Final answer:
For financial reporting purposes, 'cash' includes physical currency and balances in bank accounts that are readily available for transactions, as well as cash equivalents that are short-term, highly liquid investments.
Step-by-step explanation:
When we talk about cash for financial reporting purposes, we are referring to not only physical currency like coins and banknotes that you can have in your pocket but also the balances available in bank accounts that are immediately accessible for transactions. Cash is a highly liquid asset, which means it can be quickly used to purchase goods or services. Other forms such as checks are also considered cash equivalents because they can be readily converted into cash. However, while checks are near-cash items, they are not as liquid as cash on hand because they require deposit and clearance. Credit cards are not cash; they represent a promise of payment using borrowed funds from the card issuer.Cash equivalents, which represent short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in value due to changes in interest rates, are also included in the cash category for financial reporting.