Restricted Cash
Cash That Cannot Be Freely Used
Restricted cash refers to cash that cannot be used for general business operations because of legal, contractual, or regulatory restrictions. Depending on the expected period of restriction, it may be classified as either a current or noncurrent asset.
- Compensating balances.
- Cash held for debt repayment.
- Construction funds.
- Escrow accounts.
Note
Restricted cash is presented separately from unrestricted cash and requires appropriate disclosure in the financial statements.
Summary
Restricted cash remains an asset but is reported separately because it is unavailable for normal operations.