Definition of a Cash Balance at the End of the Period

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Businesses report financial information to stakeholders each accounting period. Balance sheets include information on a company’s assets, liabilities and owner’s equity. Cash is an asset in accounting terms. Each accounting period, accountants report the company’s cash balance on its balance sheet. Companies may also reconcile the cash balance prior to reporting it to stakeholders.

Defined

The cash balance is the amount of money a company has in its general ledger account. The general ledger contains all information relating to a company’s transactions. Cash represents capital a company uses to purchase the items needed to run its business.

Classification

Cash is a current asset. Companies often use the money within the next 12 months of business operations. In certain cases, it's possible for companies to report a negative cash balance on financial reports. This often happens when a company has checks outstanding and few deposits coming in during the period. This usually corrects itself in a subsequent accounting period, when a company receives money from customers to pay off accounts receivable.

Reconciliation

A company’s cash balance doesn't always — if ever — match the total in its bank account. Checks and deposits outstanding are often the two activities that create this difference. To rectify this difference, a company reconciles its cash balance. This involves a comparison between the bank account and general ledger cash account. Accountants identify all activities that are outstanding between the two and list an adjusted cash balance on the reconciliation report.

Reporting

Companies rarely report just a cash balance on their financial statements. The statement of cash flows expands on a company’s cash reporting. This financial statement details the sources and uses of cash within a company. Stakeholders use this statement to determine how a company used cash during an accounting period. Companies often prepare this statement each accounting period, along with the income statement and balance sheet.

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References

  • "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds, et al.; 2011
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