Lori's Company has the following items: cash in a checking account, $ 6 comma 000 ; cash in a savings account, $ 9 comma 000 ; highminusgrade government securities due in one month (purchased last month), $ 3 comma 586 ; accounts receivable, $3,000. How much should appear as Cash and Cash Equivalents on the balance sheet?

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4 January, 02:57

Lori's Company has the following items: cash in a checking account, $ 6 comma 000 ; cash in a savings account, $ 9 comma 000 ; highminusgrade government securities due in one month (purchased last month), $ 3 comma 586 ; accounts receivable, $3,000. How much should appear as Cash and Cash Equivalents on the balance sheet?

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Lukas Walker · Answer 1

18,586.

Explanation:

In-order to get understanding of Cash and Cash Equivalents, lets break-up this account and see what does it mean.

Cash

It includes the paper money that businesses have on hand, coins, and demand deposits. Usually Checking Accounts and Savings Accounts are demand deposits and you can easily withdraw your money, so these are termed as Cash.

Cash Equivalents

These are marketable securities that mature in a period of less than three months (90 days). Any other financial security that can be easily converted into cash fall under this category.

Looking at the scope of Cash and Cash Equivalents, the amount that should appear on the balance sheet is $18,586 (6,000 + 9,000 + 3,586).

Note: Sometimes there is a withdrawal restriction on Saving Accounts and you can not withdraw your money from it before six months, if that is the case then it should not be included in Cash and Cash Equivalents.