[Anonymous]

In Becker F4, question CPA-00056 (FARE May 94 #13), we’re asked to calculate cash and cash equivalents reportable at year end. There is a checking account balance of $175,000 and another of ($10,000).

I can’t figure out for the life of me why that negative balance has anything to do with cash and why it is deducted. In other words, a negative balance implies an overdraft, or credit line, or credit nonetheless.. so… why isn’t it classified as a liability instead?

[smuppane]

If both accounts are in same bank then the bank has a legal right to offset the negative amount with the positive amount in another account. So you need to remove that amount while calculating net amount.

If these accounts happen to be in 2 different bank accounts then you will classify the -ve amount as liability.

REG - 07/01/2011 - 93
AUD - 08/25/2011 - 95
FAR - 10/29/2011 - 94
BEC - 11/28/2011 - 90

[Anonymous]

@smuppane Makes sense. Thanks for the reply!

[Author]

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