CASH

1. CASH Agapito, Paul Dela Cruz, Pauline Lucman, Fatimah Torio, Jeandie

2. WHAT IS CASH? • Available for immediate use/ general use • Involves bills, currency, notes, coins, checks (unless bounce) postal money orders. • Can be on hand or in bank • An asset most susceptible to improper diversion and use. • A medium of exchange • A store of value • A unit of account • NOT A LEGAL TENDER -particular item or medium of payment that can be used extinguish a debt, or meet a financial obligation.

3. CASH ITEMS INCLUDED IN “CASH” a.) CASH ON HAND – customer’s checks - cashier’s or manager’s checks - traveler’s checks - bank drafts - money orders b.) CASH IN BANK – demand deposits - checking account and saving deposits unrestricted as to withdrawal. c.) CASH FUND - petty cash fund - payroll fund - dividend fund

4. SPECIAL CASES • BOUNCING CHECKS - check that cannot be processed because of insufficient funds. • POSTDATED CHECKS – any checks dated in the FUTURE. • STALE CHECKS – checks not encashed within a long period of time. (more than 6 months ago)

5. HOW DO YOU VALUE CASH IN YOUR B/S? • AT FACE VALUE! *Translate to reporting currency using SPOT RATE. SPOT RATE: - the exchange rate at the time of reporting.

6. CASH EQUIVALENTS

7. WHAT IS CASH EQUIVALENTS? • Short-term • can be easily encashed • are subject to insignificant risk of change in value • purchased 3 months before MATURITY • a debt instrument

8. INTERNAL CONTROL

9. WHAT IS INTERNAL CONTROL? • Under AUDITING • Process and procedures to achieve the objectives/goals of an organization • SAFEGUARD ASSETS - from theft or any unauthorized use. • COMPLIANCE WITH REGULATION/LAW – taxes • ACCURATE INFORMATION – reasonable, for reducing the risk of errors. • *Sarbanes-Oxley Act of 2002 (SOX)

10. 5 ELEMENTS: (CRIME) • CONTROL ENVIRONMENT - attitude of management and employees - tone at the top - dictates the risk • RISK ASSESSMENT - identifying and assessing the risk and their impact in the organization - COMMON RISK: CREDIT/COLLECTABILITY RISK • CONTROL PROCEDURES/ACTIVITIES - how you manage your risks - the mechanisms/ practices or procedures to address the risks that you have identified

11. 5 ELEMENTS: (CRIME) • INFORMATION AND COMMUNICATION - how information flows in the company in order to function effectively. - how to disseminate information • MONITORING - “are we on the right track?” - you monitor what is happening in an organization for corrections.

12. COMMON INTERNAL CONTROLS RELATED TO CASH: • SEGREGATION OF DUTIES - separating accounting & cash custodianship - prone to theft • VOUCHER SYSTEM - disbursement function - prevent control *voucher – proof, supported by documents • ELECTRONIC FUND TRANSFER - connected to payments and withdrawal - fund transfer from on account to another

13. COMMON INTERNAL CONTROLS RELATED TO CASH: • OFFICIAL RECEIPT - is issued when an entity is receiving cash • BANK RECONCILIATION - detect control - a process of reconciling your cash balance per book and cash balance per bank

14. COMMON FRAUD RELATED TO CASH: • KITTING - check is drawn against a first bank and depositing the same check in a second bank - covering cash shortage in the latter bank - usually done at the end of the month • LAPPING - stealing & patching collections from customers • WINDOW DRESSING - applies to the entirely F/S - any deliberate misstatement - untruth or falsity statements