Far 1- Cash and Cash Equivalents

Current Assets are assets that will be used up or converted into cash within one year or the operating cycle, whichever is longer.

Current Liabilites are liabilities that will be settled within one year or the operating cycle whichever is longer.

• A cash equivalent is a security that is easily converted into cash with an original maturity of 90 days or less. A cash equivalent is a financial instrument that is both 
• -highly liquid means easily convertable to cash
• -and originates in 90 days or less from when you the company get the securities. 

Examples include Coin, money market accounts, unmailed checks, savings accounts, negotiable paper.

bank reconciliations are used to reconcile differences between cash balances per bank and per book to arrive at corrected amounts. 

• Balance on Bank Statement 
• +Deposits in transit
• -Outstanding checks
• +/- Errors made by bank
• =Corrected Balance

• Checkbook Balance
• +Amounts collected by bank 
• -Unrecorded bank charges
• +/- Errors made in recording transactions
• =Corrected Balance

• Current assets is classified if current when: 
• 1. the entity expects to realize the asset or to consume or sell it within 12 months or the normal operating cycle. or
• 2. the entity holds the asset primarily for the purpose of trading.

• A liability is current when: 
• 1. the entity expects to settle the liability within the normal operating cycle 
• 2. the liability will be settled within 12 months after the reporting period, or
• 3. the entity holds the liability for the purpose of trading.