Intermediate Accounting Chapter #7: Identify Items Considered Cash
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- Cash is
1. the most liquid of assets
2. the standard medium of exchange
3. the basis for measuring and accounting
for all other items.
- Items classified as cash
1. Coins
2. Currency
3. Available funds on deposit at the bank
4. Money orders
5. Certified checks
6. Cashier’s checks
7. Personal checks
8. Bank drafts
9. Saving accounts
- Negotiable instruments classified as
temporary investments than cash as they
usually contain restrictions or penalties on
their conversion to cash.
1. Money market funds
2. Money market savings certificates
3. Certificates of deposits (CDs)
4. Short-term papers
- Money market funds that provide checking
account privileges are usually classified as
cash.
- Petty Cash & Change Funds are used to meet
current operating expenses & liquidate
current liabilities include theses funds in
current assets as cash.
- Items treated as receivables rather than cash
1. Post-Date Cheques
2. I.O.U.s
3. Travel advances if collected from
employees/deducted from their salaries
- Items classified as prepaid expenses
1. Travel advance
2. Postage Stamps on Hand
- Items classified/treated as Supplies inventory
1. Postage Stamps on Hand

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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Questions
Question #1
- What may be included under the heading of “cash”?
Answers
- Cash normally consists of
1. coins and currency on hand,
2. bank deposits, and
3. various kinds of orders for cash such as bank checks, money orders, travelers’ checks,
demand bills of exchange, bank drafts, and cashiers’ checks.
4. Balances on deposit in banks which are subject to immediate withdrawal are properly
included in cash.
5. Money market funds that provide checking account privileges may be classified as cash.
6. There is some question as to whether deposits not subject to immediate withdrawal are
properly included in cash or whether they should be set out separately.
7. Savings accounts, time certificates of deposit, and time deposits fall in this latter category.
Unless restrictions on these kinds of deposits are such that they cannot be converted
(withdrawn) within one year or the operating cycle of the entity, whichever is longer, they
are properly classified as current assets. At the same time, they may well be presented
separately from other cash and the restrictions as to convertibility reported

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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Question #2
- In what accounts should the following items be classified?
a) Coins and currency.
b) U.S. Treasury (government) bonds.
c) Certificate of deposit.
d) Cash in a bank that is in receivership.
e) NSF check (returned with bank statement).
f) Deposit in foreign bank (exchangeability limited).
g) Postdated checks.
h) Cash to be used for retirement of long-term bonds.
i) Deposits in transit.
j) 100 shares of Dell stock (intention is to sell in one year or less).
k) Savings and checking accounts
l) Petty cash.
m) Stamps.
n) Travel advances.
*Receivership is a situation in which an institution or enterprise is held by a receiver—a person
"placed in the custodial responsibility for the property of others, including tangible and intangible
assets and rights"—especially in cases where a company cannot meet its financial obligations and is
said to be insolvent.
**NSF: Non-Sufficient Funds

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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# Date Account
a) Coins and currency. Cash
b) U.S. Treasury (government) bonds. Marketable Securities
c) Certificate of deposit. Short-term Investments
d) Cash in a bank that is in receivership. Accounts Receivable
e) NSF check (returned with bank statement). Accounts Receivable/a Loss if Uncollectible
f) Deposit in foreign bank (exchangeability limited). Cash (If expendable)/Other Others (If not expendable)
g) Postdated checks. Accounts Receivable
h) Cash to be used for retirement of long-term bonds. Short-term Investments
i) Deposits in transit. Cash
j) 100 shares of Dell stock (intention is to sell in one year or less). Short-term Investments
k) Savings and checking accounts Cash
l) Petty cash. Cash
m) Stamps. Prepaid Expenses/Inventory
n) Travel advances. Prepaid Expenses/Accounts Receivable

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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BriefExercises
Question #1
Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank—savings account 68,000
Cash on hand 9,300
Cash refund due from IRS 31,400
Checking account balance 17,000
Postdated checks 750
Certificates of deposit (180-day) 90,000
What amount should be reported as cash?
Answer
Cash in bank—savings account 68,000
+ Cash on hand 9,300
+ Checking account balance 17,000
= 94.300

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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Exercises
Question #1
(Determining Cash Balance)
- The controller for Weinstein Co. is attempting to determine the amount of cash and cash
equivalents to be reported on its December 31, 2012, balance sheet.
- The following information is provided.
1) Commercial savings account of $600,000 and a commercial checking account balance of
$800,000 are held at First National Bank of Olathe.
2) Money market fund account held at Volonte Co. (a mutual fund organization) permits
Weinstein to write checks on this balance, $5,000,000.
3) Travel advances of $180,000 for executive travel for the first quarter of next year (employee
to reimburse through salary reduction).
4) A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term
debt.
5) Petty cash fund of $1,000.
6) An I.O.U. from Marianne Koch, a company customer, in the amount of $150,000.
7) A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit
its cash receipts. At the present time, the company has no deposits at this bank.

