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Which of the following would not be classified as ‘cash and cash equivalents’?Accounts receivableShort-term depositsCash at bankPetty cash

Question

Which of the following would not be classified as ‘cash and cash equivalents’?Accounts receivableShort-term depositsCash at bankPetty cash

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Solution

Accounts receivable would not be classified as 'cash and cash equivalents'.

Cash and cash equivalents refer to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately. These include cash in hand, cash at bank, petty cash, and short-term deposits that are highly liquid and typically have a maturity period of three months or less.

Accounts receivable, on the other hand, represent money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for. While they are considered a current asset because they are expected to be paid within one year, they are not as liquid as cash or cash equivalents because they cannot be immediately converted into cash.

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