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Cash and Cash Equivalents

The document discusses accounting procedures for cash and cash equivalents, including unreleased commercial checks, cancelled checks, and replacement checks. It notes that unreleased checks are reversed at the start of the following year, cancelled checks are reverted back to cash accounts through adjusting entries, and replacement checks are recorded through debiting accounts payable and crediting cash.

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ALMA MORENA
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75 views1 page

Cash and Cash Equivalents

The document discusses accounting procedures for cash and cash equivalents, including unreleased commercial checks, cancelled checks, and replacement checks. It notes that unreleased checks are reversed at the start of the following year, cancelled checks are reverted back to cash accounts through adjusting entries, and replacement checks are recorded through debiting accounts payable and crediting cash.

Uploaded by

ALMA MORENA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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a. Transfer taxes and duties.

Cash and cash equivalents

 Cash – comprises cash on hand, cash in bank and cash treasury accounts.

Adjustments for Unreleased Commercial Checks


 Unreleased checks are checks drawn but not yet given to the payees as of the
end of the period. These are reverted back to cash as follows:

Date Cash in Bank. Local Currency-Current xx


Accounts Payable (or other liability xx
account)

 Unreleased checks are not physically cancelled. At the start of the following year,
the adjusting entry above is reversed to recognize the availability of the checks
for release.
 This procedure does not apply to the “Cash – Modified Disbursement System
(MDS)” account because there is no actual cash with the Government Servicing
Bank.

Accounting for Cancelled Checks


 Checks are cancelled when they become stale, spoiled or voided. A check is
considered stale if it has been outstanding for over 6 months from its date.
 Replacement checks may be issued for cancelled checks that were already
released to payees, upon submission of the cancelled checks to the Accounting
Unit.
 Cancelled checks are reverted back to cash as follows:

Curren Cash – Modified Disbursement System, Regular xx


t year Accounts Payable xx
To recognize the cancellation of stale/voided/spoiled MDS checks in current year

Prior Accumulated Surplus/(Deficit) xx


year Accounts Payable xx
To recognize the cancellation of stale/voided/spoiled MDS checks in prior year

 For prior period MDS checks, the “Accumulated Surplus/(Deficit)” account is


debited. This is because, again, the “Cash – Modified Disbursement System
(MDS)” account is zeroed-out at the end of each period.
 For cancelled commercial checks, the “Cash in Bank – Local Currency,
Current” account is debited for both current year and prior period.
 If a replacement check is issued, the replacement check is recorded in the
regular manner, i.e, Debit to Accounts Payable and Credit to Cash.

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