Register now or log in to join your professional community.
The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under which heading ?
The cash which can't be utilized to purchase long term asset, must be shown in a head under current asset. It can be kept as provision for any expense, like irrecoverable receivable or tax, or in some other head under current asset, may be petty cash.
No specific classification in balance sheet because so far you have not invest it. But if the company wants to restrict the cash, then it can create special reserve will will be record at equity side of the balance sheet, the pupose will mentioned in related notes to the financial statements.
Since the cash hasn't been used for the purchase of long term assets it can be shown under Current assets.
But must be shown in the notes of the Financial Statement.
Because the cash is not available to pay current liabilities, cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset heading Investments. Investments is the first of the long-term asset headings and it is positioned immediately after current assets. preferably disclosed about it in Financial Position notes.
Dear Murtuza,
You may create a special purpose reserve equal to the cash reserved for acquiring long term asset & such cash can be used for short term invest in the form of sinking fund. As far as accounting standards are concerned no need to keep these cash seperate form others. Because ultimatly you will loss the interest on the same by keeping such cash ideal.
The cash which can't be utilized to purchase long term asset, must be shown in a head under current asset. It can be kept as provision for any expense, like irrecoverable receivable or tax, or in some other head under current asset, may be petty cash. my opnion too
In my opinion the cash in hand in which the working capital is restricted to be utilized for the purchase of long term assets whic is under the current assets in the balance sheet
