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What is cash balance

The term “cash balance” might bring to mind the cash register for those overseeing a business. While not entirely inaccurate, this phrase encompasses a broader financial concept within the corporate sphere. In the business context, cash balance refers to the total amount of readily available money a company possesses. This includes not just physical cash in tills but also liquid assets that can be easily converted into cash when necessary.

Cash balance is commonly referred to as “cash holdings”, denoting the tangible funds a company holds. Typically, this includes cash in tills or physical money securely stored in a box or cash register. Additionally, in certain situations, easily convertible liquid assets may contribute to the overall cash balance.

Cash balance in accounting

In the realm of accounting, cash balance is categorised as a current asset, necessitating its inclusion in the company’s balance sheet.

Managing this aspect involves establishing a cash journal where the daily count of cash balance is recorded and verified for accuracy. The reconciliation process entails cross-referencing the recorded amount in the cash journal, reflecting the actual cash in the register, with the corresponding figure in the company’s accounts.

Companies typically follow a structured procedure to implement this. The daily count of the cash balance is meticulously documented in the cash journal, signed off as accurate, and subsequently reconciled with the accounts. This ensures that the recorded amount aligns with the company’s financial records, offering a comprehensive overview of its available cash.