Accounting Knowledge: Cash Equivalents
Cash equivalents refer to investments with short duration, strong liquidity, easy conversion to known amount of cash and little risk of change in value. Although cash equivalents are not cash, their ability to pay is almost the same as cash, which can be regarded as cash or "quasi cash".
An investment is recognized as a cash equivalent.
meanwhile
There are four conditions, namely:
hold
The term is short; liquidity is strong; easy to convert to known amount of cash; the risk of change in value is very small.
Among them, the term is short, usually refers to from the purchase date, 3 months or less time can be expired or can be converted into cash.
It should be noted that the range of cash equivalents of different enterprises may also be different.
If business activities are dominated by short term and highly mobile investments, all projects may be regarded as investment rather than cash equivalents.
Enterprises should determine the scope of cash equivalents according to their specific characteristics, and disclose the accounting policies for determining cash equivalents in the notes to accounting statements, and consistently.
keep
This classification standard.
Such a change in policy should be regarded as a change in accounting policy.
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