What is cash?

What is cash?

• A. Cash comprises cash on hand at the bank excluding overdrafts and demand deposits
• B. Cash includes only cash in hand
• C. Cash is any liquid asset that can be spent immediately
• D. Cash comprises cash on hand at the bank including overdrafts and demand deposits

Answer: (D)

Cash is the most liquid asset and consists of funds that are readily available for use: cash on hand and balances in bank current accounts (demand deposits) that can be drawn immediately. Overdrafts, where the account is in negative, are not cash. They represent a liability to the bank and are shown separately (often as a current liability or, where allowed, netted with cash under a specific offset arrangement). So, the standard definition is cash equals cash on hand plus demand deposits, with overdrafts not included in cash unless there is a formal netting arrangement.

Cash is the most liquid asset and consists of funds that are readily available for use: cash on hand and balances in bank current accounts (demand deposits) that can be drawn immediately. Overdrafts, where the account is in negative, are not cash. They represent a liability to the bank and are shown separately (often as a current liability or, where allowed, netted with cash under a specific offset arrangement). So, the standard definition is cash equals cash on hand plus demand deposits, with overdrafts not included in cash unless there is a formal netting arrangement.