Definition
As it applies to the accounting discipline, cash includes paper money, coins, checks, money orders, and money on deposit with banks. In general, an item is classified as cash if a bank will accept it for deposit.
Explanation
Cash is classified as a current asset on the balance sheet of a company. When determining whether or not an item is considered a current asset, the length of time to convert the item into cash is typically less than 12 months.
Line items on the balance sheet are listed in order of decreasing liquidity, meaning the most liquid assets appear first. Liquidity is the ease of converting an asset into cash; therefore cash is the first asset appearing on the balance sheet.
Related Terms
Also known as a statement of financial position, the balance sheet is used to show the financial health of a company at a particular point in time. The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
Moneyzine EditorJanuary 8th, 2024
The accounting term used to describe an economic resource, which is owned by the corporation and expected to provide future benefits to its operation, is asset. Appearing on the balance sheet, assets are typically broken down into two categories:Moneyzine EditorJanuary 5th, 2024
The financial accounting term current assets is generally defined as cash and other assets that can be converted into cash within one year or one operating cycle, whichever is longer. Current assets are a subcategory of assets, which appear on a company's balance sheet.Moneyzine EditorJanuary 12th, 2024
The cash flow statement is a financial accounting report that demonstrates how cash flows both into and out of a company. Cash flow statements provide investors and analysts with insights into the change in cash and cash equivalents in a given accounting period.Moneyzine EditorJanuary 10th, 2024
The financial accounting term cash and cash equivalents refer to a company's assets that can be quickly turned into cash; these will be the company's most liquid holdings. Cash and cash equivalents appear in the current assets portion of the company's balance sheet.Moneyzine EditorJanuary 10th, 2024
