Reading Financial Reports For Dummies
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For companies, cash is basically the same as what you keep in your checking and savings accounts. Keeping track of the money on financial reports is a lot more complex for companies, however, because they usually keep it in many different locations. Every multimillion-dollar corporation has numerous locations, and every location needs cash.

Even in a centralized accounting system, in which all bills are paid in the same place and all money is collected and put in the bank at the same time, a company keeps cash in more than one location. Keeping most of the money in the bank and having a little cash on hand for incidental expenses doesn't work for most companies.

For example, retail outlets and banks need to keep cash in every cash register or under the control of every teller to be able to transact business with their customers. Yet a company must have a way of tracking its cash and knowing exactly how much it has at the end of every day (and sometimes several times a day, for high-volume businesses).

The cash drawer must be counted out, and the person counting out the draw must show that the amount of cash matches up with the total that the day's transactions indicate should be there.

If a company has a number of locations, each location likely needs a bank to deposit receipts and get cash as needed. So a large corporation has a maze of bank accounts, cash registers, petty cash, and other places where cash is kept daily. At the end of every day, each company location calculates the cash total and reports it to the centralized accounting area.

The amount of cash that you see on the balance sheet is the amount of cash found at all company locations on the particular day for which the balance sheet was created.

Managing cash is one of the hardest jobs because cash can so easily disappear if proper internal controls aren't in place. Internal controls for monitoring cash are usually among the strictest in any company.

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Lita Epstein, MBA, designs online courses about reading financial reports, investing, and taxes. She’s the author of Reading Financial Reports For Dummies and also writes periodically for AOL’s Daily Finance.

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