Cash and cash equivalents
Cash and cash equivalents are the liquid amounts reconciled in a statement of cash flows. Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments readily convertible into a known cash amount with insignificant risk of changes in value. Certain repayable-on-demand bank overdrafts that form an integral part of cash management are included in the cash flow total.
Worked example
Cash of $8,000 plus a qualifying $2,000 short-term deposit gives $10,000 cash and cash equivalents.
Common mistake
A share investment with an uncertain selling price is not a cash equivalent simply because it can be sold quickly.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |