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Cash Management in Accounting 1

1. Several adjusting entries are presented to reconcile cash accounts, such as debiting accounts receivable and crediting cash on hand. 2. A list of cash, cash equivalents, current assets and non-current assets is shown including balances for each. 3. Examples of an imprest fund system and fluctuating fund system are provided showing entries for expenses and replenishing petty cash.

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Abbie Profugo
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386 views46 pages

Cash Management in Accounting 1

1. Several adjusting entries are presented to reconcile cash accounts, such as debiting accounts receivable and crediting cash on hand. 2. A list of cash, cash equivalents, current assets and non-current assets is shown including balances for each. 3. Examples of an imprest fund system and fluctuating fund system are provided showing entries for expenses and replenishing petty cash.

Uploaded by

Abbie Profugo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

1. Cash simply means money.

It is th
2. This are cash that is readily availab
3. Highly liquid investments that are
present an insignificant risk of c
4. Cash are measured in face value.
5. Cash and cash equivalents are alw
6. If the term of the investment is 3 m
considered a short-term investemen
7. Foreign currency should be conve
8. If the cash is set aside for current
9. It is when cash in bank account ha
10. It is a balance that needs to be m
11. Undelivered checks are checks th
date, thus, it cannot be enchased ye
check for encashment for a long peri

12. When cash is less than the book


the cashier and a credit cash short o
book balance, it is an overage. If it is
attainable then it is classified as a mi
13. In imprest system, cash receipts
14. It is a fund for out-of-pocket expe
15. Imprest fund system and Fluctua
there is also adjusting needed to be
mply means money. It is the standard medium of exchange in business.
e cash that is readily available. You can use it whenever.
liquid investments that are readily convertible into cash and so near to maturity that they
ent an insignificant risk of changes in value because of the changes in interest rates.
e measured in face value.
nd cash equivalents are always the first line item financial statement because they are the most liqud item of all the accounts.
erm of the investment is 3 months or less, it is part of cash equivalents. If the term is more than 3 months but within the year, it is
d a short-term investement. If it is more than a year, then it is a long-term investement.
n currency should be converted to Philippine peso using the current exchange rate.
ash is set aside for current operations, then it is a current asset. If it is set aside for non-current operations, then it is a non-current asset.
en cash in bank account has a credit balance.
balance that needs to be maintained, it serves as a collateral for borrowing agreement.
ivered checks are checks that are drawn and recorded but not yet given to the payee. Post dated check are checks that are written with a
s, it cannot be enchased yet. Stale checks are checks that are drawn, recorded, and given to the payee but the payee haven't deposited th
encashment for a long period of time.

cash is less than the book balance, is it a shortage. If it is identitfied that it is the cashier or custodian's fault, we'll have a debit receivable
er and a credit cash short or over. If it is identified of anyone's responsibility, then it is a loss from cash shortage. When cash is more than t
nce, it is an overage. If it is found out that it's from the cashier, then debit cash short or over and credit payable to cashier. If the reason is
e then it is classified as a miscellaneous income.
prest system, cash receipts must always be deposited and cash disbursement must always be in check.
fund for out-of-pocket expenses, emergency expeneses
st fund system and Fluctuating System. They both have the same process but in imprest, there is no entry for the payment of expenses an
so adjusting needed to be made. While in fluctuating, expenses go straight to PCF, and no adjustsing are needed.
l the accounts.
within the year, it is

n it is a non-current asset.

ecks that are written with a future


payee haven't deposited the

e'll have a debit receivable from


e. When cash is more than the
e to cashier. If the reason is not

he payment of expenses and


ed.
1. Adjusting Entry
Accounts Receivable
Cash in Bank

Cash in Bank
Accounts Payable

Cash in Bank
Accounts Payable

Accounts Receivable
Cash in Bank

2.
Cash in Bank
Time Deposit - 30 days
Money market
Saving deposit
Sinking fund
Petty cash

Cash and Cash Equivalent


200,000.00
200,000.00

250,000.00
250,000.00

100,000.00
100,000.00

450,000.00
450,000.00

Cash Cash Equivalent A/R


2,700,000.00 2,700,000.00
1,000,000.00 1,000,000.00
2,000,000.00
100,000.00 100,000.00
1,500,000.00
20,000.00 20,000.00
2,720,000.00 1,000,000.00 100,000.00

