Not sure where to place this on the balance sheet
The cash account has a current balance of 22,500
Problem:The cash balance includes $1,200, the first deposit in a fund for the eventual purchase of an adjacent piece of property
To determine where to place the $1,200 deposit on the balance sheet, we need to understand the purpose of the adjacent piece of property. If it is intended for investment purposes or long-term use by the company, it would be classified as a non-current asset. On the other hand, if the property is intended for resale or short-term use, it would be classified as a current asset.
Assuming the adjacent property is being purchased for investment purposes or long-term use, here's how you would place it on the balance sheet:
1. Current Assets: This section includes assets expected to be converted into cash or consumed within one year, such as cash, accounts receivable, and inventory. Since the $1,200 deposit is part of the cash balance, it would already be included in this section.
2. Non-Current Assets: This section includes assets expected to generate economic benefits for the company over a period longer than one year, such as property, plant, and equipment. To properly account for the $1,200 deposit, a new line item should be added under non-current assets, specifically under the property section.
Here's an example of how it would be displayed on the balance sheet:
Current Assets:
- Cash: $22,500 (including $1,200 deposit)
Non-Current Assets:
- Property
- Adjacent Piece of Property Fund: $1,200
Remember, the specific format and categories on the balance sheet may vary depending on the accounting standards used or the company's specific requirements. However, the general concept remains the same.