Are Postage Stamps Cash Equivalent? Postage stamps are not cash equivalent, this is because they can’t be instantly changed to cash. Other receivables like IOUs, notes, and a few others are not cash equivalent as well. Cash is meant to be an amount in currency that can be used to buy or sell assets, or to make an investment.
What Are Cash And Cash Equivalent?
Legal tender, coins, bills, and non-deposited checks are referred to as cash, plus savings accounts, and checkings. While cash equivalents remain investments made within a very short time, usually one or less than 3 months for bodily growths.
The account policy or a company depends on the cash equivalent classification for some particular commercial securities and assets such as account receivable. Other cash equivalents are treasury bills, bank’s acceptance, and commercial paper, corporate or government bonds. Cash equivalents are most times liquid, swift or working assets.
Hence, a company can have any of these for a 3-month investment but end up going into debt, to avoid going bankrupt, such matured bonds can be used as a cash equivalent, to cover the debt on the ground.
Notes To The Financial Statement
These are notes attached to a financial statement to describe some items in the company’s financial life. It also includes a detailed explanation of the latest financial status of a company which could be done occasionally (monthly or annually).
ALSO SEE: Where Are Postage Stamps Made?
What’s Not Included In Cash Equivalent?
Asides postage stamps, they are several non-cash items that cannot be used to pay bills, purchase items on E-commerce stores, physical store, etc. These items include liquid security investments, derivatives, bonds, stocks. These assets are just investments that can reside on the balance sheet.
Conclusively, postage stamps are not cash equivalent, because they cannot be used to purchase items or assets on stock, digital items, or in a grocery store. It is not cash equivalent since it cannot become cash instantly. They are existing cash equivalents, but postage stamps aren’t one.