Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

What are cash equivalents? How are cash equivalents reported on the statement of cash flows?

To determine


Cash flow statements are the statements that determine the inflow and outflow of cash. Cash equivalent are a part of cash flows which helps in determining the difference between opening cash and cash equivalent and closing cash and cash equivalents.

To state: The definition of cash and cash equivalents and where are they recorded in the cash flow statement.



Cash and cash equivalents are highly liquid short-term investment for that can be easily convertible into cash within the period of 3 months or less.

Cash includes:

Currency, petty cash, check-in-hand.

Cash equivalents includes:

marketable securities, treasury bills, commercial papers, etc.

Cash flow statement mainly consists of three activities and those are operating activities, investing activities, and financing activities. The sum of all these activities are added to the opening cash and cash equivalents at the end of the cash flow statements to find the balance of closing cash and cash equivalents...

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