Many beginning accountants are not completely clear what is included in the concept, which we will analyze in the article, how it is characterized, how to display it in the ledger. Therefore, we will try to depict in detail what cash and cash equivalents are. In conclusion of the article, we also present an algorithm for their presentation in accounting documents.
Definition of a concept
Cash is cash directly held at the cash desk, as well as held on demand accounts.
Cash equivalents are various investments characterized by high liquidity. They can be easily transferred to the expected amount of money. Their cost in one direction or another varies slightly. For the most part, these are short-term investments that can be used no later than three months from the date of acquisition. It is important to remember that cash equivalents serve only one purpose - the payment of short-term liabilities.
Both cash and cash equivalents are accounted for in accordance with the “Cash Flow Statement” standard.
Constituent elements
Let us see what specifically parsed concepts include. Cash and cash equivalents are:
- Money lying in the box office.
- Cash in transit. This also includes collected finances that have not yet been credited to bank accounts.
- Funds in ruble and foreign currency accounts, at any time available for use.
- Promissory notes (including bank transferable), which can be repaid no later than 3 months after the acquisition.
- Demand deposits, as well as those that can be used no later than 3 months later.
- Other highly liquid securities, bonds and securities that are planned to be sold no later than within a three-month period.
Overdrafts, which should be repaid at the first request of the bank, are included in the balance of cash and cash equivalents to write a report on the movement of the latter.
Limited categories
Now about more private categories. Cash and cash equivalents may be limited in the following cases:
- If they are in the accounts of those banks whose license has been revoked.
- Funds are blocked or seized at the request of the tax inspectorate, as a condition in court proceedings , etc.
- State legislation imposes some restrictions on their use.
- A loan or loan agreement implies limited use.
- The concluded agreement with the bank stipulates the preservation of a certain account balance. The funds that make up it will be limited.
All of the above is excluded from cash and cash equivalents and is added to current or non-current assets.
Statement of financial position
The concepts disclosed by us are written in the Statement of financial position as a separate line. The notes to it indicate:
- Components of cash and cash equivalents.
- Information about their balances in foreign currency.
- The total amount of limited cash and cash equivalents. An explanatory commentary is additionally written on the reasons for this restriction.
- Interconnection of the described categories in the Statement of cash flows and Statement of financial position.
Cash Flow Statement
The statement of cash and cash equivalents is a list of expenses and income that helps to coordinate the incoming and outgoing balance of money and their equivalents in the balance sheet. 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 cash equivalents.
The data in the Report are presented in three large-scale sections:
- Operational activities . This is what brings the company profit, and also does not apply to the following two categories. Revenues here - 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 certainly profitable.
- Investment activity . This includes the acquisition and subsequent sale of long-term investments. By definition, they do not apply to cash equivalents (since they are not short-term).
- Financial activity . Affects the change in the size and filling of the capital of the company, as well as its borrowed funds. Cash accumulations in this category include proceeds from the issuance of various types of shares, bonds, loans, bills, as well as repayment of borrowings.
In the reporting, funds for the financial and investment component are presented by the direct method, and by the operating one, by the indirect method.
Display in documents
Cash and cash equivalents are shown on line 1250 as follows:
D (debit) on account 50 "Cashier"
+
D on the count. 51 "Settlement accounts"
+
D on the count. 52 "Currency accounts"
+
D on the count. 55 "Special accounts in banks" (deposits that cannot be attributed to cash equivalents are not included here)
+
D on the count. 57 "Money on the go"
+
D on the count. 58 "Attachments"
+
D on the count. 76 "Settlements with borrowers and debtors."
Cash and cash equivalents often appear in financial statements. Their main components are cash on the accounts and at the cash desk, as well as a number of short-term liabilities that can be easily and quickly transferred to the expected amount of money.