GERALD N.

ROMAN

BSBA FM 2-C

FINANCIAL ANALYSIS AND REPORTING

Assessment Tasks / Output (ATOs) QUESTIONS

1. Define cash.

-“cash" simply means money. Money is the standard medium of exchange in business
transactions. Money refers to the currency and coins which are in circulation and legal tender.
However, in the accounting parlance, the term "cash" has a special and broader meaning. It
connotes more than money. As contemplated in accounting, cash includes money and other
negotiable instrument that is payable in money and acceptable by the bank for deposit and
immediate credit.

2. Explain the meaning of unrestricted cash.

-Unrestricted Cash means cash or cash equivalents of the Borrower or any of its Subsidiaries
that would not appear as “restricted” on a consolidated balance sheet of the Borrower or any of
its Subsidiaries.

3. Define cash equivalents.

-cash equivalents as short-term and highly liquid investments that are readily convertible into
cash and so near their maturity that they present insignificant risk of changes in value because
of changes in interest rates.

4. Explain the measurement of cash.

- Cash is measured at face value. Cash in foreign currency is measured at the current exchange
rate. If a bank or financial institution holding the funds of an entity is in bankruptcy or financial
difficulty, cash should be written down to estimated realizable value if the amount recoverable is
estimated to be lower than the face value.

5. Explain the financial statement presentation of cash and cash equivalents.

- Cash equivalents should be shown as the first line item under current assets. This caption
includes all cash items, such as cash on hand, cash in bank, petty cash fund and cash
equivalents which are unrestricted in use for current operations. However, the details
comprising the cash and cash equivalents should be disclosed in the notes to financial
statements.

6. Explain the classification of investments of excess cash in time deposits, money

market instruments and treasury bills.

- If the term is three months or less, such instruments are classified as cash equivalents and
therefore included in the caption "cash and cash equivalents". If the term is more than three
months but within one year, such investments are classified as shortterm financial assets or
temporary investments and presented separately as current assets. If the term is more than one
year, such investments are classified as noncurrent or long-term investments. However, if such
investments become due within one year from the end of the reporting period, they are
reclassified as current or temporary investments.

7. Explain the treatment of foreign currency.

-Cash in foreign currency should be translated to Philippine pesos using the current exchange
rate. Cash and Cash equivalents Deposits in foreign countries which are not subject to any
foreign exchange restriction are included in "cash". Deposits in foreign bank which are subject
to foreign exchange restriction should be classified separately among noncurrent assets and the
restriction clearly indicated.

8. Explain the classification of a cash fund

-The classification of a cash fund as current or noncurrent should parallel the classification of
the related liability.

9. Explain a bank overdraft

-When the cash in bank account has a credit balance, it is said to be an overdraft. The credit
balance in the cash in bank account results from the issuance of checks in excess of the
deposits. A bank overdraft is classified as a current liability and should not be offset against
other bank accounts with debit balances.

10. Explain a compensating balance.

-A compensating balance generally takes the form of minimum checking or demand deposit
account balance that must be maintained in connection with a borrowing arrangement with a
bank.

11. Explain undelivered check, postdated check delivered and stale check.

-An undelivered or unreleased check is one that is merely, drawn and recorded but not given to the
payee before the end of reporting period. A postdated check delivered is a check drawn, recorded and
already given to the payee but it bears a date subsequent to the end of reporting period. A stale check is
a check not encashed by the payee within a relatively long period of time.

12. Explain the accounting for cash shortage or cash overage.

-Accounting for cash shortage Where the cash count shows cash which is less than the balance
per book, a cash shortage is to be recorded. Accounting for cash overage Where the cash count
shows cash which is more than the balance per book, a cash overage is to be recorded.

13. Explain the imprest system of internal control.

-The imprest system is a system of internal control ideally requires that all payments should be
made by means of check, this is sometimes impossible.

14. What is a petty cash fund?

-The petty cash fund is money set aside to pay small expenses which cannot be paid
conveniently by means of check.
15. Explain the two methods of accounting for petty cash fund.

-There are two methods of handling the petty cash

* Imprest fund system- The imprest fund system is the one usually followed in handling petty
cash transactions.

* Fluctuating fund system- The system is called "fluctuating fund system" because the checks
drawn to replenish the fund do not necessarily equal the petty cash disbursements.

Argentina Company
Adjusting Journal Entries
For the period ended December 31,2020
Requirement 1

DATE ACCOUNT TITLES DEBIT CREDIT

DEC 31 a. Accounts Receivable 150,000
Cash on hand 150,000

b. Expenses 10,000
Receivable from employee 5,000
Petty cash Fund 15,000

Account Receivable 5,000

Petty cash fund 5,000

Requirement 2

Cash on hand ₱ 1,000,000

(150,000)
_____________________________
TOTAL ₱ 850,000

Petty cash fund ₱ 50,000

(10,000)
(5,000)
______________________________
TOTAL ₱ 35,000

Security Bank Current Account 2,000,000

PNB Current account 1,500,000
BPI time deposit -90days 2,000,000
________________
Total Cash and Cash Equivalents ₱ 6,385,000
Requirement 3
Items exclude from the presentation of Cash and Cash Equivalents
 BDO current account (over draft) – classified as current liability.
 BSP Treasury Bill -120 days- Held as non-current investment.
 Bond Sinking fund – classified under non-current asset.