Is Cash A Current Asset? Its Treatment In The Balance Sheet

ByAlbert Harris 09/08/202309/08/2023

In economic terms, cash is banknotes or coins while in accounting terms it is an asset that holds value in a business.

Is Cash A Current Asset

Yes, cash is a current asset that is recorded in the balance sheet as a short-term or current asset because cash is a readily available economic resource that can be used at any time without losing its value.

As cash is a readily available economic resource so it does not need any conversion and can be used as it is received from any financial source.

Some assets such as treasury bills, money market funds, and commercial paper are liquid assets that can be converted into cash within a short time but they are not considered as cash but yes they are cash equivalents.

In short, cash is a current asset and it is recorded in the first line in the statement of financial position, it can be used as it is received without doing the conversion.

FAQs

Why is cash a current asset in a balance sheet?

Cash is a short-term asset that is already converted into cash, and it can be used for purchasing or for business operations without converting anymore.

Which asset account is cash?

Cash is considered a current asset because it is spendable at any time during a business cycle.

Is cash debit or credit in accounting records?

when cash is received in a business it is recorded as an asset and makes a double entry of debit in the cash account while if the cash is paid out of business it is recorded as an expense in the income statement and the cash account balance will be decreased with the credit entry.

What is the cash journal entry for a sale of merchandise inventory of $100?

Debit: Cash Account with $100
Credit: Merchandise Inventory with $100

Can cash be recorded as a long-term asset?

Cash can be held for a long period if a company has a large portion of the cash to cover its short-term liabilities or if the company is not going to start a new project or use that cash. In this scenario, cash is recorded as cash or cash equivalents in the balance sheet under the heading of current assets.

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