Final answer:
Cash is an asset, which is something of value that a firm or individual owns. On a bank's balance sheet, cash counts as an asset because it can be used directly for transactions or to create more wealth.
Step-by-step explanation:
Cash is considered an asset. An asset is an item of value that a firm or an individual owns. In the context of a bank's balance sheet, cash held in bank vaults or at the Federal Reserve represents an asset because it is owned by the bank and can be used to produce more wealth or settle transactions. This is different from liabilities, which are debts owed by the firm or individual.
The liquidity of a financial asset like cash is immediate, making it a very liquid asset compared to something like the money in a savings account, which would require a trip to the bank or ATM for physical withdrawal before use. Thus, coins, currency in circulation, and the cash a bank holds at the Federal Reserve are all considered assets because they have inherent value and can be readily used or traded for goods and services.