Account and Budget Level III: Learning Guide
Account and Budget Level III: Learning Guide
Account and Budget Level III: Learning Guide
LEARNING GUIDE
Unit of Competence Balance CASH
Holding
Module Title: Balance CASH
Holding
LG Code: CDS CPM3 M016 0312
Information sheet 1
1.1 ,Definition Cash safe box medium of exchange
1.1.1. Introduction
that a bank will accept at face value and immediate credit to the depositors account.
An item to be reported as cash it must fulfill the following criteria’s:
It should be used as a medium of exchange, i.e. in settlement of transactions.
It should be available immediately for the payment of current obligations.
It should be free from any contractual restriction that limits its use in
satisfying debts
Items those are included as Cash:
Coins and Currencies(Paper money)
Money on deposit in a bank that can be drawn without any restriction, i.e.
demand deposits
Negotiable instruments, which are documents that can be transferred from one
party to another as money, like money orders, certified checks or certified
payment orders(CPOs), checks issued by third parties and are available at
cashiers, checks written to third parties but not yet issued, traveler’s checks,
and bank drafts.
Saving accounts
Petty cash funds
Change funds
Credit card sales draft
Some items, however, may initially appear or seem as Cash; but do not meet the
criteria’s. For instance, a check received from a third party, as a payment is not included
as cash if the party issuing the check has not sufficient fund in its bank account. Such
checks are marked as NSF (Not Sufficient Fund) checks and are reported as receivables.
Similarly, Postdated checks, issued by third parties but that will be drawn only in the
future dates reported as receivables. Postage Stamps are items for which cash has been
paid and are expected to be used in the future. They represent office supplies (prepaid
expense items).
Self cheek
Name __________________________class _____id ____
1,what is the in this some of point Items those are included as Cash:
3, what is NSF
Answer key
1.2.1.Introduction
The need to safeguard cash is crucial in most businesses because cash is mostly exposed
to embezzlement. Firms address this problem through the internal control system. An
internal control system is a set of policies and procedures designed to protect assets,
provide accurate accounting records and evaluate performances.
A sound internal control system for cash increases the likely hood that the reported values
for cash are accurate.
Signature Card :At the time the account is opened, an identifying number is assigned to
the account, and a signature card must be signed by each person authorized to sign checks
drawn on the account. The card is used by the bank to determine the authenticity of the
signature on checks presented to it for payment.
Deposit Ticket: The details of a deposit are listed by the depositor on a printed form
supplied by the bank. Deposit tickets may be prepared in duplicate, in which case the
copy is stamped or initialed by the bank’s teller and given to the depositor as a receipt.
The receipt of a deposit may be indicated by means other than a duplicate deposit ticket,
but all methods give the depositor written proof of the date and the total among The
following are some activities that are increases or decreases the cash balance
Activities that increases cash balance Activities that decrease cash balance
(Cash Inflow) (Cash outflow)
Increasing long- term debt Decreasing long- term debt
Increasing equity(selling some stocks) Decreasing equity
Increasing current liabilities Decreasing current liabilities
Decreasing current assets other than Increasing current assets other than
cash cash(buying some inventories etc)
Decreasing fixed assets (selling assets) Increasing fixed assets (purchase
Building, Furniture etc.)
Bank interest;
Sale of fixed assets;
Supplier refunds;
Directors loans to the business;
Grants & Funding proceeds
What are basic accounting skills?
Basic Accounting Skills Every Professional Accountant Must Have!
Following is the list of few skills or technical expertise that every management
accountant should be well-versed with:
1) Interpersonal skills: ...
2) Taxation. ...
3) Analysis. ...
4) Accounting basics. ...
5) National certification. ...
6) Accounting Software.
Self cheek
Name __________________________class _____id ____
1, What are basic accounting skills?
Answerer key
1,3.1 .Introduction
Motive and such motive refers to be holding of cash to met anticipate obligations whose
timing is not perfectly synchronized with cash receipts.
Precautionary Motive: In addition to the non-coincide of anticipated cash receipt and
payments in the ordinary course of business, a firm may have to pay cash for purposes
which cannot be predicted or anticipated. The unexpected cash need at short notice may
be result of:
* Flood, strikes and failure of important customer;
* Bills may be presented for settlement earlier than expected;
* Unexpected slow down in collection of accounts receivable;
* Cancellation of some order for goods as the customer is not satisfied;&
The cash balance held in reserve for such random and unforeseen fluctuations in cash
flows are called as precautionary balances. In other words, precautionary motive of
holding cash implies the need to hold cash to meet unpredictable obligations.
Speculative Motive: It refers to the desire of a firm to take advantage of opportunities
which represent themselves at unexpected moments and which are typically outside the
normal course of business. While the precautionary motive is defensive in nature in that
firms must make provision
to tide over unexpected contingencies, the speculative motive represents a positive and
aggressive approach. Firms aim to exploit profitable opportunities and keep cash in
reserve to do so. The speculative motive help to take advantage of:
* An opportunity to purchase raw materials at reduced price on payment of
immediate cash.
* A chance to speculate on interest rate movements by buying securities when.
Self cheek
Name __________________________class _____id ____
1 Explain Motives for Holding Cash (Reasons for Holding Cash)
Answerer key
1,4.1,.Introduction
Self cheek
Name __________________________class _____id ____