Cash, Cost Accounting

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This is difficult to perceive cash maintained in the vault as an investment. Fairly, you would be thinking that if we invest cash, then how can cash itself be an investment? However, you will realize that a specific minimum amount of cash is essential for any business. Take an easy case: if you are a retailer, will you send away a customer who does not have accurate change? Though, you can entertain him only if you keel change. It is your  investment  in  cash;  likewise,  you  will  have  to  pay  your  employees  and suppliers at a particular time. So as to do that you needs cash. Thus investment in cash is that amount that is required to be maintained on hand to meet daily requirements of cash. This amount is determined after taking in account the regularity and amounts of cash of inflows, the frequency and amount of outflows, as also the uncertainties related to these. Clearly, as your business grows the requirement for cash will also grow.


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