Many novice accountants are not completely clear,which is included in the concept that we will discuss in the article, how it is characterized, how to display it in the ledger. Therefore, we will try to depict what money means and cash equivalents are. In conclusion of the article, we also give an algorithm for their presentation in accounting documents.
Definition of concept
Cash is cash that is directly on hand and is also stored on “demand” accounts.
Эквиваленты денежных средств - это различные investments with high liquidity. They can be easily transferred to the expected amount of money. The cost of them in one direction or another at the same time varies 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 liabilities.
Both cash and cash equivalents are accounted for in accordance with the standard “Statement of Cash Flows”.
Constituent elements
Let's see what specifically sorted concepts include. Cash and cash equivalents are:
- Money in the checkout.
- Cash in transit. This includes the collected finances, which are not yet credited to the current accounts with the bank.
- Funds in ruble and foreign currency accounts, available at any time.
- Bills of exchange (including bank transfers) that can be repaid no later than 3 months after the acquisition.
- Deposits "on demand", 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 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 for writing a report on the movement of the latter.
Limited Categories
Now for more specific categories. Cash and cash equivalents may be limited in the following cases:
- If they are in the accounts of those banks whose license was revoked.
- The funds are blocked or arrested at the request of the tax inspectorate, as a condition in court proceedings, etc.
- State legislation imposes some restrictions on their use.
- The loan or loan agreement implies limited use.
- The agreement with the bank sets the condition for the preservation of a certain account balance. The funds that make it up will be limited.
All of the above is excluded from the number of cash and cash equivalents and added to current or non-current assets.
Statement of financial position
The concepts we disclose are spelled out 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. Additionally, an explanatory comment is made on the reasons for this restriction.
- The linkage of the described categories in the Statement of Funds Movement and the Financial Position Report.
Cash flow statement
The statement of cash flows and cash equivalents isa list of expenses and revenues that helps to coordinate the incoming and outgoing balance of money and their equivalents on 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 is presented in three large-scale sections:
- Operating activities. This is what makes the company profit.does not fall into the following two categories. Revenues here are income from the sale of any items or the provision of services. Costs - settlements with suppliers, labor remuneration, etc. Cash flows here come from either core business, or from another, but, of course, profitable.
- Investment activities. This includes the acquisition and subsequent implementation of long-term investments. By definition, they do not refer to cash equivalents (since they are not short-term).
- Financial activities. Affects resizing and fillingcapital of the company, as well as its borrowed funds. Cash savings in this category include proceeds from the issuance of various types of stocks, bonds, loans, promissory notes, as well as repayment of borrowings.
In reporting, cash is represented by the financial and investment component by the direct method, and by the operational component - by the indirect method.
Display in documents
Cash and cash equivalents are displayed on line 1250 as follows:
D (debit) account 50 "Cashier"
+
D on sch. 51 "Settlement accounts"
+
D on sch. 52 "Currency accounts"
+
D on sch. 55 "Special accounts in banks" (this does not include deposits that can not be attributed to cash equivalents)
+
D on sch. 57 "Money on the road"
+
D on sch. 58 "Attachments"
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D on sch. 76 "Settlements with borrowers and debtors".
Cash and cash equivalents are sufficientoften featured in financial statements. Their main components are cash in the accounts and on hand, as well as a number of short-term liabilities that can be easily and quickly transferred into the expected amount of money.