3,720,000.00
Short term invsetment Long term

2,000,000.00

1,500,000.00

2,000,000.00 1,500,000.00
1. Adjusting Entry
Accounts Receivable
Cash on hand

Expenses
Receivable from employee
Petty cash fund

2.
Cash on hand
Petty cash fund
Security bank
PNB
BDO
BSP treasury bill
BPI time deposit
Bond sinking fund

Cash and Cash Equivalent


s Receivable 150,000.00
Cash on hand 150,000.00

10,000.00
le from employee 5,000.00
Petty cash fund 15,000.00

Cash Cash Equivalent Current Acc Non-current acc


850,000.00 850,000.00
35,000.00 35,000.00
2,000,000.00 2,000,000.00
1,500,000.00 1,500,000.00
-200,000.00
3,000,000.00 3,000,000.00
2,000,000.00 2,000,000.00
2,500,000.00 2,500,000.00
4,385,000.00 - 5,000,000.00 2,500,000.00

Cash Equivalent 4,385,000.00


Current liab

-200,000.00

-200,000.00
1. Adjsuting entry
Accounts Receivable
Cash on hand

Accounts Receivable
Cash on hand

Cash on bank
Accounts Payable

Cash on bank
Accounts Payable

2.
Cash on Hand
Petty cash fund
Cash in bank
Saving deposit

Advances to employees
Cash short or over
Petty cash fund

Cash on Hand
Petty cash fund
Cash in bank
Saving deposit
s Receivable 100,000.00
Cash on hand 100,000.00

s Receivable 150,000.00
Cash on hand 150,000.00

200,000.00
Accounts Payable 200,000.00

300,000.00
Accounts Payable 300,000.00

750,000.00
50,000.00
4,500,000.00
2,000,000.00
7,300,000.00

s to employees 10,000.00
5,000.00
Petty cash fund 15,000.00

750,000.00
35,000.00
4,500,000.00
2,000,000.00
7,285,000.00
1. Adjusting Entry
Accounts Receivable
Cash on hand

Accounts Receivable
Cash on hand

Expenses
IOU
Cash short or over
Petty cash fund

Phil Bank
Acconts Payable

Phil Bank
Acconts Payable

City Bank 2
City bank 1

2.
Cash on hand
Petty cash fund
Phil Bank
City bank 1
City Bank 2
Asian bank savings account
Asian bank time deposit

Total Cash
s Receivable 35,000.00
Cash on hand 35,000.00

s Receivable 15,000.00
Cash on hand 15,000.00

12,000.00
2,000.00
1,000.00
Petty cash fund 15,000.00

25,000.00
Acconts Payable 25,000.00

45,000.00
Acconts Payable 45,000.00

100,000.00
City bank 1 100,000.00

Cash Cash Equivalent


150,000.00 150,000.00
5,000.00 5,000.00
5,070,000.00 5,070,000.00
3,900,000.00 3,900,000.00
- -
nk savings account 250,000.00 250,000.00
nk time deposit 2,000,000.00 2,000,000.00
9,375,000.00 2,000,000.00

Total Cash 11,375,000.00


Imprest Fund System

Jan-2
Petty cash fund
Cash in bank

Feb-1
Petty cash fund
Postage
Supplies
Transportation
Misc Exp
Cash in bank

Fluctuating fund system


Jan-2
Petty cash fund
Cash in bank

Jan 2-31
Postage
Supplies
Transportation
Misc Exp
Petty cash fund

Feb-1
Petty cash fund
Cash in bank
10,000.00
Cash in bank 10,000.00

5,000.00
1,500.00
5,500.00
1,200.00
800.00
Cash in bank 14,000.00

10,000.00
Cash in bank 10,000.00

1,500.00
5,500.00
1,200.00
800.00
Petty cash fund 9,000.00

14,000.00
Cash in bank 14,000.00
Imprest Fund System
1. Petty cash fund
Cash in bank

Postage
Supplies
Transpo
Accounts P
Cash in bank

4. Petty cash fund


Postage
Supplies
Transpo
Accounts P
Cash in bank

Fluctuating fund system


1. Petty cash fund
Cash in bank

2. Postage
Supplies
3. Transpo
Accounts P
Petty cash fund

4. Petty cash fund


Cash in bank
10,000.00
10,000.00

1,500.00
3,000.00
1,000.00
3,500.00
9,000.00

10,000.00
1,500.00
3,000.00
1,000.00
3,500.00
19,000.00

10,000.00
10,000.00

1,500.00
3,000.00
1,000.00
3,500.00
9,000.00

19,000.00
19,000.00
Imprest fund system
May 2 Petty cash fund
Cash in bank

May 29 Postage
Supplies
Transpo
Miscellaneous
Cash in bank

Jun 30 Supplies
Postage
Transpo
Petty cash fund

July 1 Petty cash fund


Supplies
Postage
Transpo

Jul 15 Petty cash fund


Supplies
Postage
Transpo
Miscellaneous
Cash in bank
Fluctuating fund system
10,000.00 May 2 Petty cash fund
Cash in bank 10,000.00 Cash in bank

