Getting to Know More About Cash in Business Accounting

You must be familiar with cash. Cash or cash means cash or paid directly without debt. However, cash has a broader meaning in accounting. Cash is one of the most liquid assets. The greater the nominal, the more liquid.

What is Cash?

According to the Indonesian Institute of Accountants (IAI), cash is an investment that can be very liquid, has a short term and can be quickly made into cash in a certain amount without facing the risk of significant value changes. Furthermore, IAI states that cash consists of cash balances ( cash on hand ), current accounts or cash equivalents. In other words, cash is the company’s assets in the form of cash (banknotes, coins, notes, checks, etc.) held by the company or kept in a bank and can be used for general corporate activities.

Cash Characteristics

To distinguish cash from other assets, you can see it by understanding the characteristics or characteristics of cash. Here are the characteristics of cash you should know:

  • The most liquidcompany assets .
  • The most common exchange standard.
  • Can be the basis of calculations and measurements.

Also read:  Cash Flow Statement: Definition, Method of Making and Examples

Types of Cash

As mentioned above, cash can be divided into several parts. The division aims to facilitate supervision and inspection processes related to the distribution of cash flow. You can find this cash distribution in the company’s ledgers. Meanwhile, if you look at the financial statements cash has been put together in general so that users of financial statements who are still unfamiliar with accounting can be easier to understand.

1. Petty Cash (Petty Cash)

Petty cash is cash in the form of money provided by companies to pay for expenses that are relatively small and not economical if paid by check. There are 2 methods for recording petty cash, namely:

a. Imprest Method (Fixed Funding Method)

A method of replenishing and controlling petty cash in which the amount of petty cash is always fixed from time to time because refilling petty cash will be the same as the amount that has been issued.

b. Fluctuation Method

The method of recording and controlling petty cash, where the amount of petty cash will always change according to expenses, receipts and additions to petty cash. In this system, the petty cash manager records the petty cash book for each expense or additional petty cash fund that will be the basis for posting to the ledger estimates.

2. Cash at the Bank

Cash in a bank is company money in a bank account. Usually used for expenses that are relatively large and may not be given directly in the transaction because the amount is large and vulnerable in terms of security. Cash in this bank is always associated with bank statements for the company.

3. Cash Reporting

Although cash reporting can be done immediately, there are also problems in cash reporting. The problems related to cash reporting are divided into 3 parts, namely:

a. Cash equivalents

Cash equivalents or commonly called cash equivalents are groups of company assets that have maturity of less than three months. This cash equivalent will be very useful when used in difficult, unstable economic conditions. Examples of these cash equivalents are state debt securities (SUN) and treasury bills .

b. Restricted Cash

Restricted cash is cash that is deliberately set aside for significant future obligations. Here is an example illustration to clarify your understanding:

The company has the obligation to pay environmental damage of 15 million rupiah for the next five years, based on these conditions, the company set aside 15 million rupiah to a restricted cash account .

c. Bank Overdrafts

Bank overdrafts are companies issuing checks whose value is greater than the balance in the bank. For example, the Maju Sejahtera Company issued a check of 120 million, whereas the Maju Sejahtera account balance at the bank was only 100 million. Then the 20 million that go into short-term debt.


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