Cash is the most liquid assets and is critical to the solvency of a company

From the accounting perspective, cash is the most liquid asset a company can own. A cash balance indicates that a company has cash and can use that money however it wants.

Cash includes more than just the traditional physical bills and coins. Money can include any other currencies, as well as checks and securities not deposited the money in your current account.

Cash accounting

Cash is classified as a current asset on the balance sheet and thus increased the debt side and reduce the credit side.

Money often appears at the top of the current asset section of the balance sheet because these items are listed in order of liquidity.

Any assets that can be liquidated to cash within one year can be included as cash, they are called "cash equivalents".

Where does the money come from?

Money generated from the sale of goods and services. It can also come from investors, personal funds manager or owner, or you can get a loan from the bank.

The simplest method is to exchange payment for goods or services, cash provides a fast, reliable, and uncomplicated to complete a transaction. It is also a useful property because it kept the market value over time.

Cash flow statement provides an outline of the money in and out of a company and is an important part of corporate financial management. This information is used to generate a cash flow statement, a very important document for potential investors.

Disadvantages of cash

How can cash a bad thing? As the most liquid assets, a reliably and immediately receive payment for a product or service, can there really be any sound?

Unfortunately, yes. Money does not come without a little obvious disadvantages. Businesses hold a huge amount of paper-based invoices at risk of theft.

Money can also be inflationary. Inflation in the economy occurs when prices rise, which means that each note carries less value than before. This is called "purchasing power".