2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Many novice accountants are not completely clear what is included in the concept that we will analyze in the article, how it is characterized, how to display it in the ledger. Therefore, we will try to describe in detail what cash and cash equivalents are. At the end of the article, we will also give an algorithm for their presentation in accounting documents.
Definition of concept
Cash is cash directly at the cash desk, as well as stored on demand accounts.
Cash equivalents are various investments with high liquidity. They can be easily converted into a pre-expected amount of money. In this case, their cost in one direction or another changes slightly. For the most part, these are short-term investments that can be used no later than three months from the date of purchase. It is important to remember that cash equivalents serve only one purpose - the payment of short-term obligations.
Both cash and cash equivalents are accounted for under the Cash Collateral Statement standard.
Constituent elements
Let's see what specifically parsed concepts include. Cash and cash equivalents are:
- Money in the cash drawer.
- Cash in transit. This also includes collected finances that have not yet been credited to bank accounts.
- Funds on ruble and foreign currency accounts available for use at any time.
- Promissory notes (including bank transfers) that can be redeemed no later than 3 months after purchase.
- Demand deposits, as well as those that can be used no later than 3 months.
- Other valuable highly liquid stocks, bonds and securities that are planned to be sold no later than three months.
Overdrafts, which should be repaid at the first request of the bank, are included in the balance of cash and cash equivalents for writing a report on the movement of the latter.
Restricted categories
Now for more specific categories. Cash and cash equivalents may become restricted in the following cases:
- If they are onaccounts of those banks whose license was revoked.
- Funds are blocked or seized at the request of the tax office, as a condition in court proceedings, etc.
- State legislation imposes some restrictions on their use.
- A credit or loan agreement implies precisely limited use.
- The concluded agreement with the bank stipulates the preservation of a certain balance on the account. The funds that make it up will be limited.
All of the above are excluded from cash and cash equivalents and added to current or non-current assets.
Statement of Financial Position
The concepts we disclose are specified in the Statement of Financial Position as a separate line. The notes to it indicate:
- Components of cash and cash equivalents.
- Information about their foreign currency balances.
- The total amount of restricted cash and cash equivalents. Additionally, an explanatory comment is written about the reasons for such a restriction.
- Relationship between the categories described in the Statement of Cash Flows and the Statement of Financial Position.
Cash flow statement
The statement of cash flows and cash equivalents is a list of expenses and incomes that helps to reconcile the incoming and outgoing balance of money and their equivalents on the balance sheet.account. Such a document is needed to assess the financial structure, changes in the assets of a particular organization, as well as its ability to influence the volume of financial flows - incoming and outgoing traffic of cash and their equivalents.
The data in the Report are presented in three scale sections:
- Operating activity. This is something that brings profit to the company, and also does not belong to the next two categories. Revenues here are income from the sale of any items or the provision of services. Expenses - settlements with suppliers, remuneration of employees, etc. Cash flows here come either from the main activity, or from another, but, of course, profitable.
- Investment activities. This includes the acquisition and subsequent sale of long-term investments. They are not, by definition, cash equivalents (as they are not short-term).
- Financial activities. It affects the change in the size and filling of the company's capital, as well as its borrowed funds. Cash savings in this category include receipts from the issuance of various types of shares, bonds, loans, bills, as well as the repayment of borrowings.
In the financial statements, cash for the financial and investment component is presented by the direct method, and for the operating component - by the indirect method.
Display in documents
Cash and cash equivalents are displayed on line 1250 as follows:
D (debit) on account 50 "Cashier"
+
Daccording to sch. 51 "Settlement accounts"
+
D on account 52 "Foreign currency accounts"
+
D on account 55 "Special bank accounts" (does not include deposits that cannot be classified as cash equivalents)
+
D on account 57 "Money on the way"
+
D on account 58 Attachments
+
D on account 76 "Settlements with borrowers and debtors".
Cash and cash equivalents often appear in financial statements. Their main components are cash on accounts and on hand, as well as a number of short-term obligations that can be easily and quickly converted into the expected amount of money.
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