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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8) The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity
of 120 days.
9) Weinstein has received a check that is dated January 12, 2013, in the amount of $125,000.
10) Weinstein has agreed to maintain a cash balance of $500,000 at all times at First National
Bank of Olathe to ensure future credit availability.
11) Weinstein has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is
due in 60 days.
12) Currency and coin on hand amounted to $7,700.
Instructions
a) Compute the amount of cash and cash equivalents to be reported on Weinstein Co.’s balance
sheet at December 31, 2012.
b) Indicate the proper reporting for items that are not reported as cash on the December 31,
2012, balance sheet.

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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Answer – a
# Account Amount Classification Point
1 Commercial savings account 600,000 Cash 1
2 Commercial checking account 800,000 Cash 1
3 Money market fund account 5,000,000 Cash 2
4 Petty Cash 1,000 Cash 5
5 Commercial Papers (Equivalent to Cash) 2,100,000 Cash 11
6 Cash & Coins 7,700 Cash 12
Total 8,508,700 -
Answer – b
# Account Amount Classification Point
1 Travel advances 180,000 Prepaid Expenses 3
2 Cash Fund for Long-term Loan Retirement 1,500,000
Non-Current Assets
Cash Restricted for
Retirement of Long-
term Debt
4
3 IOU 150,000 Accounts Receivable 6
4 Bank Overdraft 110,000
Current Liabilities
Bank Overdraft
7
5 Certificate of Deposits 500,000 Short-term Investments 8
6 Check Dated 21/1/13 125,000 Accounts Receivable 9

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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7 Restricted Funds 500,000
Compensating Balance
Requirements does not
affect the balance in
Cash.
Disclosure is required.
If not reimbursed,
charged to prepaid
expenses
If cash is present in
another account in the
same bank on which
the overdraft occurred,
offsetting is required
11
Total 3,065,000 -

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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Question #2
(Determine Cash Balance)
- Presented below are a number of independent situations.
Instructions
- For each individual situation, determine the amount that should be reported as cash.
- If the item(s) is not reported as cash, explain the rationale.
1) Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to
subsidiary of $980,000; utility deposit paid to gas company $180.
Answer
Cash Items: Checking account $925,000
Short-Investment Items: Certificate of Deposit: $1,400,000
Other Receivables: Cash Advance to subsidiary $980,000 + Utility Deposit $180 = $980,180.

Intermediate Accounting Chapter #7: Identify Items Considered Cash
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2) Checking account balance $500,000; an overdraft in special checking account at same bank as
normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund
$300; coins and currency on hand $1,350.
Answer
Cash Items
Checking account balance $500,000
- Overdraft ($17,000)
+ petty cash fund $300
+ coins and currency on hand $1,350
= $484,650
Restricted Funds
cash held in a bond sinking fund $200,000
- If the bond is non-current, the restricted cash is reported as non-current.

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3) Checking account balance $590,000; postdated check from a customer $11,000; cash restricted
due to maintaining compensating balance requirement of $100,000; certified check from
customer $9,800; postage stamps on hand $620.
Cash items
Checking account balance $590,000
+ certified check from customer $9,800
= $599,800
Restricted Funds/Compensating Balance
cash restricted due to maintaining compensating balance requirement of $100,000
A note shall be included in the disclosures stating the type of arrangement and amount.
Accounts Receivable
postdated check from a customer $11,000
Supplies Inventory/Prepaid Expenses
postage stamps on hand $620

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4) Checking account balance at bank $42,000; money market balance at mutual fund (has checking
privileges) $48,000; NSF check received from customer $800.
Cash Items
Checking account balance at bank $42,000
+ money market balance at mutual fund (has checking privileges) $48,000
= $90,000
Accounts Receivable
NSF check received from customer $800

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5) Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-
term Treasury bills $180,000; cash advance received from customer $900 (not included in
checking account balance); cash advance of $7,000 to company executive, payable on demand;
refundable deposit of $26,000 paid to federal government to guarantee performance on
construction contract.
Cash Items
Checking account balance $700,000
+ cash advance received from customer $900
= $700,900
Restricted Funds (Non-Current Assets)
cash restricted for future plant expansion $500,000
Short-term Investments/Marketable Securities
short-term Treasury bills $180,000
Other Receivables
cash advance of $7,000 to company executive, payable on demand
+ refundable deposit of $26,000
= $33,000