CHAPTER 1: CASH AND CASH
EQUIVALENTS
POINTERS:
● Cash and cash equivalents need to be in the first line presentation of the current
operations. However, it should be disclosed in the notes to financial statements.
● Measurement of Cash is measured at face value / stated amount.
● IFRS 18 paragraph 99 (New standard, Presentation and disclosure in financial
statements), an entity shall classify an asset as current when the asset is cash or a cash
equivalent unless it is restricted to settle a liability for more than twelve months after the
end of the reporting period.
CLASSIFICATION OF CASH, CASH EQUIVALENTS,
NON-CASH AND CURRENT LIABILITIES:
1. Cash (Current Asset – Available for Immediate Use)
Cash includes all money that a business or individual can use immediately for
transactions.
Current Assets (Cash)
● Physical Cash – Coins and paper money held by the business.
● Bank Balances – Checking and savings accounts that can be accessed anytime.
● Petty Cash – Small amount of cash kept for minor business expenses.
● Undeposited Checks – Checks received from customers but not yet deposited in
the bank.
● Cash in Transit – Cash that has been collected but not yet reflected in the bank
account.
2. Cash Equivalents (Highly Liquid Investments, Easily Convertible to Cash)
Cash equivalents are short-term investments (maturity of 3 months or less) that can be
quickly converted into cash with minimal risk of value loss.
Current Assets (Maturity within 3 months)
● Treasury Bills (T-bills) – Short-term government securities with maturities of a few
weeks or months.
● Commercial Paper – Unsecured short-term debt issued by corporations.
, ● Money Market Funds – Mutual funds that invest in short-term, low-risk securities.
● Short-Term Government Bonds – Government-issued bonds maturing within 3
months.
● Certificates of Deposit (CDs) (≤ 3 months maturity) – Fixed-term bank deposits
that mature within 3 months.
● Repurchase Agreements (Repos) – Short-term borrowing agreements where
securities are sold and repurchased later at a higher price.
Non-Current Assets (Maturity More Than 3 Months)
● Long-Term Government Bonds (> 3 months maturity) – Government bonds that
mature in more than 3 months.
● Long-Term Certificates of Deposit (CDs) (> 3 months maturity) – Fixed-term bank
deposits with maturities longer than 3 months.
3. Restricted Cash (Cash Set Aside for Specific Purposes)
Restricted cash is money that cannot be used freely because it has been reserved for
specific obligations such as debt repayment, leases, or contractual agreements.
Current Assets (Expected to Be Used Within 1 Year)
● Loan Repayment Cash – Money set aside to repay short-term loans.
● Short-Term Sinking Funds – Reserved funds for repaying short-term debts.
● Short-Term Security Deposits – Refundable cash deposits for leases or services.
● Short-Term Escrow Accounts – Funds held by a third party for a short-term
contractual obligation.
Non-Current Assets (Held for More Than 1 Year)
● Long-Term Sinking Funds – Reserved funds for repaying long-term debt.
● Long-Term Security Deposits – Cash deposits held for more than 1 year, e.g., for
lease agreements.
● Compensating Balances – Minimum balances that businesses must maintain in
their bank accounts as per long-term loan agreements.
● Long-Term Escrow Accounts – Funds held for future contractual obligations
extending beyond 1 year.
4. Non-Cash Items (Not Readily Available as Cash)
● Receivables (Amounts Owed to the Business)
Receivables are amounts due from customers or other entities for goods or
services already provided.
, Current Assets (Collected Within 1 Year)
Accounts Receivable – Money due from customers for credit sales.
Short-Term Notes Receivable – Written promises to receive payment
within 1 year.
Non-Current Assets (Collected After 1 Year)
Long-Term Notes Receivable – Written promises to receive payment
beyond 1 year.
● Investments (Held for Income or Capital Gain)
Investments are financial assets held to generate income or capital appreciation
over time.
Current Assets (Maturity Within 1 Year)
Short-Term Marketable Securities – Stocks or bonds held for trading
purposes.
Short-Term Equity Investments – Shares in other companies intended for
sale within 1 year.
Non-Current Assets (Held for More Than 1 Year)
Long-Term Investments – Stocks, bonds, and securities held for long-term
gain.
Long-Term Certificates of Deposit (CDs) – Fixed-term deposits maturing
in more than 1 year.
Equity Investments – Ownership in other companies not easily sold.
● Prepaid Expenses (Advance Payments for Future Benefits)
Prepaid expenses are payments made in advance for goods or services to be
received in the future.
Current Assets (Used Within 1 Year)
Prepaid Rent – Rent paid in advance for less than 1 year.
Prepaid Insurance – Insurance premiums covering less than 1 year.
Other Prepaid Expenses – Prepaid utilities, advertising, or maintenance.
