in the 2 nd column then add in the 4th column E. Debit Memo Last Month, deduct in the 3 rd column then deduct in the 1st column F. Debit Memo Memo Current Month, add in the 3 rdcolumn then deduct in the th 4 column 1st 2nd 3rd 4th A. (xxx) (xxx) B. xxx (xxx) C. xxx (xxx) D. xxx xxx E. (xxx) (xxx) F. xxx (xxx)
Baliktarin mo lang pag dating sa bank. Kasi pag may papasok na cash sa company book ang normal balance nun ay DEBIT pag naman may mag dedeposit ng cash or cheque sa banko ang normal balance balance nun ay CREDIT dahil LIABILITY LIABILITY ng banko yun sa depositor.
HINT: *Simple analysis ang proof of cash ay bank recon lang din naman dalawang buwan nga lang, kaya 4columns. Ang tandaan mo timing difference lang difference lang naman yan so kung para yan kay current month ilagay mo sa current month, yung para kay last month ibalik mo sa last month.
HINT: **Ang best example ng timing difference ay DIT at OC. Ang DIT ay receipt na tumatalon sa current month from previous month dahil sa cut off kaya na papahalo sya sa receipt ng current month kaya tanggalin sya sa receipt ng current month at ilipat sa last month as a addition. Ang OC ay disbursement na tumatalon sa current month from previous month dahil din sa cut off kaya napapahalo sya sa disbursement ng current month so tanggalin sa disbursement ng current month at ilipat sa previous month as a deduction.
RECEIVABLES Related Standard PAS 39 and PFRS 9 *Accounts Receivable - Refers to the outstanding invoices a invoices a company has or the money the company is owed from its clients. clients. The phrase refers to accounts a business has a right to receive because it has delivered a product or service. service. Receivables essentially represent a line of credit extended by a company and due within a relatively short time period, ranging from a few days to a year. Types of / accounts considered as receivables: 1. Trade Receivable Trade Receivable – arising – arising from the ordinary course of business (Current Asset) 2. Non – Non – Trade Trade Receivable Receivable – not – not arising from the ordinary the ordinary course of business (either business (either current or non - current asset based on the terms) 3. Post Dated Checks 4. NSF 5. IOU 6. Notes Receivable Receivable (nature is is current asset, asset, should be net of discount) discount) 7. Loans Receivable (nature is non - current asset) asset) 8. Claims Receivable – – usually arising from goods lost in transit (current asset) asset) 9. Debit Balance Balance from creditors – – generic term for trade accounts receivables (current (current asset) asset) 10. Charge / credit sales Accounts receivable should not be net of “credit balance account” account” credit balance is recognized separately in the current liability section as accounts payable. Account payable should not be net of “debit “debit balance account” account” debit balance is recognized separately in the current asset section as accounts receivable.
Bad Debts Expense - is the loss that loss that occurred from extending credit during the period of time indicated in the heading of the income statement, statement , normal balance is debit. Allowance for Doubtful Accounts - is the estimated amount of amount of the accounts receivable that will not be collected. The Allowance for Doubtful Accounts is a contra asset account or valuation account associated with the balance in Accounts Receivable, Receivable, normal balance is credit. credit . Under the allowance method, if a specific customer's accounts receivable is identified as uncollectible, it is written off by removing the amount from Accounts Receivable. Receivable. The entry to write off a bad account affects only balance sheet accounts: accounts: a debit to Allowance for Doubtful Accounts Accounts and a credit to Accounts Receivable. Receivable . No expense or loss is reported on the income statement statement because this write-off is "covered" under the earlier adjusting entries for estimated bad debts expense. After a seller has written off an accounts receivable, it is possible that the seller is paid part or all of the account balance that was written off. Under the allowance method, method, if such a payment is received (whether directly from the customer or as a result of a court action) the seller will take the following two entries: 1. Accounts Receivable Allowance for Doubtful Doubtful Accounts 2. Cash Accounts Receivable Receivable
HINT: *Accounts * Accounts Receivable End – – beginning balance Plus Plus credit sales Less Less collections, sales discounts, sales returns and allowances, allowances, and writeoff. Recovery of accounts – ignore in computing accounts receivables, unless included in collections in which case deduct from collections Aging – Aging – Required Required Allowance Percentage of Accounts Receivable – Receivable – Required Allowance Percentage of Sales – Sales – Doubtful accounts expense Allowance for doubtful accounts End – – Allowance beginning Plus recovery of previous writtenoff and Doubtful accounts expense Less writtenoff. Writeoff – has – has no effect in the NET account receivable but if.
INVENTORIES Applicable Standard PAS 2 Inventories Inventories - are assets (a) held (a) held for sale in the ordinary course of business; (b) in (b) in the process of production for such sale; or (c) in (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventories encompass goods purchased and held for resale including, resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. resale . Inventories also encompass finished goods produced, or work in progress being produced, produced , by the entity and include materials and supplies awaiting use in the production process . In the case of a service provider, inventories include the costs of the service, service, as described in paragraph 19, for which the entity has not yet recognised the related revenue (see IAS 18 Revenue). Net realisable value - is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Fair value - is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Net realisable value refers to the net amount amount that an entity expects to realise realise from the sale of inventory in the ordinary course of business. Fair value reflects the amount for which the same inventory could be exchanged between knowledgeable and willing buyers and sellers in the marketplace. marketplace. The former is an entity-specific value; the latter is not. Net
realisable value for inventories may not equal fair value less costs to sell. PAS 2 applies to all inventories, except: 1. Construction contracts (see contracts (see IAS 11 Construction Contracts) 2. Financial instruments (see instruments (see IAS 32 Financial Instruments) 3. Biological assets related to agricultural activity and agricultural produce at the point of harvest (see IAS 41 Agriculture) Inventories shall be measured at the lower of cost and net realisable value. Inventoriable Cost - refer to all costs incurred to obtain or produce the endproducts. products. Apply these costs to the products the company produces and sells.
Examples of inventoriable cost / product cost: 1. Net cost Net cost of purchase 2. Import duties / freight in 3. Taxes but not subsequently 4. Transport cost 5. Handling / directly attributable to the acquisition 6. Finished goods 7. Factory Supplies 8. Storage cost of WIP 9. Direct materials 10. Direct labour 11. Manufacturing overhead overhead both fixed and variable 12. Depreciation of factory building and equipment