Cash

Cash consists of paper currency, coin, back deposits, money orders, checks, bank drafts and other negotiable instruments. Some cash may be segregated from the general account and designated to a specific use. Segregated cash may be current or non-current depending on its intended use.

Restricted cash are monies earmarked for a specific purpose and therefore not available for immediate and general use by an organization. Restricted cash, if the amount is material, is shown separately from cash and equivalents on the balance sheet. Restricted cash can be designated for a range of purposes such as loan repayment, equipment purchase, investments or compensating balances. If the restricted cash is restricted by law or contract it is considered material and must be separately classified on the balance sheet.

Bank overdrafts are an extension of credit when a check is written for more than the amount in the account. Bank overdrafts should be accounted for a accounts payable, unless material then separately disclosed.

Cash equivalents are assets that have high credit quality, are short term and highly liquid. They are readily converted into cash at a known amount of cash and so near maturity they present insignificant risk of changes in interest rates, such as: money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper. They mature within 3 months whereas short-term investments are 12 months or less.