ACCN 1010/1006
CASH+CASH
EQUIVALENTS AND
TRADE+OTHER
PAYABLES
FINANCIAL ACCOUNTING STUDY
NOTES
, CASH AND CASH EQUIVILENTS
What is Cash?
It is defined in IAS 7
• IAS 7 - Cash comprises cash on hand and demand deposits (Deposit of money that can
be withdrawn without prior notice, e.g., in a current & savings accounts.)
• IAS 7 - Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value. (i.e. an investment normally qualifies as a cash equivalent only when it
has a short maturity of, say, three months or less from the date of acquisition,
including bank overdrafts)
Bank OD is also classified as cash but is negative cash
How can businesses prevent fraud and internal controls to implement:
• Segregation of duties (custody of cash must be separated from recordkeeping for cash).
• Cash receipts deposited daily.
• All payments to be made by cheque or EFT
(unless minor).
• Minor payments should be made from petty cash float, which is maintained on an
imprest system(fixed amount at all times) .
• Bank reconciliation prepared on a regular basis to prove accuracy of both reporting
entity & the bank.
CASH+CASH
EQUIVALENTS AND
TRADE+OTHER
PAYABLES
FINANCIAL ACCOUNTING STUDY
NOTES
, CASH AND CASH EQUIVILENTS
What is Cash?
It is defined in IAS 7
• IAS 7 - Cash comprises cash on hand and demand deposits (Deposit of money that can
be withdrawn without prior notice, e.g., in a current & savings accounts.)
• IAS 7 - Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value. (i.e. an investment normally qualifies as a cash equivalent only when it
has a short maturity of, say, three months or less from the date of acquisition,
including bank overdrafts)
Bank OD is also classified as cash but is negative cash
How can businesses prevent fraud and internal controls to implement:
• Segregation of duties (custody of cash must be separated from recordkeeping for cash).
• Cash receipts deposited daily.
• All payments to be made by cheque or EFT
(unless minor).
• Minor payments should be made from petty cash float, which is maintained on an
imprest system(fixed amount at all times) .
• Bank reconciliation prepared on a regular basis to prove accuracy of both reporting
entity & the bank.
