Are refundable deposits included in cash and cash equivalents?
Yes, but the deposit is considered restricted cash and may be recorded separately as an asset on the balance sheet. Refundable deposits represent restricted cash because the money must be returned to the customer at a future date. The easiest example is a security deposit that you pay your landlord at the start of the lease. At the end of the lease, the landlord is required to return the deposit to you, as long as all of the required conditions were met.
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What are funds held in escrow?
Funds held in escrow represents cash that is set aside until predetermined conditions are satisfied. For example, often in an acquisition, part of the purchase price is set aside escrow and is only released if the business achieves certain milestones. The important thing to understand is that funds held in escrow must be classified as […]