Cash on hand
Cash on hand is generally the amount of means of payment ( cash in the form of banknotes and coins ) at a specific point in time.
There are cash on hand wherever cash holdings play a role. The cash balance is then increased by cash deposits and reduced by cash withdrawals . Both processes are evidenced by documents ( receipts ), which represent the basis for the control of the cash balance and the bookkeeping . When required to keep books companies cash in hand is an asset of the current assets in the balance sheet , it is by means of a cash book out. This is from the auditors examined possible differences between the cash book and the actual cash on hand, the cash difference .
Determination of the cash balance
The cash on hand is determined through an inventory ( cash register ) in which cashiers physically count the cash on hand at a certain point in time. The frequency of an inventory depends on both the frequency of cash movements and security. The accounting cash balance results from the initial balance of the inventory account ( cash book ) plus the deposits and minus the payments, which together result in an ending balance. If the accounting cash balance does not match the result of the cash admission , there is a deficiency (cash deficit) or a surplus. The opening balance usually contains the change that must be held during the day for the purpose of paying the purchase price. The cash receipt is also referred to as a cash fall . The word has its origin in turning a cash register on the table to count the money in it. In a figurative sense, it is often used for the one-off assessment of government budget policy after a change of government.
According to Section 266 (2) B IV of the German Commercial Code ( HGB) , cash in hand at non-banks must be shown as the last item in current assets on the assets side of the balance sheet. The core of the balance sheet item is the company's cash holdings. The position also includes cash-like assets such as bank balances ( book money ) and all types of checks (bearer or order checks, cash or crossed checks , travelers checks , performance receipts from card payments ). Cash in hand shall include not only the domestic cash and varieties and unused stocks of fit Stamps ( petty cash ). The balance sheet position of the cash on hand summarizes with the cash on hand, bank balances, checks and bills of exchange assets with the highest liquidity . Commemorative coins that are legal tender (e.g. the 2 euro commemorative coins of the FRG ) are also part of the cash holdings. This does not include gold coins , even if they are recognized as legal tender in their country of origin. With them, the collector function predominates, especially since the market value is above their nominal value . Accounting according to the International Financial Reporting Standards records the cash on hand in the position “cash and cash equivalents” (IAS 1.66).
The cash on hand is the most liquid current asset with little or no risk of fluctuation in value. His assessment is therefore carried out on holdings in euros at nominal value . Since in foreign currencies (varieties) currency risks exist, these stocks are on the balance sheet date after strict lower of cost ( § 253 para. 4 sentence 1 and 2 HGB) to evaluate.
Cash on hand can be subject to strong seasonal fluctuations (increased purchases on salary dates or during Christmas sales). The cash payment, deposit or withdrawal habits of the customers play a decisive role in the assessment of the cash balance. While in the trade almost exclusively deposits are made through purchases, the cash registers at credit institutions are predominantly "payment cash registers"; when the bank rushes , stocks cannot be high enough there. Cash on hand is interest-free and therefore unprofitable and is subject to an - insurable - risk of theft.
For companies with a high percentage of cash payments, it is worthwhile to determine the business key figure :
The key figure indicates how high the share of cash on hand is in sales. In relation to the fiscal year , there is the key figure Days Sales in Cash :
It indicates how many days of sales are in the cash on hand and plays a role in retail, where the cash portion is relatively high. As a rule, both key figures are not very meaningful, as the cash on hand is reduced daily to the required minimum for security and profitability reasons in the cash-intensive companies ( retail trade ).
When determining liquidity , the cash balance is part of the formula as part of the means of payment:
Cash on hand at credit institutions
Cash in hand at credit institutions plays a special role because it is their main task to supply the economy with cash. Even if the “ cash reserve ” at banks has shifted significantly to the detriment of the cash desk since the introduction of the ATM , the cash holdings still play a major role. Cash management is subject to the dilemma between the cash behavior of customers to be managed by banks, questions of profitability and security aspects ( bank robbery ). Seasonal fluctuations (salary withdrawals at the end of the month, vacation time) also occur in banking. The cash reserve also includes sight deposits at the central bank .
According to § 12 Paragraph 1 Clause 1 RechKredV, legal tender including foreign notes and coins as well as postage and court fee stamps are to be shown as cash in hand . Bank balances at credit institutions are limited to the daily credit balances in euros and foreign currencies at central banks and post office giro offices (§ 12 Paragraph 2 RechKredV), all other bank balances are - unlike non-banks - according to § 14 RechKredV in the separate item "Claims on credit institutions" to activate. Gold coins - even if they are legal tender -, commemorative coins with agio and bars are to be recorded as “other assets” (Section 12 (1) sentence 2 RechKredV). In the case of banks, the most liquid position is shown first, it is subject to a low risk of fluctuations in value and causes negative profit contributions due to the refinancing costs and the personnel and security costs .
As a risk-free balance sheet item , the cash in hand does not need to be backed with own funds (Art. 134 Para. 3 Capital Adequacy Ordinance ).
The currency in circulation, together with the sight deposits and the central bank money, make up the money supply M1:
The aggregate of the money supply M1 also includes the cash holdings. If the cash supply increases, the money supply M1 increases - all other things being equal - and vice versa. The cash aggregate also influences the ability of credit institutions to create money , which is restricted when the currency in circulation increases and vice versa. Like the minimum reserve, cash is a restrictive factor in active deposit creation . If the cash holdings and / or minimum reserves are increased, the banks' ability to create deposit money decreases.
In the economic theory of the demand for money, cash holding is synonymous with holding cash and book money in the possession of economic agents. John Maynard Keynes names three reasons for keeping cash:
- Transaction motive : since the income does not cover the expenses in terms of time or amount, the economic entities are induced to keep liquid funds ready in order to be able to cover due expenses.
- Cautionary motive : as there is uncertainty about future liquidity developments; the economic entities take precaution with their cash management.
- Speculative motive : Price and interest rate expectations are also a cause of cash holdings, as falling interest rates go hand in hand with high cash holdings and vice versa.
The decisive factor for keeping cash on hand for transaction purposes with absolutely secure but not synchronized incoming and outgoing payments are the exchange costs for the interest-bearing financial investment.
The business cash management problem of optimal cash disposition is discussed in the context of cash management .
- ↑ Gerhard Scherrer, accounting according to the new HGB , 2011, p. 195
- ↑ Andreas Spiegel, Growth Strategies in the Media Industry , 2006, p. 200
- ↑ Hartmut Bieg, bank accounting according to HGB and IFRS , 2011, p. 186
- ↑ Reinhard Kohler, Limits of the Bundesbankpolitik , 1979, p. 56
- ↑ Sybille Brunner / Karl Kehrle, Volkswirtschaftslehre , 2014, p. 585
- ^ John Maynard Keynes, The General Theory of Employment Interest and Money , 1936, pp. 195 f.