L10-Cash and Cash Equivalents
L10-Cash and Cash Equivalents
L10-Cash and Cash Equivalents
Cash – includes money and other negotiable instrument that is payable in money and acceptable by the bank for deposit and
immediate credit.
Cash Equivalents – short term and highly liquid investments that are readily convertible into cash and the maturity is near that they
present insignificant risk of changes in value ( acquired 3 months before maturity)
Note: Equity Securities cannot qualify as cash equivalents because shares do not have maturity date.
Preference shares with specifies redemption date and acquired three months before redemption date can qualify as cash
equivalents.
Imprest System – system of control of cash which requires that all cash receipts should be deposited intact and all cash disbursements
should be made by means of check.
Petty Cash Fund- money set aside to pay small expenses which cannot be paid conveniently by means of check.
Bank Reconciliation – statement which brings into agreement the cash balance per book and cash balance per bank. It is usually
prepared monthly because the bank provides the depositor with the bank statement at the end of every month.
Bank Statement – monthly report of the bank to the depositor showing the:
a. Cash balance per bank-beginning
b. Deposits
c. Checks drawn
d. Daily cash balance per bank during the month