The Tax Lady-Helping you understand the components of the line item cash and cash equivalents on the balance sheet.
Definition of Terms:
Cash - Currency (bills and coins) on hand and balances in checking and savings accounts acceptable by the bank and available for immediate withdrawal.
Cash Equivalents - These are short-term, highly liquid investments that are readily convertible to cash and are so near their maturity that they present insignificant risk of changes in value due to fluctuations in interest rates; a highly liquid debt instrument with maturities of less than three months.
Cash in Bank – This includes demand deposit or checking account and savings deposit which are unrestricted as to withdrawal.
Cash Fund – Cash set aside for a specific purpose.
Cash on Hand – This includes undeposited cash collections and other items awaiting deposit such as checks, bank drafts and money orders.
Compensating Balance – A minimum credit balance that a bank or a financial institution may require a borrower to keep on deposit as a condition for granting a loan. (it is a common requirement for establishing a line of credit in a bank.)