3.7 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash in bank;
deposits on call and highly liquid investments with an original maturity of
three months or less, which are readily convertible to cash and they
present insignificant risk of changes in value because of changes in
interest rates.
Petty Cash Fund (PCF) is maintained under an imprest system wherein
replenishment is charged to the expense accounts. The PCF is not used to
purchase regular inventory items for stock.
3.8 Investments
The LGU limits its exposure to risk by investing in authorized depository
banks.
3.9 Receivables
Receivables represent amounts collectible from various constituents,
taxpayers, other local government units, national government agencies,
municipal officials and employees arising from claims for money lent, real
property taxes due the local government unit and cash advances granted or
travel and for payment of salaries, wages, allowances, honoraria and petty
operating expenses.
3.10 Inventories
Inventories are recognized and measured at cost upon initial recognition.
Inventories are recognized as expense when issued for utilization or
consumption in the ordinary course of operation.
3.11 Prepayments and Deferred Charges
Prepayments are recorded under asset method. Adjusting entries are
prepared at the end of the year to record the portion of the prepayment
representing the expense incurred during the current accounting period.
3.12 Changes in accounting policies and estimates
The LGU recognizes the effects of changes in accounting policy
retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.
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