Cash is a current asset as it is liquid and you have access to it at any given time. At the month-end or year-end date, there are usually cheques that have been written and disbursed but have not yet been cleared until the subsequent month. In addition, cash or electronic deposits sometimes have not been deposited in the bank at the month-end close.

The carrying value of the bank at year-end on the general ledger is calculated as the bank balance less outstanding cheques plus outstanding deposits. It is important that outstanding cheques and deposits get tracked on the bank reconciliation. A bank reconciliation should be prepared monthly for each account. Bank accounts can be denominated in Canadian or foreign currency. The carrying value of the cash section on the Balance Sheet is in Canadian dollars. For example, a U.S. dollar bank account will need to be converted to Canadian at year-end using the spot rate. The exchange difference at year-end is recorded as an unrealized gain or loss on the Income Statement.

Petty cash is a small amount of cash funds kept by the company for small expenditures. A typical amount to be kept in a petty cash fund can be anywhere from $100 to $500. The advantage of keeping a petty cash fund is convenience so you do not need to write a cheque for small purchases. It is also an easy way to reimburse employees instead of preparing expense reports. It is important to reconcile the petty cash account regularly to ensure that funds have not been misappropriated.

Line of Credit that is grouped under Cash can be in the form of overdraft protection or a demand loan with monthly interest payments. Line of credits can be secured or non-secured and they have a limit determined by your bank. These accounts should also be reconciled at year-end to ensure that the carrying value is correct. When your Cash category is in a negative position, it will be classified as bank indebtedness, which is under the Current Liabilities section of the Balance Sheet.