Cash is money in its most liquid form - physical notes and coins, plus funds sitting in a bank account, available to spend without delay. It is the most liquid item among a business's current assets.
What it means
Cash is distinct from other current assets like debtors or inventory because it requires no further step to use - a debtor must pay, stock must sell, but cash is already spendable. The bank balance shown on the balance sheet is confirmed each period through a bank reconciliation against the bank's own records.
Where it fits in
Cash is what funds payroll directly - the bank account a payroll run draws from must hold enough cash to cover net pay and the statutory payments due to SARS and the funds. Working capital, which measures short-term liquidity, is built around how much cash and near-cash a business holds against what it owes.
Key rules
- The most liquid current asset - immediately available to spend.
- Confirmed each period through a bank reconciliation.
- What a payroll run actually draws on to pay net pay and statutory amounts.
- Central to working capital and short-term liquidity.
