Cash

Cash

Accountant defined cash as money on deposit in bank sand any items that bank will accept for deposit. These items include not only coins and paper money, but also checks, money orders, and traveler’s checks. Bank also accepts drafts signed by customer using bank credit cards, such as visa and master card. Thus sales to customers using bank cards are cash sales, the enterprise that makes the sale.

A cash subsidiary ledger includes separate accounts corresponding to each bank account and each supply of cash on hand within the organization.

Reporting Cash in the balance sheet:

Cash is listed first in the balance sheet because it is most liquid of all current assets. For the purposes of balance sheet presentation, the balance of the cash controlling account is combined with that of the controlling account for cash equivalents.

Cash Equivalents:

Some short term investments are so liquid that they are termed cash equivalents. Examples include money market funds. U.S, treasury bills. These assets are considered so similar to cash that they are combined with the amount of cash in the balance sheet. Therefore, the first asset listed in the balance sheet often is called Cash and Cash Equivalents.

Restricted Cash:

Some banks accounts are restricted as to their use, so they are not available to meet the normal operating needs of the company. For example, a bank account may contain cash specifically marked for the acquisition of plant assets. Bank accounts in foreign countries are restricted by laws that prohibited transferring the money to another country. Cash that is not available in for paying current liabilities should not be viewed as a current asset. Therefore, restricted cash should be listed just below the current asset sections of the balance sheet in the section entitled “Investments and Funds”.

Cash Management:

The term cash management refers to planning, controlling, and accounting for cash transactions and cash balances. Because cash moves so readily between banks accounts and other financial assets, cash managements really means the management of all financial resources. The basic objectives of cash management are as follows:

· Provide accurate accounting for cash receipts, cash disbursements, and cash balances. Many of the total transactions of a business involve the receipt or disbursement of cash.

· Prevent or minimize losses from theft or fraud. Cash is more susceptible to theft than any other asset and, therefore, requires physical protection.

· Anticipate the need for borrowing and assure the availability of adequate amounts of cash for conducting business operations. Every business organization must have sufficient cash to meet its financial obligations as they come due.

Prevent unnecessarily large amounts of cash from sitting idle in bank accounts that produce no revenue. Well-managed companies frequently review their bank balances for the purpose of transferring any excess cash into cash equivalents or other investments that generates revenue

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