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Cash and Cash Equivalents

A statement of cash flows should explain the change during the period in cash and cash equivalents regardless of whether there are restrictions on their use. The total amounts of cash and cash equivalents at the beginning and end of the period shown in the statement should be easily traceable to similarly titled line items or subtotals shown in the Balance Sheet.

Restricted securities held as collateral for securities lending are not included as cash equivalents for the purpose of the statement of cash flows.

Cash includes:

  • Cash on Hand
  • Cash in Local Banks
  • Cash in State Treasury
  • Demand Deposits with banks or other financial institutions

Cash Equivalents are defined as short term, highly liquid investments that are:

  • Readily convertible to known amounts of cash
  • So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Next: Examples of Cash Equivalents

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