Non-Current Assets (Extending Beyond 1 Year)
EQUIVALENTS
POINTERS:
● Cash and cash equivalents need to be in the first line presentation of the current
operations. However, it should be disclosed in the notes to financial statements.
● Measurement of Cash is measured at face value / stated amount.
● IFRS 18 paragraph 99 (New standard, Presentation and disclosure in financial
statements), an entity shall classify an asset as current when the asset is cash or a cash
equivalent unless it is restricted to settle a liability for more than twelve months after the
end of the reporting period.
CLASSIFICATION OF CASH, CASH EQUIVALENTS,
NON-CASH AND CURRENT LIABILITIES:
1. Cash (Current Asset – Available for Immediate Use)
Cash includes all money that a business or individual can use immediately for
transactions.
Current Assets (Cash)
● Physical Cash – Coins and paper money held by the business.
● Bank Balances – Checking and savings accounts that can be accessed anytime.
● Petty Cash – Small amount of cash kept for minor business expenses.
● Undeposited Checks – Checks received from customers but not yet deposited in
the bank.
● Cash in Transit – Cash that has been collected but not yet reflected in the bank
account.
2. Cash Equivalents (Highly Liquid Investments, Easily Convertible to Cash)
Cash equivalents are short-term investments (maturity of 3 months or less) that can be
quickly converted into cash with minimal risk of value loss.
Current Assets (Maturity within 3 months)
● Treasury Bills (T-bills) – Short-term government securities with maturities of a few
weeks or months.
● Commercial Paper – Unsecured short-term debt issued by corporations.
, ● Money Market Funds – Mutual funds that invest in short-term, low-risk securities.
● Short-Term Government Bonds – Government-issued bonds maturing within 3
months.
● Certificates of Deposit (CDs) (≤ 3 months maturity) – Fixed-term bank deposits
that mature within 3 months.
● Repurchase Agreements (Repos) – Short-term borrowing agreements where
securities are sold and repurchased later at a higher price.
Non-Current Assets (Maturity More Than 3 Months)
● Long-Term Government Bonds (> 3 months maturity) – Government bonds that
mature in more than 3 months.
● Long-Term Certificates of Deposit (CDs) (> 3 months maturity) – Fixed-term bank
deposits with maturities longer than 3 months.
3. Restricted Cash (Cash Set Aside for Specific Purposes)
Restricted cash is money that cannot be used freely because it has been reserved for
specific obligations such as debt repayment, leases, or contractual agreements.
Current Assets (Expected to Be Used Within 1 Year)
● Loan Repayment Cash – Money set aside to repay short-term loans.
● Short-Term Sinking Funds – Reserved funds for repaying short-term debts.
● Short-Term Security Deposits – Refundable cash deposits for leases or services.
● Short-Term Escrow Accounts – Funds held by a third party for a short-term
contractual obligation.
Non-Current Assets (Held for More Than 1 Year)
● Long-Term Sinking Funds – Reserved funds for repaying long-term debt.
● Long-Term Security Deposits – Cash deposits held for more than 1 year, e.g., for
lease agreements.
● Compensating Balances – Minimum balances that businesses must maintain in
their bank accounts as per long-term loan agreements.
● Long-Term Escrow Accounts – Funds held for future contractual obligations
extending beyond 1 year.
4. Non-Cash Items (Not Readily Available as Cash)
● Receivables (Amounts Owed to the Business)
Receivables are amounts due from customers or other entities for goods or
services already provided.
, Current Assets (Collected Within 1 Year)
Accounts Receivable – Money due from customers for credit sales.
Short-Term Notes Receivable – Written promises to receive payment
within 1 year.
Non-Current Assets (Collected After 1 Year)
Long-Term Notes Receivable – Written promises to receive payment
beyond 1 year.
● Investments (Held for Income or Capital Gain)
Investments are financial assets held to generate income or capital appreciation
over time.
Current Assets (Maturity Within 1 Year)
Short-Term Marketable Securities – Stocks or bonds held for trading
purposes.
Short-Term Equity Investments – Shares in other companies intended for
sale within 1 year.
Non-Current Assets (Held for More Than 1 Year)
Long-Term Investments – Stocks, bonds, and securities held for long-term
gain.
Long-Term Certificates of Deposit (CDs) – Fixed-term deposits maturing
in more than 1 year.
Equity Investments – Ownership in other companies not easily sold.
● Prepaid Expenses (Advance Payments for Future Benefits)
Prepaid expenses are payments made in advance for goods or services to be
received in the future.
Current Assets (Used Within 1 Year)
Prepaid Rent – Rent paid in advance for less than 1 year.
Prepaid Insurance – Insurance premiums covering less than 1 year.
Other Prepaid Expenses – Prepaid utilities, advertising, or maintenance.
Non-Current Assets (Extending Beyond 1 Year)
