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cash and cash equivalents

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › cash and cash equivalents

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.
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  • April 6, 2021 at 1:05 pm #616089
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    sir my study text states that “an overdraft of $100,000” is “cash and cash equivalents”.

    the bone of contention is that as per ,my understanding cash and cash equivalents(CCE) should be “ASSETS”, and an overdraft is clearly a liability.

    Although OD does qualify the criteria of CCE, of being highly liquid, short term investments which can be converted to known amount of cash and with insignificant risk of change in value, I still feel that it should not be considered CCE because it is a liability.

    Perhaps it could have been an asset, when taken out, but as the name OD suggests that the collection phase of principal is over and now its time for repayment of borrowed sum with interest, hence its not appropriate to deem it as CCE.

    April 7, 2021 at 9:26 am #616219
    Stephen Widberg
    Keymaster
    • Topics: 11
    • Replies: 2837
    • ☆☆☆☆☆

    Bank overdrafts which are repayable on demand and which form an integral part of an entity’s cash management are also included as a component of cash and cash equivalents. [IAS 7.7-8]

    Don’t rock the boat! 🙂

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