1,000.00 May 29 Postage


3,000.00 Supplies
2,500.00 Transpo
1,500.00 Miscellaneous
Cash in bank 8,000.00 Petty cash fund

2,000.00 Petty cash fund


1,000.00 Cash in bank
1,000.00
Petty cash fund 4,000.00 Jun 30 Supplies
Postage
4,000.00 Transpo
2,000.00 Petty cash fund
1,000.00
1,000.00 Jul 15
Petty cash fund
5,000.00 Supplies
3,500.00 Postage
1,500.00 Transpo
1,500.00 Miscellaneous
500.00 Cash in bank
Cash in bank 12,000.00
10,000.00
10,000.00

1,000.00
3,000.00
2,500.00
1,500.00
8,000.00

8,000.00
8,000.00

2,000.00
1,000.00
1,000.00
4,000.00

5,000.00
3,500.00
1,500.00
1,500.00
500.00
12,000.00
Nov 2 Petty cash fund

Nov 30 Petty cash fund


Postage
Supplies

Dec 31
Postage
Supplies
Deposit

Jan 1 Petty cash fund

Jan 31 Postage
Supplies
Payment
Cash short or over
etty cash fund 10,000.00
Cash in bank 10,000.00

etty cash fund 10,000.00


2,000.00
5,000.00
Cash in bank 17,000.00

3,000.00
4,000.00
2,000.00
Petty cash fund 9,000.00

etty cash fund 9,000.00


Postage 3,000.00
Supplies 4,000.00
Deposit 2,000.00

5,000.00
6,000.00
7,000.00
Cash short or over 1,000.00
Cash in bank
19,000.00
Dec 1 Petty cash fund
Cash in bank

Dec 20 Selling Exp


Misc Exp
Equipment
Cash in bank

Dec 31 Emplo Check


Selling Exp
Transpo
Petty cash fund

Jan 1 Petty cash fund


Emplo Check
Selling Exp
Transpo

Jan 31 Distribution
Admin exp
Transpo
Payment
Cash short or over
Cash in bank
10,000.00
Cash in bank 10,000.00

5,000.00
2,000.00
2,000.00
Cash in bank 9,000.00

2,000.00
1,500.00
500.00
Petty cash fund 4,000.00 Petty csh before replishment = 6,000.00

4,000.00
Emplo Check 2,000.00
Selling Exp 1,500.00
500.00

500.00
2,000.00
1,000.00
1,200.00
5,300.00
Cash in bank 10,000.00
Cash and cash equivalent
350,000.00
750,000.00
3,500,000.00
C. 4,600,000.00
Cash
5,000,000.00
400,000.00

50,000.00
100,000.00
1,000,000.00
6,550,000.00

C. 6,550,000
Cash equivalent

1,500,000.00

1,500,000.00
Cash
4,000,000.00
500,000.00
2,000,000.00
D. 6,500,000.00

4,000,000.00
500,000.00
4,500,000.00 A.
Unreplenished
IOU

Cash on hand

Petty cash funds


Cash on hand
Cash in bank - curr
Cash in bank - payr
Time deposit
5,000.00
5,000.00
Petty cash fund 10,000.00

100,000.00
Accounts payable 100,000.00

Cash Cash equivalent


40,000.00
400,000.00
4,000,000.00
1,000,000.00
2,000,000.00
5,440,000.00 2,000,000.00 = 7,440,000.00
Cash in bank
Petty cash
Time deposit
Saving deposit
Cash in bank 400,000.00
Cash held as compensating bal 400,000.00 (current asset)

Cash Cash equivalent


5,600,000.00
50,000.00
2,500,000.00
1,000,000.00
5,650,000.00 3,500,000.00 = 9,150,000.00
(current asset)
C. 2,375,000
First Bank - CIB
Accouts payable
100,000.00
100,000.00

50,000.00
4,100,000.00
1,000,000.00
5,150,000.00 B.
Cash and cash equivalent
600,000.00
4,000,000.00
1,000,000.00
2,000,000.00
450,000.00
8,050,000.00 D.
Checkbook Balance
Less:

Add:
Updated checkbook balacnce:

