You can determine your company’s year-end cash and cash equivalents balance by determining the amounts that you have added and subtracted from certain accounts in your accounting records during the year. Your cash consists of your paper money, such as coins and currency, checking account balances, petty cash and undeposited checks. Cash equivalents consist of very safe, liquid investments that you expect will be converted into cash within 90 days. Cash set aside for a specific purpose is called restricted cash and is not part of your cash and cash equivalents balance.
Find the beginning balance of each account that you can categorize as cash or cash equivalents, such as your cash account, payroll checking account, petty cash and money-market investment account, in your accounting records. Determine the total debits, or increases, to each account, and the total credits, or decreases, to each account that occurred during the year. For example, assume the beginning balance of your cash account was $10,000, your total debits during the year were $15,000 and your total credits during the year were $8,000.
Add each account’s total debits to its beginning balance. For example, add $15,000 in total debits to the $10,000 beginning balance of the cash account, which equals $25,000.
Subtract each account’s total credits from each result to calculate each account’s year-end balance. For example, subtract $8,000 in total credits in your cash account from your result of $25,000. This equals an ending cash balance of $17,000.
Calculate the sum of each account’s ending balance to determine the year-end balance in cash and cash equivalents. For example, if your year-end balances for cash, payroll checking, petty cash and money-market investments are $17,000, $5,000, $1,000 and $4,000, respectively, calculate the sum of those amounts. This equals $27,000 as your year-end cash and cash equivalents balance.
Report your year-end cash and cash equivalents balance on the first line of your balance sheet in the current assets section.