what is cash in accounting

In accounting, cash is considered the most liquid asset that a company can possess. It refers not only to physical money such as currency and coins but also includes amounts held in bank accounts, undeposited checks, and other forms of currency that can be readily accessed and used immediately. Cash can sometimes also encompass cash equivalents, which are short-term assets that can be quickly converted into cash at their face value, such as money market funds and government bonds. Cash is classified as a current asset on the balance sheet and is typically listed at the top of the current assets section due to its high liquidity. It plays a vital role in business operations by providing funds for daily expenses, solvency, and investment opportunities. Cash flow, which tracks incoming and outgoing cash, is an important indicator of a company's financial health and liquidity. Overall, cash in accounting is the money a company has available for use immediately, encompassing physical money and highly liquid financial instruments.