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Financial Reporting Standards by David T. Doran

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Chapter 2

Cash, Receivables, and Revenue Recognition

Cash and Cash Equivalents

Cash is the most liquid of all assets. Cash includes currency on hand and unrestricted funds deposited with banks. Also included in cash are instruments that can be immediately deposited in bank accounts for credit at face value (e.g., negotiable customer checks, money orders, and travelers’ checks). Since postdated checks cannot be immediately deposited, they are classified as receivables. Although some companies report “cash” on the balance sheet, about 95%1 report “cash and cash equivalents” or “cash and equivalents.” The FASB defines cash equivalents as highly liquid, short-term investments that are readily convertible into known amounts of cash, and are so near ...

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