Chapter 6 Financial Assets
Chapter 6 Financial Assets
Chapter 6 Financial Assets
Learning Objectives
Definitions
Financial instrument – is any contract that gives rise to both a financial asset of
one entity and a financial liability or equity instrument of another entity. (PPSAS
28.9)
a. Cash;
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MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS
e. A contract that will or may be settled in the entity’s own equity instruments.
Receivables
Derivative assets
Initial Recognition
Initial Measurement
Financial assets are initially measured at fair value plus transaction costs,
except for financial assets at fair value through surplus or deficit whose
transaction costs are expensed.
Transaction costs are incremental costs that are directly attributable to the
acquisition, issue, or disposal of a financial instrument.
Cash
Cash – comprises cash on hand, cash in bank and cash treasury accounts.
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Cancelled checks (e.g., stale, voided or spoiled) are reverted back to cash.
The disbursing officer is liable for any cash shortage while any cash overage that
he cannot satisfactorily explain to the auditor is forfeited in favor of the
government.
Shortage:
Overage:
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Dishonored Checks
A dishonored check is a check that is not accepted when presented for payment,
e.g., a check returned by the bank because of lack of sufficient funds - ‘bounced’
check.
Bank Reconciliation
A government entity prepares monthly bank reconciliations for each of the bank
accounts it maintains, using the adjusted balance method.
Cash Equivalents
Receivables
Receivables are initially measured at fair value plus transaction costs and
subsequently measured at amortized cost.
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maturity
Derivatives
A derivative is a financial instrument or other contract that derives its value from
the changes in value of some other underlying asset or other instrument.
Characteristics of a derivative:
2. It requires no initial net investment (or only a very minimal initial net
investment); and
Purpose of a derivative
Risk management is the process of identifying the desired level of risk, identifying
the actual level of risk and altering the latter to equal the former.
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To know more information about CHAPTER 6-Receivables- PLEASE CLICK THE LINK:
https://www.youtube.com/watch?v=YMw_9naWXNI
Reference:
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