★ Must-know
📌 Cash includes more than notes and coins, whereas temporary investments are not classified as cash and provide an opportunity to earn interest.
Further detail
📌 A cheque is generally classified as cash, whereas a post-dated cheque is not classified as cash because it cannot be used until its future date.
Cash is immediately liquid; temporary investments seek interest.
📌 An asset is reported as cash only when it is readily available for payment of current obligations and free from contractual restrictions limiting its use to satisfy debts. — Keiso et al., 2015
1. Which characteristic best defines cash in a business?
2. What is the primary characteristic that defines cash in accounting terms?
3. Which item is classified as cash rather than a temporary investment?
What is cash in business terms?
A universally accepted medium of exchange that is 100% liquid.
Cash classification label
Medium of exchange, 100% liquid
Why is a post-dated cheque not classified as cash?
Because it cannot be used until its future date.
Cash includes
Notes, coins, and most cheque payments
When is an asset reported as cash according to Keiso et al., 2015?
Only when it is readily available for current obligations and free from contractual restrictions.
Reporting cash asset conditions
Available for current obligations, free from restrictions
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