Checkbook Balance
Cash on hand
Change fund
Treasury bill
Money market
eckbook Balance 8,000,000.00
2,000,000.00
500,000.00
1,500,000.00
dated checkbook balacnce: 7,000,000.00

Cash Cash equivalent


7,000,000.00
400,000.00
40,000.00
2,500,000.00
3,000,000.00
7,440,000.00 5,500,000.00
Treasury bill
Cash
Commercial paper
Cash Cash equivalent
2,000,000.00
3,400,000.00
1,500,000.00
3,400,000.00 3,500,000.00
Petty cash fund
Cash in bank

Gasoline
Medical supplies
Repairs
IOU
Ann Cruz
NSF
Contribution
Cash short or over
Cash in bank

D. 22, 000
50,000.00
50,000.00

3,000.00
1,000.00
1,500.00
3,500.00
15,000.00
3,000.00
5,000.00
-4,000.00
28,000.00
Transpo 600.00
Gasoline 400.00
Office Supplies 500.00
Postage 300.00
Due 1,200.00
NSF 1,000.00
A/r 4,000.00
Cash in bank 8,000.00

A. 2,000
Checkbook balance:
Less:
Add:
adjusted

Cash on hand
Cash in bank
Petty cash fund
4,000,000.00
200,000.00
400,000.00
4,200,000.00

400,000.00
4,200,000.00
45,000.00
4,645,000.00

Common questions

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Investments must be highly liquid and convertible into a known amount of cash with an insignificant risk of changes in value to be classified as cash equivalents. These investments should also have maturities of three months or less from the date of acquisition. This classification is crucial as it influences a company's liquidity assessment and the ability to meet short-term obligations, reflecting on the financial strategy and risk management .

In the imprest fund system, cash transactions are recorded less frequently, only adjustments are made when funds are replenished, and no entry is recorded for each expenditure payment. Contrarily, the fluctuating fund system records transactions as they occur, directly affecting the Petty Cash Fund account. These systems impact accounting adjustments since the imprest system requires a reconciling entry only during replenishment, while the fluctuating system necessitates continuous updating of the cash balance .

Cash balances required for collateral purposes under a borrowing agreement are tied up and cannot be readily used for operational needs. This affects liquidity by restricting available cash for immediate use, classifying such funds as non-current assets unless they are expected to be released in the near term, influencing both the liquidity ratios and asset management strategies .

Undelivered checks, drawn but not given to the payee, and stale checks, checks not cashed for an extended period, can overstate a company's cash book balance, as these checks are recorded as deductions from cash. To address this, companies must regularly review outstanding checks and make adjusting entries to align the book balance with actual cash available, ensuring accurate financial reporting .

Foreign currency should be converted to the functional currency, such as the Philippine peso using the current exchange rate, to classify cash accurately. Cash set aside for current operations is classified as a current asset, while cash designated for non-current operations is considered a non-current asset. These classifications assist in accurately reflecting a company's current financial status and obligations .

Adjusting entries for cash short or over address discrepancies between actual cash and recorded amounts. Frequent imbalances may indicate underlying issues, affecting a company's financial health by reflecting potential mismanagement or control weaknesses. In financial statements, these adjustments affect income (via miscellaneous income or losses) and adjust liabilities or receivables, providing insight into the company's accuracy in cash management .

Classifying long-term investments as short-term can affect company liquidity assessments, resource allocation, and investment strategies. It may overstate liquidity, leading to misguided financial decisions. For accurate strategy formulation, firms must ensure classifications reflect the true accessibility of funds, considering strategic timing of their financing and investment activities to align with their risk tolerance and operational needs .

Correcting bank statement balances involves reconciling discrepancies due to transactions in transit such as outstanding checks and deposits. Challenges include ensuring the timing of entries matches real cash flow and addressing errors promptly. Effective methodologies involve regular reconciliation processes, double-checking records for accuracy, and updating entries to align the statement with the cash book, promoting accurate financial reporting and decision-making .

When a cash shortage is identified, the company records a debit to receivables if the cashier is at fault, or a loss if it is unidentified. For overages, if attributable to the cashier, the entry would be a debit to cash short or over and credit to payable to the cashier; if unattributable, it may be misc income. These adjustments impact the financial statements by adjusting the cash balances and reflecting potential income or losses, providing transparency in financial records .

Cash and cash equivalents are listed as the first line item on financial statements because they are the most liquid assets, providing an immediate source of funds for current operations. This prominence highlights their importance in meeting short-term obligations and managing liquidity risk .

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